What you should know this week

Stocks secured their sixth straight gain on Friday as strong earnings from Netflix (NFLX) boosted the overall technology sector. Attention now turns to other names in the Magnificent Seven, with electric vehicle maker Tesla (TSLA) due to report quarterly results on Wednesday.

The Dow Jones Industrial Average (^DJI) led markets higher, rising about 1% last week. This was followed by the benchmark S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC), each securing weekly gains of around 0.9% and 0.8%, respectively.

The Dow Jones and S&P 500 also reached all-time highs during the week.

Meanwhile, the rotation away from megacap technology and into other areas of the market was seen last week as utilities (XLU) rose to end the five-day period up 3.4%, followed by real estate (XLRE) and financials (XLF). with increases of 3% and 2.4% respectively. Small caps also outperformed the major indices, with the Russell 2000 (^RUT) ending the week up around 2%.

The market moves come as investors have had a particularly strong start to earnings season and Big Tech giants like Apple (AAPL) and Amazon (AMZN) have yet to report.

So far, 79% of S&P 500 companies have delivered a positive third-quarter earnings surprise, above the full five-year average of 77%, according to John Butters, senior earnings analyst at FactSet.

The earnings season party continues this week, with reports from Tesla, Boeing (BA), General Motors (GM), American Airlines (AAL), and UPS (UPS), among others, highlighting a busy calendar.

Aside from earnings, investors will also be keeping an eye on a range of economic data, including the latest reading of consumer sentiment from the University of Michigan, due on Friday. The Fed Beige Book, scheduled for Wednesday, will provide another pulse check on current economic conditions across the Federal Reserve’s 12 districts.

The housing market will also be in focus after mortgage rates rose for a third week in a row, with the 30-year fixed rate moving closer to 6.5%.

A weekly update on jobless claims and activity checks from the services and manufacturing sectors are also on the agenda.

Can Tesla Drive Strong Earnings Growth?

Tesla will report quarterly results on Wednesday after the highly anticipated “We, Robot” event on October 10th.

Wall Street analysts surveyed by Bloomberg expect the electric vehicle giant to post adjusted earnings per share of $0.60 on revenue of $25.42 billion. Global deliveries, which improved quarter-on-quarter for the first time this year, as well as a potential increase in automotive gross margins are expected to help boost profits in the quarter.

The story continues

However, investors remain skeptical about the company’s future investments after its robotaxis launch last week fell short of expectations.

In a note to clients following the event, Jefferies analysts called the $30,000 driverless robotaxi, dubbed Cybercab, a “toothless taxi,” adding that Tesla has “ambitious goals” with “little evidence to back them up.” Feasibility”.

The new Cybercab is designed to be completely autonomous and has neither a steering wheel nor pedals. According to CEO Elon Musk, production is expected to begin “before 2027” and will likely be a big talking point during the earnings announcement.

“Investors may be looking for details on the launch of Tesla’s sub-$30,000 vehicle,” Steve Man, an analyst at Bloomberg Intelligence, wrote on Friday. “For high volume sales, the automaker may need to incorporate traditional features such as a steering wheel and pedals into its cybercabs.”

Tesla shares, which have seen volatile swings in recent months, have fallen about 10% since the start of the year.

Consumer and employment checks

September retail sales were slightly above consensus expectations from early last week, suggesting the U.S. economy remains strong. But investors will have even more data points to chew on as the final reading of the University of Michigan Consumer Sentiment Index is expected on Friday.

For the latest October reading, sentiment is expected to rise to 69.5, after the index’s preliminary reading unexpectedly fell to 68.9 in September for the first time in three months.

According to the University of Michigan, consumers continued to express frustration with high prices despite moderate inflation data. That had offset more optimistic views on the labor market, which remains a key focus for the Federal Reserve after it cut interest rates by 50 basis points at its last meeting.

Markets are currently pricing in another 25 basis point rate cut in November, but Fed officials appear divided on the path forward.

