Wall Street Braces for a Week of High-Stakes News Before the Election
Wall Street is gearing up for what promises to be its most newsworthy week yet, coinciding ominously with the period leading up to the elections and a recent market slowdown. The coming days will see a deluge of crucial information impacting investor sentiment, including earnings reports from five of the “Magnificent Seven” tech giants – Alphabet, Microsoft, Meta, Amazon, and Apple – alongside vital economic data such as the October jobs report, inflation figures (PCE), and a preliminary GDP reading for the third quarter. This confluence of events is creating heightened uncertainty in a market already displaying signs of pre-election jitters, as evidenced by the CBOE Volatility Index (VIX), Wall Street’s “fear gauge,” briefly exceeding 20.
Key Takeaways: A Week of High Stakes
- Earnings Bonanza: Five of the “Magnificent Seven” tech giants – Alphabet, Microsoft, Meta, Amazon, and Apple – will release their Q3 earnings, potentially influencing market direction significantly.
- Economic Data Overload: Investors will dissect critical economic indicators including the jobs report, inflation (PCE) data, and a preliminary GDP reading, which could significantly shift market sentiment.
- Market Volatility: The VIX, a measure of market volatility, recently spiked, indicating investor uncertainty and potentially influencing trading activity throughout the week.
- Diverging Performances: While the “Magnificent Seven” are expected to show significant growth, the broader S&P 500 is projected to exhibit considerably weaker performance, highlighting market concentration.
- Election Jitters: The proximity to the election is adding an extra layer of uncertainty, impacting investor decisions and potentially contributing to heightened volatility.
The Magnificent Seven Under the Microscope
The upcoming earnings reports from five of the “Magnificent Seven” – Alphabet, Microsoft, Meta, Amazon, and Apple – will be closely scrutinized. While these mega-caps are anticipated to report strong overall earnings growth of approximately 18% year-over-year for the third quarter (a slowdown from 35% in Q2, according to FactSet), the relatively lower growth compared to previous quarters and concerns regarding high valuations are already casting a shadow on investor enthusiasm. This concentration of earnings power within a small number of companies is a point of concern for some analysts, as this could affect the long-term outlook of the overall market. Goldman Sachs’ David Kostin, for example, has lowered his long-term S&P 500 return projection to a mere 3% annualized growth over the next decade, down significantly from the 13% seen in the last decade, citing this concentration as a key factor.
The Broader Market’s Struggle
The expected earnings growth of the “Magnificent Seven”, however impressive, presents a stark contrast to the remainder of the S&P 500. The remaining 493 companies are only predicted to show a meager 0.1% year-over-year earnings growth in the third quarter, per FactSet. This disparity underscores a significant concentration of growth within a select few technology giants, which is causing market apprehension and influencing the market outlook.
Market Concentration and Future Outlook
Mark Malek, chief investment officer at Siebert, aptly describes the current market situation as “a strange brew.” He highlights the significant influence of these tech giants, stating, “Though we try to find a new path to take us in a new direction, what we’re finding is that all roads keep leading back to the Mag Seven.” This overreliance on a handful of mega-caps presents both opportunities and risks. While their performance can drive significant market gains (or losses), it also creates dependence and vulnerability to shifts in their fortunes.
Economic Data: Clues to Future Direction
Beyond the earnings reports, a flurry of critical economic data releases will provide further insight into the health of the US economy and potentially sway market sentiment. Investors will be closely monitoring the October jobs report (expected to show 140,000 jobs added, according to FactSet), the September personal consumption expenditures (PCE) price index (forecast to ease to 2%, from 2.2%), and the preliminary third-quarter GDP reading (projected to rise to 2.1%, down slightly from 3% in the previous reading).
Positive Signals Amidst Uncertainty
Despite the apparent market uncertainty, some analysts are maintaining a relatively positive outlook. Nicole Inui, head of equity strategy at HSBC, recently raised her year-end S&P 500 target to 5,900, citing a “Goldilocks” scenario—a scenario where economic growth is robust, inflation is moderating, and the rally is broadening beyond mega-cap tech stocks. Inui’s optimism is based on her belief that “The pieces are falling into place for a bull case scenario“. The upcoming data releases could lend credence to this perspective, or conversely, trigger a reevaluation of the market. Further reports to watch are the JOLTS survey and consumer confidence data.
The Week Ahead: A Detailed Calendar of Events
The following calendar details the key economic data releases and earnings announcements scheduled for the week, providing a comprehensive overview for investors and market watchers. The times listed are all in Eastern Time (ET).
Monday, October 29th
- 10 a.m.: Richmond Fed Index (October)
- 10:30 a.m.: Dallas Fed Index (October)
- Earnings: Ford Motor, On Semiconductor
Tuesday, October 30th
- 8:30 a.m.: Wholesale Inventories preliminary (September)
- 9 a.m.: FHFA Home Price Index (August)
- 9 a.m.: S&P/Case-Shiller comp. 20 HPI (August)
- 10 a.m.: Consumer Confidence (October)
- 10 a.m.: JOLTS Job Openings (September)
- Earnings: Visa, Chipotle Mexican Grill, First Solar, Caesars Entertainment, Advanced Micro Devices, McDonald’s, Pfizer, Royal Caribbean Group, PayPal, D.R Horton, Alphabet
Wednesday, October 31st
- 8:15 a.m.: ADP Employment Survey (October)
- 8:30 a.m.: GDP Chain Price first preliminary (Q3)
- 8:30 a.m.: GDP first preliminary (Q3)
- 10 a.m.: Pending Home Sales Index (September)
- 10 a.m.: Pending Home Sales
- Earnings: Microsoft, Meta Platforms, Starbucks, Kraft Heinz, Caterpillar, Eli Lilly, GE Healthcare Technologies, Clorox, Booking Holdings
Thursday, November 1st
- 8:30 a.m.: Continuing Jobless Claims (10/19)
- 8:30 a.m.: ECI Civilian Workers (Q3)
- 8:30 a.m.: Initial Claims (10/26)
- 8:30 a.m.: Core PCE Deflator (September)
- 8:30 a.m.: PCE Deflator (September)
- 8:30 a.m.: Personal Consumption Expenditure (September)
- 8:30 a.m.: Personal Income (September)
- 9:45 a.m.: Chicago PMI (October)
- Earnings: Apple, Amazon.com, Norwegian Cruise Line Holdings, Uber Technologies, The Estee Lauder Companies, Mastercard, Generac
Friday, November 2nd
- 8:30 a.m.: Jobs Report (October)
- 9:45 a.m.: S&P PMI Manufacturing final (October)
- 10 a.m.: Construction Spending (September)
- 10 a.m.: ISM Manufacturing (October)
- Earnings: Exxon Mobil
This week’s events could significantly shape the trajectory of the markets leading into the election. Investors must closely monitor both company earnings and macro-economic signals, anticipating potential volatility and preparing for various outcomes. The “strange brew” of data will certainly keep investors on edge until the dust settles.
