U.S. stocks finished last week mixed as investors braced for a wave of corporate earnings and a closely watched employment report, as the U.S. election approaches.
On Friday, the Dow Jones Industrial Average fell 260 points, or 0.6%, to close at 42,114.4, the S&P 500 remained flat at 5,808.1, while the Nasdaq Composite rose 103.1 points, or 0.6%. Over the week, the Dow declined 2.6%, the S&P 500 dipped 0.8%, while the Nasdaq gained 0.3%.
Despite recent declines, U.S. equities remain at elevated valuations, leaving markets potentially vulnerable to any disappointments ahead of this week’s high-impact events.
Megacap Earnings in Spotlight
This week, five members of the "Magnificent Seven" group of megacap stocks, which have driven market gains in recent years, are set to release quarterly earnings.
These include Google’s parent Alphabet, Microsoft, Facebook's parent Meta Platforms, and Apple.
Given their substantial market values, these companies collectively represent 23% of the S&P 500’s weight, meaning their performance could significantly sway broader indexes.
The Magnificent Seven stocks currently trade at an average forward P/E ratio of 35x, well above the broader S&P 500, though analysts expect profit growth in these companies to moderate in coming quarters.
Investors are particularly focused on whether their substantial investments in artificial intelligence are beginning to yield results.
Tesla, the first of this group to report last week, saw shares rise on Thursday after CEO Elon Musk projected 20-30% vehicle sales growth for next year.
This week marks the peak of the third-quarter reporting season, with over 150 S&P 500 companies set to announce results.
US Jobs Report Expected on Nov. 1
Alongside earnings, the U.S. October employment report due on November 1 is drawing close attention, with economists expecting 140,000 new jobs.
Meanwhile, U.S. Election Day on November 5 and the Federal Reserve's next policy decision on November 7, will further impact market sentiment.
On the bond markets, benchmark U.S. Treasury yields rose to three-month highs last week, indicating that markets are anticipating less dovish Fed policy in response to recent economic strength.
10-year rates were at 4.242% and 2-year rates were at 4.107%.