Upcoming corporate earnings reports are set to take center stage as investors look to capitalize on the stock market’s recent rally. The week ahead promises a slew of financial updates, with Disney (DIS) standing out among the list of companies due to announce their quarterly results. Other notable reports will come from Uber (Uber), Rivian (RIVN), Occidental Petroleum (OXY), and Warner Brothers Discovery (WBD).
The economic calendar for the week appears relatively quiet, with the most notable release being the first reading of November consumer sentiment from the University of Michigan, scheduled for Friday.
The stock market enters November on the heels of one of its best-performing weeks in nearly a year. A boost in investor confidence regarding the Federal Reserve’s potential pause in the rate-hiking campaign drove equities to significant gains.
Last week saw the Dow Jones Industrial Average (DJI) climb about 5%, the S&P 500 (GSPC) gain nearly 6%, and the Nasdaq Composite (^IXIC) surge over 6.6%, marking the strongest weekly performance for these major indexes in 2023.
The recent jobs report, released on Friday, indicated that job growth in October was below expectations, with 150,000 jobs added and the unemployment rate reaching its highest level since January 2022, at 3.9%. This slowdown in the labor market aligns with the Federal Reserve’s goal of achieving a soft landing to address inflation concerns.
Federal Reserve Chair Jerome Powell’s statements suggested that more labor market softening might be necessary to maintain price stability. While Powell did not explicitly rule out further rate hikes, the market interpreted his comments as a signal that the central bank may halt interest rate increases for the foreseeable future.
As of Friday, market pricing indicated a roughly 95% probability that the Fed would not raise rates at its next meeting, a notable shift from just a month ago when there was a 53% probability that rates would remain unchanged.
Disney is set to lead the earnings reports in the coming week, with a particular focus on the company’s new reporting structure and key metrics such as Disney+ subscribers and the impact of pay increases on the platform. The financial community will also be interested in updates on Disney’s acquisition of Comcast’s remaining stake in Hulu.
Although solid earnings reports have not recently acted as a market catalyst due to concerns over higher bond yields and potential rate hikes, these fears have receded as the 10-year yield reached its lowest level in over a month, easing off 16-year highs. This change in market sentiment occurs as earnings have generally exceeded expectations.
The upcoming earnings season is expected to bring sales growth of 2.2% and earnings growth of 3.6% for the third quarter, marking the first quarter of earnings growth since late 2022.
The general sentiment is that stocks can perform well with current interest rates or even slightly higher, and market dynamics have shifted in light of the recent trends in Treasury yields.
The economic calendar for the week is as follows:
- Monday: No notable economic news.
- Tuesday: Trade balance for September.
- Wednesday: MBA mortgage applications for November 3 and wholesale inventories month-over-month for September.
- Thursday: Initial jobless claims for the week ended Nov. 4.
- Friday: University of Michigan consumer sentiment for November (preliminary).
Investors and market participants will be closely monitoring these reports and corporate earnings to gauge the direction of the stock market in the week ahead.