The Nasdaq Composite rose to a record high on Friday, driven by gains in large-cap technology stocks. The index climbed 0.56%, closing at 18,518.61. Meanwhile, the S&P 500 slipped slightly by 0.03% to finish at 5,808.12, and the Dow Jones Industrial Average (DJIA) dropped 259.96 points, or 0.61%, ending the session at 42,114.40. Investor anticipation of upcoming earnings from major tech companies fueled the rally, with Nvidia (NASDAQ:NVDA) rising 0.8%, and Meta Platforms (NASDAQ:META), Amazon (NASDAQ:AMZN), and Microsoft (NASDAQ:MSFT) also posting gains. Despite the Nasdaq’s seventh consecutive weekly gain, advancing nearly 0.2%, both the S&P 500 and the Dow saw their six-week winning streaks come to an end. The S&P 500 was down nearly 1% for the week, while the Dow declined 2.7%.
This week’s economic data will take center stage as the Federal Reserve enters a communications blackout ahead of the November 7 FOMC meeting. While the Fed has clearly signaled its intention to implement a 25 basis-point rate cut at the meeting, the upcoming data could influence the tone following the announcement. Notably, the October employment report is expected to be the key release of the week. However, the data may be skewed by the effects of Hurricane Milton, which struck Florida during the nonfarm payrolls survey period. “Next week’s October jobs report is critical after September showed an unexpected acceleration in job growth and decline in the unemployment rate,” Citi strategists said in a note. Despite this, they believe the labor market continues to soften, with the hiring rate remaining subdued.
The October jobs figure is likely to be impacted by both the hurricane and ongoing strikes, with Ciit projecting a modest 90,000 increase in payrolls. Meanwhile, the unemployment rate is expected to see less of an effect, with predictions indicating a rise back to 4.2%. “Markets may fail to find a clear direction until after Friday’s jobs report and the presidential election the following week,” strategists noted.
Other key economic reports to watch this week include Wednesday’s ADP employment data, followed by core PCE inflation figures and initial jobless claims on Thursday, and the ISM Manufacturing PMI release on Friday.
Investors brace for the busiest week of Q3 earnings season
This week also marks the busiest period of the third-quarter earnings season, with more than 150 companies from the S&P 500 scheduled to release their results. Most notably, five of the “Magnificent Seven” mega-cap companies— Google parent Alphabet (GOOGL), Microsoft Corporation (MSFT), Meta Platforms Inc (META), Apple (AAPL), and Amazon.com Inc (AMZN)—are slated to release their quarterly earnings.
These companies have been key drivers of market performance in recent years and collectively represent 23% of the S&P 500’s weight. As a result, their earnings reports could significantly influence broader market indices. Investors are particularly keen to see whether these tech giants’ hefty investments in artificial intelligence are starting to pay off. According to BofA Global Research, AI “hyperscalers”—Microsoft, Amazon, Alphabet, and Meta—are expected to boost their capital expenditures by 40% this year, while the rest of the S&P 500 companies are projected to reduce spending by 1% in 2024. Alongside these tech behemoths, investors will also scrutinize the financial performance of AMD (AMD), Pfizer (PFE), Eli Lilly (LLY), Intel (INTC), Uber (UBER), Mastercard (MA), and Visa (V), among many others.
What analysts are saying about US stocks
Citi: “With market consensus seemingly coalescing around a “Red Sweep”, this may limit near-term upside on Trump trades, while leaving room for rotation in a Harris win.” “Despite strong moves in the cross-asset space, our long/short strategies for Trump still remain below mid-September levels, suggesting potentially more room to run in a Trump win scenario. Potential Trump trades that have lagged include the UK and ex-US Energy. Harris-linked trades that have underperformed include Europe ex UK.”
Evercore ISI: “A rise in volatility, already occurring and similar to 2016’s and 2020’s run-up, remains base case. A contested election could sour sentiment as uncertainty around the election rises. Conversely a “clean” outcome could refocus to the positive macro/ year-end “meltup” potential – the Fed is cutting, inflation risks remain contained, economic growth is solid as AI Adoption looks set to rise. The path to S&P 500 6,000 remains intact.”
BTIG: “We continue to view risk/reward [for the S&P 500] as poor over the coming weeks. We believe we will either see a pre-election shakeout, or if the bulls are intent on rallying into the election, the odds for a ‘sell the news’ on the event is high, in our view. In other words, we think a ‘trick’ is more likely than a ‘treat’ over the coming weeks.”
Goldman Sachs: “We recently updated our long-term equity return model to incorporate a variable for market concentration, which stands at a near-record high. The model points to a 10-year annualized total return for the capitalization-weighted S&P 500 index of 3%. The annualized return would be 4 pp greater, or 7%, if the concentration variable were excluded. From a long-term relative performance perspective, investors should consider allocating to other indices that benefit from the strength of the US economy, earnings growth, and innovation but without the concentration risk, such as the equal-weight S&P 500 (SPW) and the S&P 400 (MID).”