(Oct 28): US stocks extended their advance Tuesday as Wall Street awaited a roll out of financial results from some of the so-called Magnificent Seven companies this week and the Federal Reserve commenced its two-day meeting.
The S&P 500 Index rose 0.3% as of 9:33am in New York, and technology-heavy Nasdaq 100 Index was up 0.5%, building on their record-setting runs. All eyes will be on five major companies that account for about a quarter of the S&P — Microsoft Corp, Alphabet Inc, Meta Platforms Inc, Amazon.com Inc and Apple Inc — as they report results on Wednesday and Thursday.
“Earnings continue to dominate, especially when it comes to expectations around capex,” said Kevin Gordon, head of macro research and strategy at Charles Schwab & Co, who will be watching how the market responds to any increases in guidance for investment spending by the biggest tech companies.
“Some of the larger pullbacks in the technology sector over the past couple years have been sparked by the market’s pushback when it comes to increased spending, so I think commentary around those plans will dominate,” he said.
Microsoft, Alphabet, Amazon and Meta are projected to post a combined US$360 billion in capital expenditures in their current fiscal years, much of it related to AI. That spending is expected to jump to nearly US$420 billion next year, according to analyst estimates compiled by Bloomberg.
Investors will also have their eyes glued to Nvidia Corp on Tuesday with speech by chief executive officer Jensen Huang scheduled for midday at the chip giant’s three-day artificial intelligence conference, called “GTC.”
See also: Stock bulls see S&P 500 rising above 7,000 as momentum builds
Equity bulls are lining up to wager the S&P 500 will surge past the 7,000 milestone by the end of this year, now that it looks as if a seasonal bout of volatility has passed. The index powered to a record 6,875 Monday, buoyed by positive signs on trade, expectations for an interest rate cut and strong corporate earnings.
The S&P 500 has soared about 92% from its October 2022 low, but the scale of the bounce-back is still lagging other bull-market periods, according to an analysis by Ryan Grabinski at Strategas Securities LLC.
“Looking at the median figures paints a slightly different picture — though it also suggests there may be further room to run,” he said Tuesday in a note to clients. “The bottom line, however, is that the AI-driven capital expenditure trade remains the most critical factor to watch. Any disruption in that area could unwind an index that has become increasingly dependent on sustained spending.”
See also: US stocks climb on hopes US-China talks will go well
A bevy of major non-tech earnings hit the tape ahead of the open. United Parcel Service Inc shares soared after it smashed Wall Street’s profit expectations by cutting costs and eliminating 34,000 jobs this year. UnitedHealth Group Inc beat Wall Street expectations for third-quarter earnings and raised its outlook for the year, a sign that the health conglomerate has stabilised after a major meltdown.
Elsewhere, PayPal Holdings Inc raised its full-year earnings guidance and announced a tie-up with OpenAI to embed its digital wallet into ChatGPT, sending its shares soaring in early New York trading.
Such earnings-season announcements are likely to have more of an impact than the Fed’s meeting. Wall Street has largely priced in a quarter of a percentage point rate reduction Wednesday.
“I think the October decision is mostly a non-event, but the Fed will dominate the narrative more if the government shutdown extends well into November.” Schwab’s Gordon said. “I see a plausible case for the FOMC cutting short the cutting cycle if members lack access to government data and private-sector labor data look stable.”
ADP Research will now be releasing US payroll data on a weekly basis, in addition to its monthly report, to provide high-frequency insights into the labour market.
Uploaded by Magessan Varatharaja
