Wall Street Braces for Pivotal Week: Big Tech Earnings, Jobs Data, and Inflation in Focus
A whirlwind of high-stakes economic releases and corporate earnings announcements awaits Wall Street this week as markets hover near record territory. The S&P 500 enters November’s first trading week after a mixed performance that saw the tech-heavy Nasdaq surge while broader markets took a slight dip.
Tech Giants Take Center Stage
The “Magnificent Seven” tech powerhouses are set to dominate this week’s earnings calendar. Alphabet, Microsoft, Meta, Apple, and Amazon will release their quarterly results, with investors eager to see if these tech behemoths can justify their lofty valuations. The spotlight will shine particularly bright on their artificial intelligence initiatives as Wall Street seeks concrete evidence that AI investments are beginning to pay off.
“There’s a chance that even strong earnings might not move the needle much on stock prices,” warns Nancy Tengler, CEO of Laffer Tengler Investments, noting that companies like Microsoft have a track record of beating estimates about 76% of the time.
Critical Economic Data on Deck
Three key economic reports will test investors’ optimism about a “soft landing” scenario:
- GDP Report (Wednesday): Economists expect 3% annual growth in Q3, matching Q2’s robust performance.
- PCE Inflation Data (Thursday): The Fed’s preferred inflation gauge is projected to show core PCE at 2.6% annually, down from August’s 2.7%.
- Jobs Report (Friday): Forecasts point to 125,000 new jobs in October, with unemployment holding steady at 4.1%.
Michael Reid from RBC Capital Markets cautions about potential noise in the employment data, citing “two hurricanes, a strike, and rolling furloughs” as factors that could muddy the waters.
Market sentiment and Treasury yields
The recent economic strength has pushed the 10-year Treasury yield up by about 50 basis points over the past month to around 4.2%. However, market experts suggest this might not spell trouble for stocks if it reflects healthy economic growth rather than inflation fears.
Gargi Chaudhuri, BlackRock’s Americas chief investment strategist, emphasizes the importance of quality stocks in this environment: “A gradual move higher in yields, backed by growth expectations, has historically benefited earnings leaders.”
Corporate Earnings Landscape
With 37% of S&P 500 companies having reported, overall earnings growth stands at 3.7% year-over-year. While this marks the slowest growth since Q2 2023, the tech sector continues to outperform.
- Tech Leaders: Expected 18.1% earnings growth
- Rest of S&P 500: Projected 0.1% growth
Other notable companies reporting this week include Ford, AMD, McDonald’s, Eli Lilly, and Exxon.
Looking Ahead
Markets are pricing in a 96% probability of the Federal Reserve holding rates steady at its November meeting, according to the CME FedWatch Tool. As we enter this crucial week, investors will closely monitor how the combination of tech earnings, economic data, and Fed expectations shapes market sentiment heading into the final months of 2024.
The convergence of these critical events could set the tone for market performance through year-end, making this one of the most consequential weeks for investors in 2024.
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