Commentary

This is the best start to an earnings season in four years, according to Bloomberg. So far, earnings are up 9.2% year-over-year, according to FactSet. With 29% of the stocks in the S&P 500 having reported their third-quarter earnings, 87% of reporting companies have delivered a positive earnings surprise, and 83% have reported a positive sales revenue surprise, according to FactSet. As of last Friday, the analyst community is expecting 11% earnings growth for the companies yet to report.

This superb start to the earnings reporting season is just one reason why the second half of October tends to be seasonally strong. One other reason is that the holiday season is fast approaching; the holiday season is when we all get together with family and friends and start to look forward to a new and better year, and this wave of positive seasonal sentiment tends to boost investor attitudes, too.

Here are the most important developments recently and what they mean:

- This will be a big week for technology earnings with Amazon (AMZN), Apple (AAPL), Meta (META), and Microsoft (MSFT) all reporting on Wednesday and Thursday. Of course, the biggest news on Wednesday will be the Federal Open Market Committee (FOMC) statement, which is expected to be dovish and signal another key interest rate cut at its December FOMC meeting.

- Amazon on Tuesday announced 14,000 job cuts because it says it needs to better prepare for the impact of AI. Specifically, Beth Galetti, SVP, People eXperience and Technology at Amazon, said in a blog post, “Some may ask why we’re reducing roles when the company is performing well,” and then elaborated, “What we need to remember is that the world is changing quickly. This generation of AI is the most transformative technology we’ve seen since the Internet, and it’s enabling companies to innovate much faster than ever before (in existing market segments and altogether new ones).” Amazon also warned of additional layoffs in the future. Ouch! There is your evidence that AI is eliminating jobs.

- I should add that Amazon is also aggressively automating its warehouses with robots to reduce jobs. Amazon has 350,000 corporate jobs, plus 1.2 million warehouse workers, for a total of 1.55 million employees worldwide. Ironically, Amazon recently hired 250,000 seasonal workers, so the company’s workforce also has seasonal changes.

- UPS has reduced its management workforce by about 14,000 positions so far this year and its operational workforce by another 34,000 positions. The company said it is well-positioned to navigate the upcoming holiday season and added that its restructuring efforts have resulted in cost savings of about $2.2 billion so far this year. Obviously, an AI-driven economy that promotes more online shopping has caused delivery companies to boost their efficiency, which may show up in U.S. productivity calculations.

- Outplacement firm Challenger Gray announced 54,064 job cuts by companies nationwide in September. This is the fifth-highest monthly job cuts that Challenger Gray has monitored in the past 36 years. Obviously, the Fed has to continue to cut key interest rates to stimulate job growth in the upcoming months.

- The Asia-Pacific Economic Cooperation (APEC) conference commences on Friday in South Korea, and more trade deals are expected to be announced. President Trump visited Malaysia and Japan prior to the APEC conference. The Trump Administration said it reached trade agreements with Malaysia and Cambodia, and frameworks for deals with Thailand and Vietnam during President Trump’s Malaysia trip.

- Treasury Secretary Scott Bessent also said that “I think we have a very successful framework for the leaders to discuss on Thursday” when President Trump meets with Chinese President Xi. Chinese Vice Commerce Minister Li Chenggang separately told reporters that “the two sides have reached a preliminary consensus” on possible solutions for issues that strained relations between China and the U.S. It is clear that the U.S. wants China to resume buying soybeans and other U.S. agricultural products.

- One thing that we know about President Trump is that he is very transactional when he goes on overseas trips, so it is obvious that the grand finale of his Asian trip might be a trade deal with China and possibly other nations like South Korea.

- Interestingly, Fed Governor Christopher Waller referenced the ADP private payroll statistics in a speech and ADP has decided to stop providing the Fed with its data after doing so for several years. Governor Waller is one of five candidates that Treasury Secretary Scott Bessent said is being considered to be nominated to become the next Fed Chairman. Since Governor Waller foresaw the problems in the labor market well before the Labor Department’s big downward revisions, his credibility has soared since he is better at anticipating economic events rather than reacting to them too late. ADP also has downward revisions to its private payroll data and has reported negative job growth in three of the past four months.

In summary, the last week of October is a seasonally strong period, and an early “January effect” appears to be underway. There is no doubt that the breadth and power of the overall stock market are improving, since we are now in the midst of the strongest earnings announcement season in the past four years, according to Bloomberg.

*Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.