The equity indices staged a turnaround last week after gaining momentum on Friday on the back of strong earnings results and an indication from the Federal Reserve that the regulatory body is looking to avoid the possibility of a recession while trying to cool down inflation.
In the last five trading sessions, the Dow Jones and S&P 500 indices gained close to 5%, while the tech-heavy Nasdaq Composite rose over 5%. Comparatively, the yield on the 10-year Treasury note remained elevated at 4.2%, which is the highest level since the financial crash of 2008.
Oil prices remained largely unchanged, with the WTI (West Texas Intermediate) crude hovering around $85 per barrel as economic activity rebounded in China with lower COVID-19-related restrictions.
Let’s see what will impact the S&P 500 index and the stock market in the upcoming week.
FAAMG earnings to be a key driver for Nasdaq Composite index
The upcoming week will be extremely busy, given the large number of corporate earnings scheduled to be reported. Some of the largest and most influential companies globally will report Q3 earnings in the week ending on Oct 28.
On Tuesday, Microsoft (NASDAQ: MSFT), Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), Coca-Cola (NYSE: KO), and Visa (NYSE: V) will report third-quarter results. A day later, Meta Platforms (NASDAQ: META), Ford (NYSE: F), and Boeing (NYSE: BA) are scheduled to report Q3 results.
Around 20% of the companies have reported quarterly results already for Q3, and 72% of them, including Goldman Sachs (NYSE: GS) and Netflix (NASDAQ: NFLX), have managed to beat consensus earnings estimates, according to a report from FactSet. In the last five years, around 77% of companies have topped Wall Street earnings estimates.
GDP numbers will be crucial for the S&P 500 index
The BEA or Bureau of Economic Analysis will publish the U.S. gross domestic product (GDP) for Q3. This metric typically tracks the country’s growth rate for the three months that ended in September.
Economists expect the U.S. GDP to expand at an adjusted annual rate of 2% in Q3 after contracting by 0.6% in Q2 of 2022. An uptick in GDP numbers will be the first quarter of economic growth since Q4 of 2021.
Generally, two consecutive quarters of falling GDP rates have been considered a proxy for a recession. But the strength of the labor market and nominal wage growth has suggested otherwise.
Housing market under the radar
S&P Global will also release the Case-Shiller National Home Price Index for August on Tuesday. Freddie Mac, a mortgage originator, will also publish the House Price Index for August, which tracks the prices of single-family homes.
In July, the Case-Shiller index fell 0.8%, its first monthly decline since January 2018, due to higher interest rates. On an annual basis, prices surged 16%, which was still below the 21,2% growth rate in March.
The slowdown in the housing market is expected to continue in the next year, and prices are expected to remain unchanged in September.
The U.S. Census Bureau will report new home sales for September on Wednesday, and the metric is expected to decline to 630,000 from 685,000 in August. In fact, sales of newly-built homes have tended lower year-to-date and down from a high of 839,000 in December 2021.
Finally, the NAR or National Association of Realtors will release pending home sales for August that might fall by 2% in August.