Weekly Update 10/23/2026: Corporate Earnings Start Strong as High Mortgage Rates Pressure Housing Sector
- RTX beats earnings expectations while raising forward guidance
- ABB delivers another solid quarter on continued strong order flow based on data center demand
- NextEra beats profit expectations on continued strong data center demand for power
- Elevance beats earnings expectations while raising forward guidance
- AT&T beats earnings expectations while raising forward guidance
- IBM beats profit and revenue expectations as delayed infrastructure deals came through this quarter
- KMI beats profit and revenue expectations on strong LNG export demand
- CACI beats profit expectations while raising both profit and revenue forward guidance
- Omnicom beats profit and revenue expectations on strong organic revenue growth
Domestic Economic News
New US residential construction declined in September to a four-month low and building permits for single-family homes slid, highlighting a struggling housing market. Housing starts decreased 5.2% to an annualized rate of 1.22 million, according to federal government data released Tuesday. The pace trailed all estimates in a Bloomberg survey of economists. Starts of single-family homes decreased to the lowest level in a year, and applications for permits on those dwellings — a gauge of future construction — dropped to the lowest since early 2023. The residential real estate market is being constrained by affordability challenges now further compounded by higher mortgage rates. Homebuilders, whose confidence has slumped to a 14-year low, may also be reluctant to begin construction on new homes before making more progress on inventories. The report showed new construction on multifamily projects, which include apartments and can be volatile on a monthly basis, fell nearly 7%. Sluggish home construction has weighed on economic growth in five of the last six quarters. Before Tuesday’s report, the Federal Reserve Bank of Atlanta’s GDPNow forecast penciled in residential investment declining an annualized 1.3% in the third quarter. Completions of single-family homes last month dropped to the weakest pace in more than six years. Starts of single-family homes in the South, the nation’s largest homebuilding region, dropped to the lowest level since January. They also fell in the West and Midwest. The new residential construction data are volatile, and the government report showed 90% confidence that the total monthly change ranged from a 17% decline to a 6.6% gain.
In further tough news this week on the housing front, pending sales of existing US homes fell to a record low in September as high mortgage rates continued to weigh on demand. An index of contract signings from the National Association of Realtors tumbled 7.3% to 66 last month, its lowest reading since records began in 2001, according to data released Tuesday. The decline was sharper than any estimate in a Bloomberg survey of economists. The bleak reading is the latest in a series of reports showing the US housing market remains mired in gridlock amid high borrowing costs and home prices. Mortgage rates have been climbing since the outset of the Iran war and are now at the highest levels in almost three years. Contract signings are down nearly 13% from a year ago, based on data unadjusted for seasonal variations. “Market conditions weakened in September due to fast-rising mortgage rates,” NAR Chief Economist Lawrence Yun said in a statement. “Buyers and sellers may simply be holding back until mortgage rates move favorably.” Contract signings typically take place a month or two before closings. They have historically served as a forward-looking indicator of existing-home sales. Pending home sales plummeted across all US regions. The West saw the steepest decline of 9.2%, while sales in the South — the biggest home-selling region — fell 8.2%. Separate data released Tuesday showed groundbreakings of new homes slowed last month to one of the weakest readings since 2020.
Jobless claims continued to signal limited layoffs in the survey week for October payrolls. Recent announcements suggest AI is beginning to reduce staffing needs in some industries, but broader evidence of AI-driven layoffs remains limited. Initial claims declined 6,000 to 194,000 in the week ended Oct. 17, below the 200,000 expected by the consensus estimate. The prior week was revised up by 1,000 to 200,000. Continuing claims increased by 25,000 to 1.728 million in the week ended Oct. 10. The jobless claims report aligns with data from Revelio Labs suggesting AI’s impact is showing up more clearly through weaker hiring — especially for junior workers in AI-exposed occupations — than through increased layoffs. As the Fed prepares to meet next week, the labor market picture for October appears little changed. Layoffs remain low, suggesting employers are largely holding on to existing workers while remaining cautious about adding new ones.
Interest Rate Insight and the Fed
US mortgage rates fell last week for the first time in more than two months, a small step down that did little to revive a moribund housing market. The contract rate on a 30-year fixed mortgage declined 9 basis points to 7.41% in the week ended Oct. 16, according to Mortgage Bankers Association data released Wednesday. Still, rates are up more than 1 percentage point from a year earlier and near the highest since 2023. The MBA’s purchase index, which measures loan applications, fell for the seventh straight week. The 7.3% decline left the gauge at the lowest level since early January 2025. Refinance activity dropped for a ninth straight week, with the group’s measure also sliding to its weakest point since the start of last year. The figures echo separate reports out this week that showed the extent to which high mortgage rates and elevated home prices are battering the housing market. Housing remains a glaring weak spot in the economy. The Federal Reserve Bank of Atlanta’s GDPNow model forecasts that residential investment probably subtracted from gross domestic product for the sixth time in the last seven quarters. Next week, the government will issue its first estimate of third-quarter GDP.