Mary Daly, president of the San Francisco Federal Reserve, said one or two more rate cuts this year would still be a “sensible move” if inflation pressures continue to ease and the labor market remains on solid footing.

“The work for a soft landing is not yet fully complete,” Daly said in her speech on Tuesday. “We are determined to finish this job.”

But just a day earlier, Federal Reserve Governor Chris Waller said the central bank needed to be more cautious on interest rates. In a speech at Stanford University, he said: “The data signals that the economy may not be slowing as much as desired.”

Another round of jobless claims due Thursday is under scrutiny after the number of people applying for jobless benefits fell again in the week ending Oct. 12.

U.S. jobless claims fell by 19,000 to 241,000, but economists warn that the labor market could be distorted in the short term due to the fallout from hurricanes Helene and Milton in the southeastern regions as well as the Boeing labor strike.

“Hurricanes Helene and Milton, as well as the Boeing attack, are beginning to distort the economic data, but given the timing of these storms – Helene hit on September 26th and Milton on October 10th – the biggest impact on the data is still ahead of us.” “Oxford Economics wrote in a note on Friday.

Weekly calendar

Monday:

Economic data: Leading economic index, September (-0.3% expected, -0.2% expected)

Earnings: SAP SE (SAP), Nucor Corporation (NUE), HBT Financial (HBT), Zions Bancorporation (ZION), Nucor Corporation

Tuesday:

Economic data: Philadelphia Fed Non-Manufacturing Index, October (-6.1 previous); Richmond Fed Manufacturing Index, October (-21 previous); Richmond Fed Terms and Conditions (-3 ahead)

Earnings: General Motors (GM), 3M Company (MMM), RTX Corporation (RTX), Verizon Communications (VZ), GE Aerospace (GE), Lockheed Martin (LMT), Quest Diagnostics (DGX), Philip Morris (PM), Denny’s Corporation (DENN), Sherwin-Williams (SHW), Interpublic Group of Companies (IPG), Norfolk Southern Corporation (NSC), RTX Corporation (RTX), Texas Instruments (TXN), PulteGroup (PHM), Enphase Energy (ENPH)

Wednesday

Economic data: MBA Mortgage Applications, Week Ending October 18 (-17.0% Previous); Existing Home Sales, September (3.88 million expected, 3.86 million prior); Federal Reserve Beige Book

Earnings: Tesla (TSLA), Boeing (BA), AT&T (T), IBM (IBM), Coca-Cola (KO), GE Verona (GEV), T-Mobile (TMUS), Las Vegas Sands (LVS), Hilton Worldwide Holdings (HLT), Whirlpool Corporation (WHR), Mattel (MAT), CME Group (CME), General Dynamics (GD), ServiceNow (NOW), Viking Therapeutics (VKTX)

Thursday

Economic data: Initial jobless claims, week ending October 19 (240,000 expected, 241,000 prior); Continuing claims, week ending October 12 (1.87 million previously); S&P Global US Manufacturing PMI, preliminary October (47.5 expected, 47.3 previous); S&P Global US Services PMI, preliminary October (55.2 expected, 55.2 previous); New Home Sales, September (720,000 expected, 716,000 expected); Kansas City Fed Manufacturing Activity, October (-8 ago); Chicago Fed National Activity Index, September (0.12 previous)

Earnings: UPS (UPS), American Airlines (AAL), Southwest (LUV), Dexcom (DXCM), Deckers Outdoor Corporation (DECK), Sketchers (SKX), Coursera (COUR), Dow Inc. (DOW), Honeywell International (HON) , Union Pacific Corporation (UNP), Hasbro (HAS), Northrop Grumman Corporation (NOC), Capital One (COF), Beyond, Inc. (BYON)

Friday

Economic data: Durable goods orders, September preliminary (-1.0% expected, 0.0% previous); Consumer durables excluding transportation, September preliminary (-0.1% expected, 0.5% previous); University of Michigan Consumer Sentiment Final October (69.5 Expected, 68.9 Previous); Kansas City Fed Services Activity, October (-2 ago)

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