No further changes expected till now from Fed – Economic Highlights

This morning’s September Retail Sales report, which was delayed by the shutdown, came in weaker than expected on the ‘headline’ but the report’s internals were largely in-line with expectations. The headline ‘miss’ provides for dramatic headlines, but the ex-autos & gasoline numbers follow the moderating growth pace of the preceding months. Just like all other recent economic data, these numbers represent the pre-shutdown month, with next month’s numbers likely distorted by the Washington noise. This lack of ‘clean’ data is a big reason why the Fed is expected to remain on the sidelines longer than would otherwise be the case.

On the earnings front, Apple’s (AAPL) will likely get positive follow through in today’s session, following conflicting after-market reactions to the company’s gross margin guidance Monday evening. Investors were at first disappointed with the lowered margin guidance, but started appreciating the numbers better after accounting for deferred revenues due to newly announced software giveaways to promote sales. The company beat expectations, but total earnings were down from the year-earlier period.

Including this morning’s long line-up of releases from Pfizer (PFE), Cummins (CMI), Aetna (AET) and others, we now have Q3 results from 278 S&P 500 members that combined account for account for 63.2% of the index’s total market capitalization. Total earnings for these 278 companies are up +6.3%, with 68% coming ahead of consensus earnings expectations. Total revenues are up +3.3% and 47.8% are beating top-line expectations. This is better performance, particularly on the earnings side, than what this same group of companies reported in Q2 and the 4-quarer average. Revenue growth and beat ratios are bit a weaker relative to Q2, but not by much.

The composite earnings and revenue growth rates for Q3, combining the results for the 278 companies that have reported with the 222 still to come, are +3.5% and +1.3%, respectively. This puts Q3’s earnings growth rate on track to be modestly better than what we saw in the first two quarters of 2013. Expectations for 2013 Q4 have started coming down, but they likely still have plenty of room for coming down, with total earning for the S&P 500 expected to be up +8.5%, down from +9.1% last week and higher than +10% at the start of the reporting season.