Most Stocks Rose While the Index Fell: Earnings Week Is the Test

Dear readers,

The week’s closing numbers settle the question we left open on Friday: this was a rotation, not a retreat. The Nasdaq had its worst week in a long time, yet roughly 70 percent of S&P 500 members gained, while the index itself lost almost 2 percent. The leaders of recent months were sold, and defensive, broadly diversified names took their place. Next week brings the test, with Netflix, SpaceX, Meta, Tesla and IBM all reporting results.

Rotation: Yesterday’s Losers, This Week’s Winners

The Nasdaq Composite fell about 4.5 percent on the week, while the Dow Jones rose slightly. The gap between the two indices has not been this wide since July 2002. Palantir lost more than 7 percent on Friday and closed at $186.03. Dell and HPE each lost more than 20 percent on the week, after more than tripling since the end of March.

Since the record on October 6, the year’s 100 strongest S&P stocks have lost about 5 percent on average, while the 100 weakest have gained about 4 percent.

This is not panic. It is profit-taking in the favorites. The equal-weighted S&P 500 rose for the second week in a row, and investors with broad diversification came through the week well. Those holding a handful of high-flyers are now learning what concentration risk costs. Palantir reports on November 2.

Defensive Strength: Coca-Cola, P&G and Berkshire

The consumer staples ETF XLP gained about 5 percent on the week. Procter & Gamble rose 1.45 percent on Friday to close at $159.35, up from $157.08 on Thursday. Against the previous Friday’s close of $151.23, that is a weekly gain of about 5.4 percent.

The stock rose even though the company is expected to report a profit decline on October 22. Analysts look for adjusted earnings of about $1.89 per share for the July–September quarter, compared with $1.99 a year earlier. The market apparently rewards predictability: P&G plans to pay out about $10 billion in dividends and $5 billion in share buybacks in the current fiscal year.

Coca-Cola closed Friday at $93.90, just below its 52-week high of $94.10, and is up 35 percent year to date. It has raised its dividend for 64 consecutive years, and the yield stands at 2.24 percent. Johnson & Johnson closed at $255.56 and holds its AAA rating.

Berkshire Hathaway rose on Friday to its highest level since Warren Buffett announced his retirement in May 2025. The B shares closed at $532.02. At the end of June, the group was sitting on $365.5 billion in cash, almost a third of its market value. For investors who want to keep their powder dry in an expensive market, where valuations are historically the second highest, that is a cushion.

Meta: The Test for Spending Appetite

Meta reports on Wednesday after the US market close, which means the early hours of Thursday in Europe. The stock closed Friday at $709.33, after a drop of 3.7 percent that day, and is up about 7.5 percent year to date.

The company itself is targeting revenue of $61 billion to $64 billion. Consensus sits around $63 billion, an increase of about 23 percent, with adjusted earnings per share expected at about $6.85.

Revenue is considered the easy part. Free cash flow is the pressure point: in the second quarter, only $784 million was left, compared with $8.5 billion a year earlier. For the third quarter, the market expects negative free cash flow of about $9 billion, with capital expenditure of about $41 billion.

Should investors sell immediately? Or is it worth buying Meta?

Bank of America sees Meta back on the offensive with the AI agent Muse and a new flagship model. The main risk, it says, is pressure on 2027 earnings per share from rising spending.

The case for Muse still needs building. After five weeks, it had only 1.3 million daily users, against 3.6 billion daily users across the group. Meta must show that the billions translate into revenue. If it does, that would be an argument for the whole group of big technology stocks, which have just had to give back value.

Tesla and IBM: Two Stocks with Catching Up to Do

Tesla also reports on Wednesday. The company delivered 486,532 vehicles in the third quarter, the third-best quarter in its history, yet analysts still expect lower profits. The stock closed Friday at $354.72 and is down about 21 percent year to date. Gasoline prices above $4 per gallon support demand for electric cars. The results must show whether that also reaches the margin.

IBM reports the same evening and is also under pressure. The stock closed at $232.14, about 22 percent below the start of the year and far below its June high of $332.46. Texas Instruments, Lam Research and SAP also report on Wednesday.

Netflix and SpaceX: Two Reports on Tuesday Evening

Netflix closed Friday at $70.53 and is down 25 percent year to date. The company is cutting about 1,000 jobs, roughly 6 percent of its workforce, and Peter Rice takes over global content leadership from Bela Bajaria. For the third quarter, Netflix is targeting revenue of $12.86 billion, an increase of 12 percent.

Several analysts have recently trimmed their price targets: BMO from $135 to $125, Wedbush from $105 to $90 and KeyBanc from $92 to $85. Jefferies initiates coverage with a “Buy” rating and an $85 target. Even after the cuts, every one of those targets sits well above the current price.

SpaceX also reports on Tuesday after the close. The stock closed Friday at $146.03. The comparison base is the second quarter, when revenue reached $7.81 billion, up 92 percent, but the company posted a net loss of $541 million.

Interest on a $25 billion bond is a new burden, at about $366 million per quarter, compared with only $20 million in the second quarter. Starlink, with 12 million subscribers most recently, remains the revenue anchor. The AI division, however, consumes a great deal of capital.

The Takeaway

The coming week puts several of the market’s biggest names on the stand. Meta must justify its spending, Tesla its margin, Netflix its fresh start and SpaceX its path to profitability. The Fed meets on October 27 and 28. Whether the broad market strength holds, or technology stocks drag the index down again, will be decided by the results of the coming days.

Those looking to hedge are turning to last week’s winners. They should keep an eye on those stocks’ high valuations.

I hope you enjoy the rest of your weekend.

Best regards,
The StocksToday.com Editorial