(Monday Market Open) After a light schedule today, the earnings and data barrage begins tomorrow.

The most important stretch of the earnings calendar is straight ahead as a host of major tech companies including Apple AAPL and Microsoft MSFT prepare to report. The week is also loaded with potentially market-moving data, so fasten your seatbelt.

Last week was the best since June for the major indexes, and performance over the last month doesn’t look as grim as it did a week or two ago. The S&P 500® index (SPX) is now down only marginally since late September and up 7% from its October 13 intraday low, and the Dow Jones Industrial Average® ($DJI) is up about 3% from a month ago.

On a technical note, Friday was an “outside” day on the SPX chart. That means the SPX took an early trip below Thursday’s low point before closing higher than Thursday’s peak. This is a bullish uptrend signal that puts the market in somewhat stronger technical shape to start the new week.

Potential Market Movers

The 10-year Treasury yield (TNX) fell below 4.2% this morning after a roller-coaster day Friday that ultimately looked positive for stocks. This whiplash from 14-year highs to the lower levels now follows Friday’s Wall Street Journal report that some members of the Federal Open Market Committee (FOMC) are making the case for caution with future rate hikes (see more below).

The U.S. Dollar Index ($DXY) seems to be stabilizing here around 112. That’s high historically but below recent peaks, and the moderation could be helpful.

China unveiled a slew of data late Sunday, including Q3 gross domestic product (GDP) September Industrial Production, and Unemployment. The country delayed these reports at the start of its national party congress earlier this month.

The data indicated better than expected GDP growth of 3.9%, compared with analysts’ 3.4% average estimate. That was also up nicely on a sequential basis. The rest of the data were decent enough, though retail sales missed the consensus estimate. Industrial output came in well above consensus. It’s the first batch of relatively firm data out of China in a while. Data out of Europe this morning was soft, but the market is more likely to focus on the numbers from across the Pacific.

There’s important U.S. data ahead this week, too, starting tomorrow with October Consumer Confidence followed by September New Home Sales on Wednesday. Thursday brings a first look at Q3 Gross Domestic Product (GDP). The Atlanta Fed’s GDP Now tracker projects a growth rate of 2.9%, compared to negative GDP in Q1 and Q2.

Another big report is on Friday when Personal Consumption Expenditure (PCE) prices for September hit the tape. That’s an inflation indicator the Federal Reserve watches closely.

Earnings Calendar Packed

We’re starting one of the most crowded weeks on the Q3 earnings calendar. Some of the industry powerhouses reporting in coming days include Boeing (BA), 3M (MMM), Caterpillar (CAT), Merck (MRK), MSFT, Alphabet (GOOGL), and General Motors (GM). Tomorrow afternoon looks especially busy as MSFT and GOOGL report. AAPL and Amazon (AMZN) highlight Thursday’s afternoon programming.

AAPL exerts a huge influence on the tech sector in general, so its results could have a ripple effect, particularly on the chip sector.

MSFT, GOOGL and AMZN earnings should provide insight into cloud computing after a June quarter that showed strength but decelerating growth from earlier in the year. Cloud revenue is a good barometer of global business activity, so earnings reports from these three mega-cap cloud competitors should be an important bellwether to watch.

AMZN and AAPL also could provide insight into how holiday season retail demand is shaping up in these two critical months ahead of Christmas, while internet ad demand is likely to the focus when GOOGL reports. That’s especially the case after Snap (SNAP) shares took a dive last week when the company signaled tough times in that particular advertising arena.

Texas Instruments (TXN) and Intel (INTC) results are also expected this week, putting more focus on the semiconductor industry as investors eye the impact of recent U.S. export restrictions on China.

Through Friday, about 20% of S&P 500 companies had reported Q3 earnings. Of those, 72% have reported a positive EPS surprise and 70% have reported a positive revenue surprise, according to FactSet. The EPS positive surprise rate is below the 77% five-year average, but the positive revenue surprise rate is above the 69% five-year average.

FactSet’s projected Q3 earnings growth rate for the S&P 500 is 1.5%. That would be the lowest since Q3 2020.

So far in earnings, there’s been nothing too unexpected from any of the major companies reporting. Still, 80% of the earnings season is ahead.

Reviewing the Market Minutes

Just how sensitive is Wall Street to Fed talk right now? Very, based on Friday’s events. A weaker open reversed course very sharply Friday based on the Wall Street Journal article.

The Bank of Japan’s move Friday to protect the declining yen might also have helped U.S. stocks by pressuring the U.S. dollar. This year’s multi-decade highs in the U.S. Dollar Index ($DJI) mean tough sledding for many multinational companies that rely on overseas revenue.

