Here is Schwab's early look at the markets for Tuesday, October 27.
Though Magnificent Seven fun doesn't begin until tomorrow afternoon when Alphabet and Microsoft report, today has plenty on tap for earnings fans, including results from Coca-Cola, Boeing, Visa, Seagate, and Corning.
Along with that comes a chunk of data including September durable goods, October consumer confidence, and September new home sales. The first is due before the opening bell and the latter two arrive just after.
"Mortgage rates picked up a little bit recently, then they kind of turbocharged even higher," said Collin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research (SCFR). "So, it'll be really interesting to see how that's flowing through to the housing data we get."
Consensus for new home sales is a seasonally adjusted annual rate of 655,000, according to Briefing.com, down from 684,000 in August. Consumer confidence, which was historically weak in September, is expected to stay that way in October at 80.5%, with inflation expectations a critical metric.
Today feels like an appetizer for Wednesday and Thursday's packed earnings and central bank schedule and follows yesterday's rally in the struggling tech sector. Most of the AI and chip names that sagged this month found buying interest, possibly on technical factors after the PHLX Semiconductor Index (SOX) flirted with its 200-day moving average.
Besides Microsoft and Alphabet, tomorrow features a decision from the Federal Reserve and results from ServiceNow and GE Vernova. Thursday brings the European Central Bank's decision and earnings from Amazon, Eli Lilly, and Intel.
Thursday's also a big day for data, with the government's first estimate of third quarter gross domestic product, third quarter personal spending, and September Personal Consumption Expenditures (PCE) data. Analysts expect monthly headline PCE of 0.5%, and core PCE, excluding food and energy, at 0.3%, up from 0.3% and 0.2% in August.
The Fed obviously won't know PCE when it makes its rate decision at 2 p.m. ET tomorrow, but even if it did, few analysts expect a rate move. The Fed raised rates last month for the first time in three years and September consumer and producer inflation data ran hot, but the chance of a rate hike tomorrow is about 10%, according to the CME FedWatch Tool.
With a change unlikely and no Fed forecasts due, focus turns to Wednesday afternoon's press conference from Chairman Kevin Warsh. Last time, he was brief compared with press conferences by his predecessor Jerome Powell, ending after roughly half an hour.
Clear forward guidance appears unlikely, but analysts hope for the chairman's views on inflation, especially if he sees any improvement from the latest round of numbers, said Martin, who expects another rate hike in December. Odds of that have gone down over the past week, to around 80% Monday from a peak of around 90%.
That could rise if the Fed leaves rates unchanged tomorrow and PCE is on the hot side. Also, the market expects a solid third quarter GDP estimate of 3%, up from 2.2% in the second quarter. The labor market continues to look resilient, possibly giving the Fed cover if it wants to address inflation before year-end.
The 10-year Treasury note yield stood in place just under 5% yesterday, right where last week ended. Trading could again be slow today as investors await the Fed decision. Today brings a $70 billion 5-year note auction, results of which should be available before the close.
After the plunge in AI stocks last week and a sharp decline in Treasury yields—which might reflect economic concerns if AI spending slows—all eyes are on the Magnificent Seven firms reporting tomorrow and Thursday. Though Meta got punished last week for promising more AI spending, that topic is less black and white in terms of possible market response for the firms up next. Microsoft and Alphabet report after tomorrow's close followed by Amazon Thursday.
They all showed evidence last time of AI spending bringing return on investment, judging from growing cloud businesses. More of the same—heavy spending and strong cloud results—might brighten sinking AI sentiment.
Meta lifted AI market spirits Monday when it announced it would sell $95 billion in shares as part of its AI spending surge.
AI-related stocks have struggled this month amid debt and spending concerns. The so-called neoclouds--specialized, high-performance cloud computing providers—are in focus after SpaceX CEO Elon Musk questioned Monday if they could secure financing they need. This followed Nvidia CEO Jensen Huang noting last week that lack of capital is hindering their growth. However, CoreWeave, one of those names, rose 4% yesterday.
Beyond that, earnings today from Boeing and Coca-Cola provide signals on industrial and consumer demand, while Corning's results highlight its chip making components. Visa is another key consumer giant after the close, while Seagate's post-close report pulls attention toward one of the more volatile names of recent days centered on AI storage technology.
To date, more than 80% of S&P companies reporting exceeded earnings per share estimates, with average EPS growth near 30% year over year.
On a separate note, Oracle hosts an Investor Day tomorrow, putting its AI spending and debt into the spotlight. Like CoreWeave, it's become a symbol of investor concerns around heavy debt-funded AI spending.
Major indexes opened green Monday and stayed that way in a broad rally, led by tech. The Meta news and excitement ahead of mega-cap earnings seemed to improve sentiment.
Ten of 11 S&P 500 sectors ended flat to high Monday, with info tech and industrials out in front followed by discretionary. Communication services lagged as Meta stayed under pressure.
Breadth has improved over the last two weeks, and more than 53% of S&P stocks now trade above their 50-day moving averages. There's been a big move into health care, staples, and energy. Breadth looks good, but breadth without tech doesn't set all time index highs, and the S&P 500 Index fell the last two weeks.
Checking Monday's individual movers, chip and AI-related stocks took pole position, led by Lumentum, Arm Holdings, Western Digital, and Intel. All rose 5% or more. So did GE Vernova before its earnings later this week.
Whirlpool fell 14% ahead of earnings that came out after Monday's close, as investors appeared to anticipate more troubles at the company where revenue had fallen year-over-year in nine of the past 10 quarters, according to Briefing.com.
Crypto stocks fell as bitcoin dropped back below $80,000. Risk-off trading from late last week appeared to roll along in crypto Monday after AI sentiment got rattled, Bloomberg reported.
Tesla got a 5% boost from Barclays upgrading shares to overweight from equal weight, citing the possible merger opportunity with SpaceX and a stronger core business outlook.
Lockheed Martin jumped 5% after getting upgraded by Morgan Stanley to overweight from equal weight. Lockheed's announcement last week that it has a framework agreement with the Department of War to maintain F-35 production at 156 per year "takes significant risk out of the stock," the analyst said.
Instacart rallied almost 8% and DoorDash fell 6% after the Wall Street Journal reported that DoorDash could soon acquire Instacart.
Dollar General fell 3% after the Federal Trade Commission (FTC) and 20 states sued the company for allegedly overcharging customers.
Verizon slipped 3.5% despite earnings beating consensus and subscribership gains. The company expanded its Amazon Web Services partnership with a $2 billion AI infrastructure deal.
Airlines, cruise companies, casinos, and resort stocks continued to climb, helped by signs of strong demand in recent earnings reports and outlooks, along with the recent drop in yields.
The Dow Jones Industrial Average® ($DJI) climbed 146.42 points (+0.28%) Monday to 52,361.58; the S&P 500 Index ($SPX) rose 53.09 points (+0.70%) to 7,676.77, and the Nasdaq Composite® ($COMP) climbed 214.04 points (+0.83%) to 26,169.38.