FX168 Financial News (North America) reports that the stock market is entering the busiest week of the year, nearing historical highs.

The rebound led by the soaring Tesla (TSLA) stock price in the latter part of last week helped the Nasdaq Composite Index close up by about 0.9%, slightly below its historical high. Meanwhile, the S&P 500 index (GSPC) fell by over 0.3%, and the Dow Jones Industrial Average index (DJI) fell by over 2.6%.

In the newly started week, the Federal Reserve's preferred inflation indicators, October employment report, and earnings from major tech giants Alphabet (GOOGL, GOOG), Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), and Meta (META) will determine the market's direction at the beginning of November.

The latest developments in third-quarter economic growth, job vacancies, service and manufacturing activities, and consumer confidence will also be on the agenda.

This week will be a busy one for corporate earnings reports, with an expected 169 S&P 500 index component companies announcing quarterly performances. Companies like Ford (FORD), AMD (AMD), McDonald's (MCD), Eli Lilly (LLY), and Exxon (XOM) will be in focus for the earnings report.

Economic Report Card

The market has recently increasingly priced in what is known as a soft landing for the U.S. economy, where the inflation rate falls to the Federal Reserve's 2% target without a significant decline in economic growth.

A series of economic data this week will test investors' bets. Firstly, the U.S. Bureau of Economic Analysis will release the estimated gross domestic product (GDP) for the third quarter on Wednesday. The U.S. economy is expected to continue steady growth, with an annualized growth rate of 3% for this quarter, matching the growth rate of the second quarter.

On Thursday, the latest data on the Federal Reserve's preferred inflation indicators will be released. Economists expect the annualized growth rate of 'core' PCE (excluding volatile categories such as food and energy) in September to be 2.6%, lower than August's 2.7%. Economists anticipate the growth rate of 'core' PCE for the previous month to be 0.3%, compared to 0.1% for the month prior.

On Friday, the US Bureau of Labor Statistics will reassess the national employment situation. According to Bloomberg's data, it is expected that the October employment report will show the addition of 0.125 million non-farm jobs in the US economy, with the unemployment rate remaining at 4.1%. In September, the US economy added 0.254 million jobs and the unemployment rate dropped to 4.1%.

"After experiencing two hurricanes, a strike, and alternating vacations, we expect a lot of noise in the October employment report on Friday," wrote Michael Reid from the Royal Bank of Canada's Capital Markets division in a report to clients.

Considering various factors that may affect employment growth, Reid wrote that the unemployment rate will "provide the best insight into this month's labor market."

Entering a busy week for economic data, according to the FedWatch tool from the CME Group, the market expects a 96% chance of the Federal Reserve cutting interest rates at the November meeting.

(Image source: finance.yahoo)

Large tech companies of the week

37% of companies in the S&P 500 Index have reported quarterly earnings, with the index recording a year-on-year profit growth rate of 3.7%. According to FactSet's data, this will be the slowest annual growth rate since the second quarter of 2023.

The profitability of large technology companies will be tested in the coming week. FactSet recently pointed out that the earnings of the "Big Seven" tech stocks this quarter are expected to grow by 18.1% year-on-year, while the other 493 companies in the S&P 500 Index are only expected to grow by 0.1%.

Following last week's late rebound in technology, several large tech companies such as Apple, Alphabet, Amazon, Meta, and Microsoft are expected to announce quarterly earnings this week after returning to near historic highs. These reports will once again make artificial intelligence the focus of attention. Investors will be watching how much these companies have invested in emerging technologies and whether it provides clues to driving profit growth.

Given the recent surge in large tech stocks, Laffer Tengler Investments CEO and Chief Investment Officer Nancy Tengler warned Yahoo Finance that earnings reports may trigger a subdued response.

"Companies like Microsoft may exceed expectations. Historically, their earnings performance has been around 76%, but stock prices may not benefit," Tengler said.

(Image source: finance.yahoo)

Rising yields are not all bad news.

In the past month, economic data has surprised Wall Street. The Citi Economic Surprise Index (measuring whether economic data is better or worse than expected) has soared to its highest level since April.

Meanwhile, the 10-year US Treasury yield (^TNX) has also risen, increasing by about 50 basis points in the past month, hovering around 4.2%. In some cases, rising yields may have adverse effects on the stock market. But as Callie Cox, Chief Market Strategist at oltz Wealth Management, pointed out on X, stock strategists believe that if rising yields are accompanied by steady economic growth, it is still a favorable sign for the stock market.

BlackRock Americas Chief Investment and Portfolio Strategist Gargi Chaudhuri told Yahoo Finance: 'For the right reasons, as income growth is expected to be higher, yields are gradually increasing... Historically, it has often been a good thing for those with income growth.' 'Therefore, quality remains very important as the core of an investment portfolio.'

(Image source: finance.yahoo)