Impactful International News
German investor confidence dropped for the first time since April, highlighting the economy’s bumpy recovery from a multiyear malaise. An expectations index by the ZEW institute decreased to 28.1 in October from 34.7 the previous month. That’s below the median estimate of 30 in a Bloomberg survey. A measure of current conditions improved much more than expected but remained subdued at -35.9. “The German economy is slowly emerging from stagnation, but the recovery is not self-sustaining,” ZEW President Achim Wambach said Tuesday in a statement. “Private consumption and investment remain weak because of high energy prices. They put real incomes under pressure, increase production costs and keep inflation higher for longer.” Buoyed by vast infrastructure and defense spending, Europe’s largest economy has proven unexpectedly resilient to the conflict in the Middle East. Despite the rising energy costs the fighting has caused, the Bundesbank says Germany is now clearly on a path to recovery. Following surprisingly strong growth in the first half of 2026, the government has raised its full-year projection to 1.3%, more than double the previous forecast and good news for the country’s struggling chancellor, Friedrich Merz. For 2027, expansion is seen at 1.1%. But headwinds like bond-market turmoil and elevated oil and natural gas prices remain. In addition, recent state-election wins for extremist parties have raised concern that Merz’s government could water down pro-growth reforms.
UK joblessness fell and employers added jobs, according to official figures that give an unexpected boost to Chancellor of the Exchequer John Healey ahead of his crucial budget next week. The number of payrolled employees rose 13,000 last month, tax data showed on Tuesday morning, defying economists’ forecasts of an 8,000 drop. August’s number was significantly revised up, from a 26,000 fall to a 1,000 increase. Unemployment decreased to 4.7% in the three months through August, the lowest since July 2025, though the Office for National Statistics has cautioned that the estimate is still affected by a quality issue with the collection of that data. The pound extended gains and was up 0.4% to $1.3353 after this news was released. Traders slightly added to bets on interest-rate hikes from the Bank of England, fully pricing four quarter-point increases and a 50% chance of a fifth. “Stronger growth has now finally landed with the labor market,” said Deutsche Bank’s chief UK economist Sanjay Raja. “Limited budget speculation has meant that firms are cautiously hiring.” The ONS data adds to evidence from private surveys. British businesses are looking to hire more workers for the first time in over two years, according to a closely watched poll of recruiters.
Canada’s inflation rate ticked up to 3.1% in September as gasoline prices rose, while some gauges of underlying price pressures eased. Gasoline prices rose 27.8% on an annual basis last month compared with a slower pace of 22.8% in August, Statistics Canada reported on Monday. Excluding food and energy, the inflation rate held at 2.1%. Meanwhile, the Bank of Canada’s median and trim measures of core inflation edged down to 1.9% and 1.8%, respectively. The consumer price index increased 0.1% on a monthly basis. Economists surveyed by Bloomberg had expected the headline inflation rate to tick up to 3.2% in September from 3% in August, and yearly change for the Bank of Canada’s preferred core measures to remain the same. The Canadian dollar trimmed its gains of the day after the report. It still remained stronger on the day against the US currency, trading 0.3% up to C$1.4101. The loonie advanced about 1% in October so far. Traders in overnight swaps placed the odds of a rate hike this month at nearly 70% prior to the CPI release, and edged back slightly after the smaller-than-expected increase in price growth. On Saturday, Bank of Canada Governor Tim Macklem said he’s seeing more evidence that higher oil prices are supporting economic growth in Canada, and the bank’s inflation outlook is expected to be higher when it offers its new forecast in the monetary policy report later this month.
China nudged economic growth back into Beijing’s target range in the third quarter, in a surprise rebound powered by factory production and the artificial intelligence super-cycle that are largely failing to feed into stronger domestic demand. Gross domestic product beat expectations and grew 4.5% from a year ago, picking up from a gain of 4.3% in the second quarter, according to data released by the National Bureau of Statistics on Monday. That took expansion in the first nine months of the year to 4.6% — within the government’s annual goal of 4.5%-5%. A split between a struggling consumer economy and the booming export sector widened further in September. While industrial production expanded at a six-month high of 5.5%, retail sales saw a far more modest pickup to 1.1%, an improvement helped by faster price growth and an earlier public holiday this year. A slump in infrastructure investment deepened. “Growth is relying on a single external engine that is showing early signs of strain,” said Dave Chia, an economist at Moody’s Analytics. “Trade risks are building.” The divergence is emblematic of a deeper divide in the world’s second-largest economy, as a protracted housing downturn and a soft job market deter households from spending at a time when exporters and AI-related sectors are on a historic tear. After turning more supportive in recent months, policymakers are set to hold off on further easing now that their target is within reach, meaning that subdued consumption will probably haunt the economy into 2027.
Performance
You can review your portfolio at www.SGKwealthadvisors.com.
Portfolio Adjustments
We continue to monitor our SGK Watch List of stocks for opportunities on attractively priced securities for our clients. We are always seeking new investments for our clients that show promise based on our fundamental analysis!
Company EventsSGK writes additional weekly commentary for clients of the firm detailing recent events and earnings of core equity holdings.
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Steigerwald, Gordon & Koch, Inc. [“SGK”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from SGK. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. SGK is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the SGK’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.sgkwealthadvisors.com. Please Note: SGK does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to SGK’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a SGK client, please contact SGK, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.