Traders are holding their breath ahead of the release of key economic data and earnings.
Third-quarter GDP and the October jobs report will be important inputs for the Fed's easing cycle.
Meanwhile, some of the biggest tech companies are set to report earnings.
Traders are bracing themselves for a big week for the stock market.
Investors will be watching key data releases — including third-quarter GDP, an inflation update from the personal consumption expenditures index, and the October jobs report — for clues about the state of the economy heading into the end of the year.
The data points will be key inputs for the Federal Reserve's interest-rate cuts. If the economy stays hot, the Fed could slow or even pause its easing cycle and spark a recalibration in markets that causes fresh volatility for stocks.
Meanwhile, five mega-cap tech firms worth a combined $12 trillion — Meta, Apple, Amazon, Microsoft, and Alphabet — are set to report third-quarter earnings this week.
Here are the key inputs for markets to keep an eye on this week.
Mega-cap tech earnings
Earnings season is peaking this week. More than 90 S&P 500 companies are set to report, including the mega-cap giants Meta Platforms, Microsoft, Apple, Amazon, and Alphabet. Together, those five companies are worth about $12 trillion.
Investors will be looking for signs of AI growth — and with it, signals that the tech bull run will continue into 2025.
Alphabet reports on Tuesday, followed by Microsoft and Meta on Wednesday.
For Meta, analysts expect to see strong growth and a stable core business. In a note last week, analysts at Bernstein described Meta as the new "set it and forget it" blue-chip stock. They raised their price target to $675 a share from $600, representing potential upside of 16% from the price of the stock at midday on Monday.
Apple has an especially big week ahead. The iPhone maker reports on Thursday and is expected to unveil software and hardware updates this week, including access to highly anticipated Apple Intelligence features with the iOS 18.1 update.
In a note last Wednesday, the supply-chain analyst Ming-Chi Kuo of TF International Securities warned of weak demand for Apple's iPhone 16 models and argued there was no sign that Apple's coming AI capabilities had boosted demand for its devices.
Amazon will also report on Thursday. Deutsche Bank analysts expect strong results driven by operating income at the high end of guidance and higher operating income for next year.
The analysts see several sources of upside, including faster growth of total ad revenue in its Prime Video segment; lower operating expenses for Amazon Web Services; and slow growth of other operating expenses.
Investors will also be watching for clues about the strength of the AI trade.
Except for Apple, the tech giants reporting this week are among Nvidia's biggest customers. As Nvidia's earnings aren't for another month, the third-quarter results and executive commentary will be gauges of demand from the so-called hyperscalers driving the bulk of GPU sales.
The Wedbush Securities analyst and tech bull Dan Ives described this week as the "world series for big tech." He predicted that earnings results would come in strong and send tech stocks higher into the end of the year.
"Investors need to see the monetization of AI spreading to the rest of the tech landscape and the next few weeks will be the linchpin to confirmation that the AI 'use case phase' have now begun within the enterprise world," Ives wrote in a note on Sunday.
3rd-quarter GDP and the Fed's favorite inflation gauge
The flurry of key data releases starts with third-quarter GDP on Wednesday.
Last week, stocks took a hit as the bond market sold off based on expectations for interest rates to remain higher; cautious comments from Fed officials; and rising odds of another Donald Trump presidency, which is widely seen as an inflationary event given his promises of high tariffs.
Depending on the data this week, the bond market could reprice and send shocks through the stock market as investors adjust rate expectations.
The Atlanta Fed's GDPNow tracker on Friday showed an expectation of 3.3% economic growth for the quarter. That would mark significant growth from last quarter's 3% growth.
A hot economy is a hurdle to aggressive rate cuts from the Fed and could cause markets to reprice expectations for interest rates through the rest of this year and into 2025.
Personal consumption expenditures, due Thursday, will be another input for the Fed as it nears its goal of 2% inflation. The Fed's preferred inflation gauge is expected to show that prices rose by 2.1% year over year in September after coming in at 2.2% in August.
The October jobs report
After a blockbuster September jobs report, the stakes are high for October's jobs data on Friday.
The data has become a double-edged sword for the market. If job growth remains high, that could reduce the need for more rate cuts. If the data is weaker than expected, that could prompt more rapid easing but also hint at a weakening economy.
Economists expect to see that 110,000 jobs were added in the month, far fewer than the 254,000 added in September.
JPMorgan analysts forecast a slightly milder increase of 100,000. They said recent storms and strikes could weigh on job growth, making the report difficult to interpret.
"A decline in the unemployment rate would likely increase chatter around a Fed 'skip' in November, but barring an unexpectedly and remarkably strong set of data next week, we think it would take more months of good data before that possibility gets onto the Fed's radar," the analysts said in a note.
According to the CME FedWatch tool, markets expect the Fed to deliver 25-basis-point cuts at the November and December meetings.
Correction: October 28, 2024 — An earlier version of this story misstated the number of jobs the US added in September. It was 254,000, not 245,000.
