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Stocks Prepare for a Major Week Ahead

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Earnings season, which generally begins about two weeks after the conclusion of each calendar quarter, typically follows a consistent pattern. Initially, the reports are predominantly from banks and financial institutions. This is followed by a sequence including energy stocks, and subsequently, both large and small retailers such as Walmart (WMT), Target (TGT), and Costco Wholesale (COST).

During this period, a significant week is designated for the release of earnings reports from major tech firms. These include five of the most valuable companies in the United States, each with market capitalizations exceeding $1 trillion. Together, these companies account for approximately 25% of the total market value of the Standard & Poor’s 500 Index. When Nvidia’s (NVDA) market cap is included, the percentage increases to around 30%. Nvidia is scheduled to report its next earnings on November 20.

In the first half of the year, these five tech stocks experienced robust growth, largely driven by investor interest in artificial intelligence. After a period of decline in mid-summer, they bounced back in September and have remained relatively unchanged in October, without significant market disruptions. Nvidia, however, has seen a 16.6% increase this month, momentarily surpassing Apple as the highest-valued company due to the enthusiasm surrounding its new Blackwell series of graphics processing units, which are central to AI advancements. Tesla (TSLA) also witnessed a 22% rise on a single day, attributed to a positive third-quarter report and optimistic forecasts.

Examining the five notable companies set to disclose earnings:

Alphabet, October 29

  • Closing price on October 25: $165.27
  • Year-to-date stock price change: 18.3%, October change: -0.4%
  • Market Capitalization: $2.05 trillion
  • Expected quarterly earnings: $1.84, compared to $1.55 in the same quarter last year
  • Estimated quarterly revenue: $86.3 billion, up from $76.7 billion the previous year

Alphabet, the parent company of Google and YouTube, has experienced a strengthening in its advertising sector, which constitutes about two-thirds of its revenue. Challenges include geopolitical tensions and clashes with non-U.S. regulators. The U.S. Department of Justice has accused Alphabet of antitrust violations, potentially leading to its breakup.

Microsoft, October 30

  • Closing price on October 25: $428.15
  • Year-to-date stock price change: 13.9%, October change: -0.5%
  • Market Capitalization: $3.18 trillion
  • Expected quarterly earnings: $3.09, up from $2.73 the previous year
  • Estimated quarterly revenue: $64.5 billion, compared to $49.7 billion last year

Microsoft’s shares surged nearly 19% in early 2024 but have since declined as the AI buzz tapered off. Key considerations include expected spending on AI applications and their impact on the company’s core cloud and related businesses.

Meta Platforms, October 30

  • Closing price on October 25: $573.25
  • Year-to-date stock price change: 61.95%, October change: 0.1%
  • Market Capitalization: $1.44 trillion
  • Expected quarterly earnings: $5.24, up from $4.00 the previous year
  • Estimated quarterly revenue: $40.3 billion, compared to $33.6 billion last year

Meta, the parent of Facebook, has seen its shares rise significantly due to substantial investments in AI-related areas boosting its advertising segment. Analysts anticipate these investments will increase profits, though the timeline is uncertain.

Apple, October 31

  • Closing price on October 25: $231.41
  • Year-to-date stock price change: 20.2%, October change: -0.7%
  • Market Capitalization: $3.52 trillion
  • Expected quarterly earnings: $1.55, compared to $1.36 last year
  • Estimated quarterly revenue: $94.4 billion, up from $83.6 billion last year

Apple’s latest fiscal quarter concluded in September, and it is launching its iPhone 16 amid reports of lukewarm orders. Despite a peak stock price on October 15, shares have since declined. CEO Tim Cook’s challenge will be to reassure investors of the iPhone’s successful release and track the performance of Apple’s services business.

Amazon.com, October 31

  • Closing price on October 25: $187.83
  • Year-to-date stock price change: 18.3%, October change: 0.8%
  • Market Capitalization: $1.97 trillion
  • Expected quarterly earnings: $1.14, compared to $0.86 last year
  • Estimated quarterly revenue: $157.2 billion, up from $141.4 billion last year

Amazon’s shares have appreciated by 18.3% this year, reflecting investor confidence, though little movement has been observed in October. The company aims to provide insights into current consumer sentiment and its engagement with emerging AI technologies.

Almost 1,000 U.S. companies are presenting their results this week, including major non-tech firms like Berkshire Hathaway (BRK.A and BRK.B), scheduled post-Friday. Pharmaceutical representatives like Eli Lilly (LLY) are also set to report. Additionally, oil giants Exxon Mobil (XOM) and Chevron (CVX) will release their figures on Friday.

Significant economic reports expected this week include the Personal Consumption Expenditures Price Index, the Labor Department’s weekly jobless claims report, and the October jobs report, offering insights into unemployment and job additions.

The impending November 5 election, featuring Democrat Kamala Harris and Republican Donald Trump, is anticipated to influence market sentiment. Uncertainty in the election results could extend its market impact, possibly complicating forecasts for the end of 2024 and early 2025 performance.

Lastly, a Federal Reserve meeting will occur shortly after the election, focusing on whether an additional rate cut is warranted, against a backdrop of increasing interest rates since the September 18 decision. Concerns over federal deficits persist, regardless of the election outcome, with a decision anticipated on November 7.

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