S&P 500 and Nasdaq 100: Microsoft, Meta Earnings in Focus as Fed Data Looms

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This week, five of the “Magnificent Seven” — Alphabet, Microsoft, Meta Platforms, Amazon, and Apple — report earnings, with investors focused on AI spending as a growth driver. Yung-Yu Ma, Chief Investment Officer at BMO Wealth Management, noted that markets expect continued AI investment, and any signal of reduced spending could dampen sentiment.

Alphabet’s earnings on Tuesday may provide insights on AI’s role in search and advertising, with positive guidance likely supporting broader tech optimism. Microsoft’s Wednesday report is anticipated to highlight growth in AI-powered cloud services, while Meta’s earnings could showcase new monetization strategies for its AI products, including the Ray-Ban Meta AI glasses, which may influence digital engagement revenue projections.

Key Economic Data and Fed Outlook

Crucial economic data this week could shape Federal Reserve policy expectations. Reports include the September PCE price index on Thursday, third-quarter GDP on Wednesday, and October’s jobs report on Friday. Analysts forecast a 0.3% rise in core PCE prices, signaling moderate inflation. Q3 GDP is expected to show 3% growth, in line with the Fed’s “soft landing” goals, while the October jobs report may reflect slowing job growth, potentially alleviating inflation concerns tied to wage pressures.

These indicators will be closely watched as traders assess the likelihood of the Fed holding rates steady in November, with markets currently projecting a 96% probability of no rate hike.

Sector Insights: Consumer, Healthcare, and Energy Earnings