S&P 500 adds to mid-October rebound from bear market low

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Traders work on the floor of the NYSE in New York

By Noel Randewich

(Reuters) – The S&P 500’s over 1% surge on Tuesday adds to two weeks of strong gains as investors speculate that third-quarter earnings reports could help pull the market out of its downturn.

Apple, Tesla and other tech-related stocks drove Wall Street higher, with Microsoft and Alphabet each adding about 1% ahead of their quarterly reports after the bell as investors bet that a relatively strong start to third-quarter earnings season will continue.

With its latest rise, the S&P 500 is up about 8% from its closing low on Oct. 12, and a close at its current level would mark the index’s third largest gain from a low so far in 2022’s bear market. Tuesday’s gains put the S&P 500 about 10% above its intra-day low on Oct. 13. (Graphic: S&P 500 recoveries from bear market lows, https://graphics.reuters.com/USA-STOCKS/BEAR/xmvjkgrogpr/chart.png)

Over 280 days have passed between the S&P 500’s record high and its most recent low. That compares to 33 days that the S&P 500 took in 2020 to fall from its record high close to its lowpoint as global markets reeled because of disruptions caused by the coronavirus pandemic. (Graphic: S&P 500 bear markets, https://fingfx.thomsonreuters.com/gfx/mkt/zgpobwkmzvd/Pasted%20image%201666721196292.png)

This year’s selloff has dragged the S&P 500’s forward earnings valuation down from a historically high 21 to about 15, just below its 10-year average of 17, according to Refinitiv data.

Earnings expectations have also sunk this year, with analysts on average expecting S&P 500 companies to increase their adjusted earnings per share by 6.8% in 2022. That compares to an estimate of 9.5% in July. (Graphic: S&P 500’s forward PE dips below 10-year average, https://fingfx.thomsonreuters.com/gfx/mkt/klpygedkwpg/Pasted%20image%201666721482856.png)

Still, third-quarter earnings season so far has been better than expected, with nearly three quarters of the 129 companies in the S&P 500 exceeding earnings per share estimates, according to Refinitiv data.

Following this year’s rout, several sectors this month are showing signs of recovery. (Graphic: Every S&P 500 stock’s performance in October, https://fingfx.thomsonreuters.com/gfx/mkt/zjvqjqwjxpx/Pasted%20image%201666721787433.png)

With Amazon, Microsoft, Tesla, Nvidia and other tech-related heavyweights still badly bruised in 2022, the S&P 500 growth index’s performance is far below the value index, which reflects smaller losses in sectors ranging from industrials to consumer staples. (Graphic: Growth loses out to value, https://graphics.reuters.com/USA-STOCKS/BEAR/xmvjkgrogpr/chart.png)

(Reporting by Noel Randewich; editing by Grant McCool)