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S&P 500 Hits New Highs as Earnings Rally Boosts Market Sentiment

Stocks rallied this week with the S&P 500, Dow, and Nasdaq 100 reaching new all-time highs. Positive earnings reports and lowered bond yields contributed to market gains, although Akamai Technologies faced a downturn after cutting its EPS growth estimate.

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AI Rating:   7

The report indicates a generally positive sentiment in the stock market, highlighting that the S&P 500, Dow Jones, and Nasdaq 100 all achieved new record highs. A critical factor behind this surge is investor speculation that the newly elected President could enhance corporate profitability through proposed tax cuts and decreased regulations.

Notable gains in specific companies, such as Axon Enterprise and Fortinet, highlight positive earnings developments. Axon Enterprise saw a remarkable increase of over 28% following an upward revision of its full-year revenue outlook to $2.07 billion, exceeding the consensus estimate of $2.04 billion. Meanwhile, Fortinet's shares rose more than 9% after reporting Q3 adjusted EPS of 63 cents, surpassing expectations of 52 cents, along with an optimistic full-year EPS forecast.

Conversely, some companies experienced significant declines. Akamai Technologies plummeted over 14% due to a reduction in its full-year adjusted EPS estimate. Similarly, Arista Networks fell over 7% after predicting revenue growth below market expectations.

A broader look at the S&P 500 shows that 78% of companies that have reported Q3 earnings have exceeded estimates, reflecting a robust earnings season, although a downward revision in average expected growth rates hints at minor concerns in performance.

While the report notes a generally supportive economic backdrop, including improved consumer sentiment, there are challenges reflected in mixed inflation expectations. The 1-year inflation expectations decreased somewhat, indicating lower anticipated inflation, yet the 5-10 year expectations rose slightly, complicating the outlook on long-term inflation.

Overall, the report emphasizes a positive market momentum driven by favorable earnings news and a conducive regulatory environment. However, specific corporate setbacks underscore the need for investors to maintain a cautious approach.

Stocks:  AXON FTNT AKAM ANET