Inflation, Big Tech earnings, and a crucial jobs report: What to know this week

Stocks are entering one of the busiest weeks of the year near record highs.

A late-week rally led by a surge in Tesla (TSLA) shares helped the Nasdaq Composite close the week higher by about 0.9%, just shy of a new record high. Meanwhile the S&P 500 (GSPC) fell more than 0.3% and the Dow Jones Industrial Average (DJI) slid over 2.6%.

In the week ahead, an update on the Federal Reserve’s preferred inflation gauge, the October jobs report, and earnings from Big Tech stalwarts Alphabet (GOOGL,GOOG), Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), and Meta (META) will drive the direction of markets to kick off November.

Updates on third quarter economic growth, job openings, service and manufacturing sector activity, and consumer confidence are also on the calendar.

A busy week of corporate earnings awaits, with 169 members of the S&P 500 expected to report quarterly results. Ford (FORD), AMD (AMD), McDonald’s (MCD), Eli Lilly (LLY), and Exxon (XOM) will be among the companies highlighting the schedule.

Economic report card

Markets have recently increasingly priced in a so-called soft landing for the US economy, where inflation falls to the Fed’s 2% target without a significant downturn in economic growth.

A slew of economic data in the week ahead will put investors’ bets to the test. First up on Wednesday, the Bureau of Economic Analysis is slated to release the advance estimate for third quarter Gross Domestic Product (GDP). Expectations are that the US economy continued on its solid path and grew at an annualized rate of 3% in the quarter, in line with the growth seen in the second quarter.

Thursday will bring the latest reading of the Fed’s preferred inflation gauge. Economists expect annual “core” PCE — which excludes the volatile categories of food and energy — to have clocked in at 2.6% in September, down from the 2.7% seen in August. Over the prior month, economists project “core” PCE at 0.3%, compared to 0.1% the month prior.

On Friday, the Bureau of Labor Statistics will provide a fresh look at the national employment situation. The October jobs report is expected to show 125,000 nonfarm payroll jobs were added to the US economy, with unemployment holding steady at 4.1%, according to data from Bloomberg. In September, the US economy added 254,000 jobs, while the unemployment rate fell to 4.1%.

“After two hurricanes, a strike, and rolling furloughs, we anticipate a lot of noise in next Friday’s October employment report,” RBC Capital Markets’ Michael Reid wrote in a note to clients on Thursday.

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Given the variety of factors that could weigh on job growth, Reid wrote that the unemployment rate will “provide the best read on the labor market this month. “

Entering the busy week of economic data, markets are pricing in a 96% chance the Federal Reserve will cut interest rates at its November meeting, per the CME FedWatch Tool.

Big Tech week

With 37% of the S&P 500 having reported quarterly results, the index is pacing for 3.7% year-over-year earnings growth. According to FactSet, this would be the slowest annual growth rate since the second quarter of 2023.

Big Tech earnings will test that narrative in the week ahead. FactSet recently pointed out the “Magnificent Seven” tech stocks were set to grow earnings year over year by 18.1% this quarter, while the other 493 companies in the S&P 500 are expected to see just 0.1% growth.

After a late-week tech rally brought several Big Tech names back near record highs, Apple, Alphabet, Amazon, Meta, and Microsoft are all expected to report quarterly earnings in the week ahead. The reports will once again bring artificial intelligence back into full focus. Investors will be listening for clues both on how much these companies are spending on the emerging technology and whether or not it’s driving profits.

Given the recent surge in Big Tech stocks, Laffer Tengler Investments CEO & chief investment officer Nancy Tengler warned Yahoo Finance about potential muted reactions off the earnings releases.

“There is a risk that you’ll see a name like Microsoft beat [estimates], which they do about 76% of the time on earnings historically, and you may get nothing out of the stock price,” Tengler said.

The rise in yields isn’t all bad

Economic data has been surprising Wall Street to the upside over the past month. The Citi Economic Surprise index, which measures whether economic data is coming in better or worse than expectations, has surged to its highest level since April.

