Stock Market Outlook for October 28, 2024: Key Developments and What to Watch This Week

Stock Market Outlook for October 28, 2024: Key Developments and What to Watch This Week

Today, October 28, 2024, the stock market opened on a cautiously optimistic note. Major indices like the S&P 500 and Nasdaq showed slight gains as investors braced for a packed week of influential earnings reports, Federal Reserve policy updates, and heightened geopolitical concerns. With tech giants on deck to release their earnings and the Fed poised to reveal its latest rate decision, this week promises to be pivotal in shaping investor sentiment for the rest of the year.

Today’s Market Performance

• S&P 500: Up slightly, trading near 4,520, with gains driven by anticipation around tech earnings. Year-to-date, the S&P 500 is up approximately 11%, reflecting investor confidence despite recent headwinds.
• Nasdaq Composite: Showing resilience, the index edged up to around 13,750, largely fueled by gains in tech stocks like Nvidia and Apple, up 37% and 20% YTD, respectively.
• Dow Jones Industrial Average: Slight decline today, trading near 34,000, weighed down by weaker performance in energy stocks due to dropping oil prices and subdued consumer goods.

Top Events to Watch This Week

1. Tech Earnings in Focus

   • Microsoft: Scheduled to report on Tuesday, analysts expect Q3 earnings to reach $2.65 per share, reflecting a year-over-year increase of 8%. Investors will closely monitor Microsoft’s cloud segment, which accounted for nearly 40% of its revenue in Q2, with expectations that Azure growth will remain strong, up by around 27% YOY (Kiplinger).
   • Amazon: Reporting Thursday, Amazon’s Web Services (AWS) is anticipated to show a modest revenue increase of 9% YOY. Analysts forecast earnings per share (EPS) at $1.14, driven by continued strength in e-commerce, despite competition from Walmart in third-party seller services. Amazon stock is up approximately 15% this year, with AWS accounting for over 70% of its operating income (Kiplinger).
   • Apple: Set to report on Thursday, Apple is expected to post earnings of $1.55 per share, with revenue at $94.4 billion, an increase of 5.5% YOY. Analysts are focused on Apple’s guidance regarding the new iPhone 16 cycle, where supply chain constraints may impact sales. The stock has traded mostly flat over the past month, hovering near a 20% gain YTD (Markets Insider).

2. Federal Reserve Rate Decision

   • The Federal Reserve is set to announce its decision on interest rates on Wednesday, with markets expecting a dovish outlook. While the Fed cut rates by 50 basis points in September, traders are anticipating an additional 25-basis-point cut, especially if inflation data remains favorable. With CPI at 3.7%, the central bank’s target rate may further ease to support economic growth. Any surprise from the Fed could trigger significant market moves, either boosting equities on a dovish signal or causing volatility if a more hawkish tone is adopted (Investopedia).

3. Geopolitical Risks Escalate

   • The ongoing conflict in the Middle East between Israel and Hamas, along with tensions in Ukraine, continues to inject uncertainty into global markets. Oil prices are expected to remain volatile, and any further escalation could disrupt global supply chains, pressuring sectors sensitive to oil prices like manufacturing and transportation. Brent crude dropped 2% last week to settle near $86 per barrel, and further declines or spikes could ripple across equities and commodities alike (Investopedia).

Additional Economic Indicators to Monitor

• Consumer Spending Data: With inflation still at elevated levels, consumer spending data released this week will shed light on the state of consumer resilience. Analysts anticipate spending growth of 0.2% from the prior month, a slight slowdown that could reflect tightening budgets as higher interest rates impact credit.
• Jobless Claims: Expected Thursday, initial jobless claims will provide insight into labor market strength. The recent reading of 210,000 claims is expected to hold steady, indicating a robust job market despite rate hikes. A significant deviation could signal either further economic softening or resilience, impacting Fed decision-making and market sentiment.

Market Implications: Short-Term Outlook

The outcome of this week’s events will likely drive both short-term volatility and longer-term trends:

• Bullish Scenario: Strong earnings from tech companies, combined with a Fed rate cut, could propel the Nasdaq and S&P 500 higher. Analysts have raised year-end price targets for the S&P 500, with some forecasting levels above 4,800 if Fed policy eases further and tech earnings surpass expectations.
• Bearish Scenario: Weak earnings or unexpectedly hawkish Fed commentary could dampen market enthusiasm, especially for growth-oriented sectors. Elevated volatility, already on the rise with the CBOE Volatility Index (VIX) near 20, could spike further if geopolitical risks escalate or economic data shows unexpected weakness.

Conclusion

This week’s earnings and Federal Reserve decisions will be instrumental in setting the tone for the final quarter of 2024. With significant events on the horizon, investors should brace for potential volatility while staying informed about updates on tech earnings, Fed policy, and global developments. For more in-depth analysis, visit Kiplinger, Markets Insider, and Investopedia.