This week, investors will be closely monitoring corporate earnings releases, retail sales data, and unemployment claims reports to further validate the economic resilience that has bolstered equity markets this month. This will put the US consumer confidence in the focus. The benchmark S&P 500, which has gained more than 21% this year, is poised to achieve its fifth straight weekly gain as earnings season gets underway. It is also on the verge of setting a new record high.
The biggest economy in the world has had a streak of positive macroeconomic statistics, allaying investors’ concerns about a downturn that shook markets in June and July. Earlier this month, the US Federal Reserve decreased interest rates, which has traditionally been a powerful combo for stock market gains, while the economy continued to grow at a robust pace. One example of this was the massive jobs report that was released.
According to analysts, this week will also be crucial to monitor for changes in the price of crude oil and geopolitical developments. Furthermore, it will be important to take into account US statistics, changes in US bond yields, and the US dollar index. Important triggers will include the impending European Central Bank (ECB) meeting and updates from China and Japan.
The Citigroup Economic Surprise Index, which gauges how economic data stacks up against expectations, went positive this month after declining since the beginning of May, according to news agency Reuters. Bank of America and Citigroup are among the other institutions that will provide additional information on Tuesday when they report.
Wall Street Week Ahead: ECB policy verdict, US Presidential Election buzz, macro data, Q3 earnings
Q3 Earnings
During the next two weeks, more than 150 S&P 500 businesses are anticipated to release their results. Profits from big banks, Procter & Gamble, American Express, Netflix, United Airlines, and other companies will provide a comprehensive picture of consumer spending, which makes up more than two-thirds of the US economy. The start of the earnings season was marked on Friday by a spike in the stock prices of JPMorgan Chase and Wells Fargo, both of which are above analyst projections.
According to Bloomberg Intelligence data, strategists expect that the S&P 500 Index companies will report their worst performance in the last four quarters, with only a 4.3% increase in third-quarter profits over the same period last year. Estimates for growth in mid-June were for an increase of 8.4%; in the second quarter, growth shot up to 14%. The S&P 500 reached a new record high on Friday and is up 22% in 2024—its greatest start to a year since 1997—despite the lower forecasts.
US macroeconomic data
On October 17, retail sales data is anticipated. Despite a protracted era of high interest rates, expectations have solidified that the economy will escape a downturn. Goldman Sachs, for instance, cut its prediction of a US recession in the upcoming year by five percentage points, to 15%, in response to the job figures.
Key international economic data, including US initial unemployment claims, US core retail sales (September), US industrial output (September), China GDP (YoY) (Q3), and UK CPI inflation statistics, will steer the market outlook.
US Presidential Election Buzz
Investors will be on the lookout for business CEOs who discuss trade policy, economic, and other political concerns, especially with the US presidential election just a few weeks away. BofA data indicates that around 110 corporations, or 62% more than four years earlier, discussed “election” in their second-quarter earnings calls.
European Markets
Bloomberg reports that the approaching earnings season in Europe may be a turning point for the Stoxx 600 index, which is closing in on all-time highs. As the third quarter approached, analysts reduced their earnings projections; since mid-June, a Citigroup indicator has shown more downgrades than upgrades. Regional economies are growing very slowly, and Germany—the world’s largest manufacturer—has predicted that the economy would contract for a second year.
