The upcoming earnings season could determine where stocks go next. Last week’s strong jobs report and some cooler inflation data this week boosted investor confidence in stocks, with both the S&P 500 and the Dow Jones Industrial Average hitting record highs. Technology stocks outperformed the broader market this week, with the sector up more than 2% as investors returned to risk assets. Nvidia shares rose more than 7%. And, with earnings season right around the corner, that could mean further gains. At the median, the S&P 500 is up 2% in the first four weeks of a given reporting period, according to a report from Oppenheimer this week. JPMorgan Chase & Co. and Wells Fargo & Co. were already trading higher on Friday after reporting their latest results for the week, getting the earnings season off to a good start. Still, investors are nervous. October is a seasonally weak month, and it’s especially bad ahead of the U.S. presidential election. Valuations are stretched. Traders are trying to understand the future direction of interest rates, and the Fed remains heavily reliant on weekly economic data. Meanwhile, U.S. Treasury yields are rising, with the 10-year Treasury yield topping 4.1% this week. .SPX YTD Mountain S&P 500 “It’s hard to predict where the market is going right now,” said Charlie Ashley, portfolio manager at Catalyst Funds. “Given the market dynamics, where valuations are stretched in certain asset classes, but the economy and the labor market remain balanced, that’s a challenge.” Ashley said of the near-term direction of the stock market: “To a large extent… …Depending on how strong corporate earnings are, the major averages were up for a fifth straight week through Friday. The Dow Jones Industrial Average, S&P 500 Index and Nasdaq Index all rose more than 1% this week. A strong earnings season Next week’s results will be dominated by reports from the banking industry, giving investors a closer look at the health of capital markets and consumers. While recent economic reports, including hot September jobs data released last week, have eased concerns about weak consumer spending, lingering concerns remain. Online bank Ally Financial, for example, is due to report next Friday and its treasurer reportedly said credit challenges faced by its customers have intensified, leading to results that have drawn interest from market watchers who track low-income consumers. Shares plummeted last month. Bank of America and Goldman Sachs will report results on Tuesday, while Morgan Stanley will report results on Wednesday. Several regional banks, including PNC Financial Services Group and Citizens Financial Group, are also due to report their latest quarter results. Even so, investors remain optimistic about the outlook for corporate profits this earnings season, especially as expectations decline. FactSet data showed that as of Friday, the composite profit growth rate in the third quarter was 3.87%. “Estimates have come down significantly, so the bar to clear is lower,” said Ross Mayfield, investment strategist at Baird Private Wealth Management. “You know, all else being equal That could be a good thing for the stock market’s reaction to a record high. Regardless, investors face more uncertainty this month. While many investors remain optimistic about further gains in stocks, they are also bracing for volatility given the risks of the presidential election, rising Treasury yields and escalating geopolitical risks in the Middle East and elsewhere. For example, US10Y 5D Yamagata 10-Year U.S. Treasury Yield Catalyst’s Ashley estimates that stocks are about as likely to rise 5% as they are to fall 5%. Meanwhile, Baird’s Mayfield said he wouldn’t be surprised by a 5% to 10% pullback in the coming weeks. Still, Mayfield remains bullish and says the “building blocks of the bull market” remain intact. He expects the S&P 500 could rise another 5% by the end of the year and said he will look for opportunities in growth stocks that have taken a breather since early summer. “I’m going to continue to be bullish,” Mayfield said. “I think there’s plenty of room to run.” Next week, investors will also get more insight into the state of consumer spending with the latest retail sales report and business inventory data due on Thursday. September housing starts and building permit data will also provide traders with further insight into housing’s contribution to the economy. The bond market will be closed Monday for Columbus Day, but the stock market will operate normally. One week ahead calendar all times are Eastern Time. Monday, October 14 Bond markets closed Tuesday, October 15 at 8:30 a.m. Empire Index (October) Earnings: United Airlines, JB Hunt Transport Services, Citigroup, State Street, Goldman Sachs, Walgreens Boots Alliance, Johnson & Johnson, Bank of America, PNC Financial Services Group, UnitedHealth Group, Charles Schwab Wednesday, Oct. 16 8:30 a.m. Export Price Index (September) 8:30 a.m. Import Price Index (September) Earnings: PPG Industries, Steel Dynamics, Discover Financial Services, CSX, Prologis, Morgan Stanley, Abbott Laboratories, US Bancorp, Citizens Financial Group, Synchrony Financial Thursday, October 17, 8:30 AM Continuing Unemployment Benefit Applications (10/05) 8:30 AM Initial Jobless Claims (10/12) 8:30 AM Philadelphia Fed Index (October) 8:30 AM Retail Sales (September) 9:15 AM Capacity Utilization (September) 9:15 AM Industrial Production (September) 9:15 a.m. Manufacturing production (September) 10 a.m. Business inventories (August) 10 a.m. NAHB Housing Market Index (October) Earnings: Intuitive Surgical, Netflix, KeyCorp, M&T Bank Corp. , Elevance Health, Truist Financial, Huntington Bancshares, Blackstone Friday, Oct. 18 8:30 a.m. Building permits preliminary (September) 8:30 a.m. Housing starts (September) Earnings: Schlumberger NV, Procter & Gamble, Fifth Third Bancorp , Regions Financial, American Express, Ally Financial
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