This has coincided with an increase in the 10-year Treasury yield (^TNX), which has added about 50 basis points over the past month to hover near 4.2%. In some instances, a push higher in yields can be a headwind for stocks. But as Ritholtz Wealth Management’s chief markets strategist Callie Cox pointed out on X, equity strategists have argued that if the increase in yields comes alongside solid economic growth, it could still be a welcome sign for stocks.

“A gradual move higher [in yields] … for the right reasons, with the expectation of higher growth, historically has tended to be good for those earnings growers,” Gargi Chaudhuri, BlackRock Americas chief investment and portfolio strategist, told Yahoo Finance. “So keeping quality at the core of your portfolio remains really important.”

Weekly Calendar

Monday

Economic data: Dallas Fed manufacturing activity, October (-9 expected, -9 prior)

Earnings: Ford (F), Philips (PHG), Waste Management (WM)

Tuesday

Economic data: S&P CoreLogic 20-city year-over-year NSA, August (5.92% prior); Conference Board consumer confidence, October (99.0 expected, 98.7 prior) JOLTS job openings, September (7.9 million expected, 8.04 million prior); Dallas Fed services activity, October (-2.6 prior)

Earnings: Alphabet (GOOGL,GOOG), AMD (AMD), BP Oil (BP), Chipotle (CMG), Crocs (CROX), McDonald’s (MCD), JetBlue (JBLU), Paypal (PYPL), Pfizer (PFE), Reddit (RDDT), Royal Caribbean Group (RCL), Snap (SNAP), Sofi (SOFI), Visa (V)

Wednesday

Economic data: MBA Mortgage Applications, week ended Oct. 25 (-6.7% prior); ADP private payrolls, October (+100,000 expected, +143,000 prior); GDP annualized quarter-over-quarter, third quarter advance estimate (3% expected, 3% prior); Core PCE Price Index quarter-over-quarter, third quarter advance (+2.8% prior); Pending home sales month-over-month, September (0.6% prior)

Earnings: ADP (ADP), Caterpillar (CAT), Carvana (CVNA), Coinbase (COIN), Etsy (ETSY), Eli Lilly (LLY), Microsoft (MSFT), Meta (META), Roku (ROKU), Robinhood (HOOD), Starbucks (SBUX)

Thursday

Economic data: Core PCE index month-over-month, September (+0.2% expected, +0.1% prior); Core PCE index year-over-year, September (+2.6% expected, 2.7% prior); Initial jobless claims, week ending Oct. 26 (227,000 prior); Continuing claims, week ending Oct. 19 (1.897 million prior); Employment cost index, third quarter (0.9% expected, 0.9% prior); Challenger jobs cuts, year-over-year, October (+52.4% prior); Personal income, September (+0.4% expected, +0.2% prior); Personal spending, September (+0.4% expected, +0.2% prior); MNI Chicago PMI, October (46.6 prior)

Earnings: Apple (AAPL), Amazon (AMZN), Conoco Phillips (COP), Estee Lauder (EL), Kellanova (K), Intel (INTC), Mastercard (MA), Norwegian Cruise Lines (NCL), Peloton (PTON), Merck (MRK), SiriusXM (SIRI)

Friday

Economic calendar: Nonfarm payrolls, October (+125,000 expected, +254,000 prior); Unemployment rate, October (4.1% expected, 4.1% previously); Average hourly earnings, month-over-month, October (+0.3% expected, +0.4% prior); Average hourly earnings, year-over-year, October (+4% expected, +4% prior); Average weekly hours worked, October (34.2 expected, 34.2 prior); Labor force participation rate, (62.7% previously); S&P Global US Manufacturing PMI, October final (47.8 prior); ISM manufacturing, October (47.6 expected, 47.2 prior); ISM prices paid, October (48.3 prior)

Earnings: Charter Communications (CHTR), Dominion Energy (D), fuboTV (FUBO), Chevron (CVX), Exxon Mobil (XOM), Wayfair (W)

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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