The SPX climbed 86.97 points, or 2.37%, on Friday to 3,752.75. The $DJI advanced 748.97 points, or 2.47%, to 31,082.56. The Nasdaq-100® (NDX) rose 2.37% to 11,310.33, and the Russell 2000® (RUT) climbed 2.2% to 1,741.64.

Three Things to Watch

Sector View: Friday’s strength came from many sectors that typically perform well in a growing economy. Top-sector performers included materials, consumer discretionary, financials, industrials, and energy. The day had begun with “risk-off” sentiment in control, but defensive sectors, such as utilities, real estate, and consumer staples, formed the rear in Friday’s sector parade by day’s end. It’s interesting to see materials lead the way, which is something that hasn’t happened for a while. Another sharp decline in Natural Gas (/NG) Friday might have helped some stocks in that sector. Materials has been outpacing the SPX since mid-October.

The market’s overall performance Friday signals a lot of pent-up bullish energy among investors. The point is not to get carried away by one day’s interest rate news, especially when Fed speakers have been overwhelmingly hawkish the last few weeks.

Rate Debate? It appears a debate’s underway at the Fed about whether the economy needs two more 75-basis-point rate hikes this year or if a 50-point hike in December might be enough. The market looks almost evenly split on this question. At the close on Friday, the CME FedWatch Tool showed a 52% chance of a 50-point hike in December versus a 45% chance of a 75-point hike.

However, chances of the Fed hiking by only 50 in December had been just 24% the previous day, with odds of a 75-basis-point hike at 75%. That sharp drop in odds for a 75-point hike probably helps explain Friday’s stock market party.

The Wall Street Journal noted the Fed likely doesn’t want to set off a huge stock market rally by signaling any sort of slowdown in the pace of rate hikes. One possibility is that the Fed could decide to send mixed signals by raising rates only 50 points in December but also raising the so-called “terminal,” or peak, rate that it sees in 2023.

The terminal rate stood at 4.6% in the Fed’s most recent dot plot, but the rate-sensitive 2-year Treasury yield topped 4.6% last week months ahead of 2023, which could be a sign that the market already expects a rise in the terminal rate. The next dot plot is due in December.

A Retirement Contribution Bump: Thank inflation for letting you sock away a little more in your 401(k), IRA, and other related retirement accounts next year. On the heels of an inflation-adjusted tax bracket adjustment earlier last week, the Internal Revenue Service (IRS) said Friday that individuals under the age of 50 will be able to contribute up to $22,500 in their 401(k) in 2023, up $2,000 from the current limit, while the catch-up contribution limit for those older than 50 will go up $1,000 next year for a total of $7,500, bringing the total 401(k) contribution limit to an even $30,000 for 2023. Here’s the rest.

Notable Calendar Items

Oct. 25: October consumer confidence and earnings from Archer-Daniels Midland (ADM), Biogen (BIIB), General Electric (GE), General Motors (GM), Microsoft (MSFT), Alphabet (GOOGL), Texas Instruments (TXN), and Visa (V)

Oct. 26: September New Home Sales and earnings from Boeing (BA), Boston Scientific (BSX), Kraft Heinz (KHC), and Waste Management (WM)

Oct. 27: Q3 gross domestic product, September Durable Goods, and earnings from Apple (AAPL), McDonald’s (MCD), Caterpillar (CAT), MasterCard (MA), Southwest (LUV), Merck (MRK), and Altria (MO)

Oct. 28: September Personal Income, Personal Spending, Personal Consumption Expenditure (PCE) prices, October Consumer Sentiment, and earnings from AbbVie (ABBV), Aon (AON), Chevron (CVX), and ExxonMobil (XOM)

Oct. 31: Happy Halloween! October Chicago PMI and earnings from CNA Financial (CNA), Goodyear Tire (GT), and Stryker (SYK)

Nov. 1: Start of the FOMC meeting, September Construction Spending, the October ISM Manufacturing Index, and earnings from Abiomed (ABMD), DuPont (DD), Eli Lilly (LLY), Pfizer (PFE), Uber (UBER), Advanced Micro Devices (AMD), and Under Armour (UAA)

Nov. 2: FOMC rate decision and earnings from Allstate (ALL), CVS Health (CVS), Yum Brands (YUM), and Zimmer Biomet (ZBH)

TD Ameritrade® commentary for educational purposes only. Member SIPC.

Image sourced from Shutterstock

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.