Wednesday, 10/21/2026 p.m.

• Stocks trade higher with earnings in focus – U.S. equity markets closed higher on Wednesday as corporate earnings remained in focus following better-than-expected revenue and earnings from SpaceX after Tuesday’s close. The tech-heavy Nasdaq Composite led the major averages, gaining roughly 1.1%, while the S&P 500 advanced 0.6%. Attention now turns to Meta Platforms and Tesla, which are scheduled to report after Wednesday’s close. Asian markets were mostly higher overnight, led by a roughly 3% gain in South Korea’s Kospi Index, while European markets also advanced. In fixed-income markets, Treasury yields finished little changed, with the 10-year U.S. Treasury yield settling near 5.12%. Meanwhile, WTI crude oil was little changed, despite reports that the U.S. is preparing to order the departure of some personnel from U.S. embassies across the Persian Gulf region amid the risk of renewed hostilities.
   
• Earnings take the spotlight – Corporate earnings were in focus Wednesday as investors digested an upbeat report from SpaceX after Tuesday’s market close, sending its shares firmly higher today. The company reported third-quarter revenue growth of 161% year over year, well above consensus expectations, driven primarily by its Super Intelligence segment, which houses its AI-related businesses. AI spending trends will remain in focus following today’s close, when Meta reports results. In addition to profit growth, investors will likely focus on management’s investment outlook and plans for funding future capital expenditures. Although the third-quarter reporting season is still in its early stages, results have been strong thus far. With 16% of S&P 500 companies having reported, 86% have exceeded consensus earnings-per-share estimates, with an average upside surprise of nearly 5%. In addition, the consensus estimate for third-quarter S&P 500 earnings growth has risen from 24.8% at the start of the quarter to 27.4% currently. Although elevated borrowing costs and persistently high inflation could pressure corporate profit margins, we expect healthy economic activity and robust AI investment to support earnings growth and equity markets over the coming months. Consistent with this view, we maintain our overweight allocation to equities relative to bonds, favoring U.S. large- and mid-cap stocks and emerging-market equities over developed international stocks. Investors should evaluate these opportunities in the context of their financial goals and risk tolerance.
   
• Housing market showing signs of softness, but broader activity remains healthy – Tuesday brought a slew of housing-market data, with building permits little changed in September at an annualized rate of 1.4 million and housing starts declining modestly to 1.2 million. Meanwhile, the National Association of Realtors Pending Home Sales Index, which dates to 2001 and tracks contracts to purchase existing homes that have not yet closed, fell to a record low of 66.0 in September, with higher borrowing costs likely weighing on prospective homebuyers. Additionally, residential investment, as measured by the Bureau of Economic Analysis and included in GDP, had contracted for five consecutive quarters before expanding in the second quarter. Although the housing sector has shown signs of weakness, it represents a relatively small share of the U.S. economy, with residential investment accounting for roughly 4% of GDP in 2025. Other areas of the economy have remained resilient despite higher interest rates. In particular, nonresidential investment has been strong, while consumer spending has remained healthy. Reflecting this resilience, real final sales to private domestic purchasers, which measures consumer spending and private fixed investment, posted its strongest quarterly increase since the first quarter of 2023 in the second quarter. Additionally, after a multiyear period of stagnation, the manufacturing sector has also shown signs of improvement, with the ISM Manufacturing PMI remaining in expansion territory throughout 2026. Although pockets of weakness persist, we believe the broader U.S. economy remains on solid footing, which should support equity markets over the coming months.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet}