Next week, investors can expect another batch of corporate earnings reports as the stock market looks to extend its recent rally.
Disney (DIS) highlights the week of earnings reports, while Uber (Uber), Rivian (RIVN), Occidental Petroleum (OXY) and Warner Brothers Discovery (WBD) also highlight the schedule.
The calendar will be quiet on the economic front, with the University of Michigan’s first reading of November consumer sentiment, scheduled for Friday, the most notable release.
On Tuesday, Yahoo Finance will host its Invest Conference, with speakers including DoubleLine founder Jeffrey Gundlach, Meredith Whitney, and media leaders Jeff Zucker and Kevin Mayer.
After their best week in about a year, stocks head into the first full week of trading in November as increased investor confidence in the Federal Reserve’s interest rate hike campaign led to a slowdown in stock prices over the weekend.
The Dow Jones Industrial Average (^DJI) gained about 5% last week, while the S&P 500 (^GSPC) gained nearly 6%. The tech-heavy Nasdaq Composite (^IXIC) rose more than 6.6%, marking the best weekly performance among major indexes in 2023.
Friday’s jobs report showed that job growth was weaker than expected last month, with the U.S. economy adding 150,000 jobs in October and the unemployment rate hitting 3.9%, its highest level since January 2022.
The slowdown in the labor market is a welcome sign for the Federal Reserve, which has noted that further weakening in the labor market will likely be necessary to keep inflation on its downward trajectory.
“It is probably still true — not a certainty, but likely — that we will need to see some slower growth and some weakening in labor market conditions to fully restore price stability,” Fed Chairman Jerome said Powell said in a press conference last Wednesday.
Powell has not explicitly rejected the possibility of further rate hikes, noting that Fed officials are not currently discussing rate cuts. Still, the market interpreted Powell’s comments as an indication that the central bank is likely to be done raising interest rates for the foreseeable future.
The story goes on
According to the CME FedWatch Tool, markets on Friday afternoon were pricing in a roughly 95 percent chance that the Fed won’t raise interest rates at its next meeting, up about 15 percentage points from the previous day. A month ago, markets were pricing in just a 53% chance that the Fed wouldn’t raise interest rates again.
“October’s jobs report appeared tailor-made to match Powell’s soft landing earlier this week,” JPMorgan chief U.S. economist Michael Feroli wrote in a research note on Friday. “Ultimately the economic data will be the deciding factor, and the data says we are done with rate hikes.”
Disney is leading the earnings boom next week as the media giant is set to report its results after the market closes on Wednesday. Investors will focus on the company’s new reporting structure, particularly additional details on ESPN, which recently released individual financials for the first time.
In February, Disney CEO Bob Iger restructured the company into three core business segments: Disney Entertainment, Sports (ESPN) and Experiences.
Key metrics in the report include Disney+ subscribers and the success of salary increases on the platform. Investors will also likely be watching for updates on Hulu after it was announced last week that Disney was buying Comcast’s remaining stake in the streaming platform.
“We expect the new linear standalone segment to continue to decline due to loss of pay-TV subscribers and advertising to remain weak,” Macquarie media tech analyst Tim Nollen wrote in a March 24 research note October.
Bob Iger attends the “Indiana Jones And The Dial Of Destiny” red carpet during the 76th annual Cannes Film Festival at Palais des Festivals on May 18, 2023 in Cannes, France. (Photo by Lionel Hahn/Getty Images) (Lionel Hahn via Getty Images)
By and large, a solid earnings season had not acted as much of a market catalyst in recent weeks, as higher bond yields and fears of another Fed rate hike had driven market moves ahead of the November 1 FOMC meeting.
But those fears are easing for now, as the 10-year yield hit its lowest level in more than a month on Friday, moving away from 16-year highs that Wall Street strategists believed would be a persistent headwind could represent for stocks.
Julian Emanuel, senior managing director of Evercore ISI, noted in a note to clients Friday that the fact that the 10-year Treasury yield never stayed above 5% during its recent rise has “changed market psychology” as the Stocks have recently fallen while yields have risen.
This is primarily due to the fact that earnings were largely better than expected.
According to data from Evercore ISI, 404 S&P 500 companies had reported earnings as of Friday morning. Using updated forecasts based on earnings reports to date for the period, the company expects S&P 500 companies to report third-quarter revenue growth of 2.2% and earnings growth of 3.6%.
If these statistics hold true, it would be the first time since the fourth quarter of 2022 that companies have reported earnings growth.
“This week reminds investors that there is money to be made in stocks when interest rates are at this level or higher. This was the case more than a decade before the global financial crisis,” Emanuel wrote in a research note on Friday.
“While we continue to view the medium-term future as challenging given earnings uncertainty, difficult geopolitics and the possibility of recession, the reason to remain hedged in the here and now no longer applies.”
Weekly calendar
Monday
Economic data: There is no significant economic news scheduled to be released.
Merits: Dish Networks (DISH), Devon Energy (DVN), FreshPet (FRPT), Tripadvisor (TRIP)
Tuesday
Economic data: Trade balance, September (-$60.5 billion expected, previously -$58.3 billion)
Merits: Celsius Holdings (CELH), Datadog (DDOG), Dutch Bros. (BROS), Fisker (FSR), Occidental Petroleum (OXY), Rivian (RIVN), Tost (TOST) Uber (Uber)
Wednesday
Economic data: MBA Mortgage Applications, November 3 (-2.1% previous); Month-on-month wholesale inventory, September (previously 0%)
Merits: Disney (DIS), Affirm (AFRM), AMC (AMC), Marathon Digital Holdings (MARA), Trade Desk (TTD), Under Armor (UAA), Twilio (TWLO), Warner Bros. Discovery (WBD)
Thursday
Economic data: Initial jobless claims, week ending November 4 (218,000 expected, previously 217,000)
Merits: Novavax (NVAX), Oatly (Oatly), Yeti (YETI), The Trade Desk (TTD), Wynn Resorts (WYNN)
Friday
Economic data: University of Michigan Consumer Sentiment, Preliminary November (64.0 Expected, 63.8 Previous)
Merits: There are no significant winnings scheduled to be released.
Josh Schafer is a reporter for Yahoo Finance.
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