THIS WEEK BEWARE OF EVENT RISK! (EARNINGS & FOMC)
Google, Microsoft, Amazon, and the Fed step up to a skittish market: What to watch this week
The first week of Big Tech earnings looked promising — until Thursday hit.
After SpaceX (SPCX), Meta (META), and Tesla (TSLA) opened their books without signaling ballooning spending next year, the reality that longer-term projects would, in fact, require the big bucks scared investors into a sharp reevaluation, sending the S&P 500 down nearly 2%.
That was enough to send the 10-year Treasury (^TNX) down under the 5% mark despite oil prices shooting up to levels not seen since May.
On the economic calendar, all eyes will be on the Federal Reserve’s interest rate decision on Wednesday at 2 p.m. While the consensus strongly favors the central bank holding interest rates steady, implications for what Fed Chairman Kevin Warsh says nearly on the eve of an election will make this a live one.
A pre-election Fed decision favors a hold
Welcome back to Fed decision week.
Coming off the Federal Reserve’s September meeting, where the FOMC issued its first rate hike in three years, Fed Chairman Kevin Warsh and co. are facing the same stressors: Inflation is running over target, the war in Iran is heating back up, and the AI-driven competition for capital has only increased.
And yet, markets are pricing in a hold. After a sharp upswing in US Treasury prices on Thursday that saw the yield on the 10-year note (^TNX) drop back below 5% for the first time in weeks, traders have heavily repositioned their bets toward a hold, pricing in 90% odds the Fed keeps rates unchanged on Wednesday.
“After hiking in September, skipping October has the benefit of observing more data before the next move,” Rabobank senior US strategist Philip Marey wrote to clients. To his point, several members of the FOMC have said exactly that in recent public comments: The market is okay, and the Fed has time to take a wait-and-see approach ahead of December’s meeting — at which the market is pricing in a 77% shot of a hike.
Why fresh volatility means a ‘valuation opportunity’ is opening up in U.S. stocks
What will be interesting about October, Marey says, is the voting split inside the FOMC. While several Fed officials have called for a cautious approach, others like Minneapolis Fed president Neel Kashari and Cleveland Fed’s president Beth Hammack have been forceful in recent calls for a hike, making the argument that inflation must be addressed quickly.
And on one hand, they have a point. Fears of a large-scale return to conflict in the Middle East around the US midterms has sent oil prices surging back skyward, as international Brent (BZ=F) and US WTI crude (CL=F) futures have advanced by 9% and 12%, respectively, over the previous month.
But there are X-factors. Treasury yields have cooled off, and inflation — while hot — isn’t drastically accelerating. The labor market has been showing a bit of a mixed picture.
Hiking in October would also be politically dicey for Kevin Warsh, even if the Federal Reserve is an independent organization of the White House. Wednesday’s decision will come only six days ahead of midterm elections that look set to flip control of at least one chamber of Congress in favor of the Democratic party, and President Trump has made it clear he’s only looking for rate cuts from the Fed.
All of this would seem to push the Fed toward December
Alphabet, Microsoft, and Amazon add three more Big Tech datapoints
Not only do we get an interest rate decision from the Federal Reserve on Wednesday, but two of the “Magnificent Seven” companies report earnings on Wednesday, followed by a third, Amazon, on Thursday.
As with the last several quarters, focus is likely to concentrate on the same places for each of these companies, as with all of the Mag Seven stocks: How much are they spending (and are executives raising their spending projections), and how are they funding all that capex?
After a rough sell-off on Thursday that saw the tech-exposed Nasdaq sink by more than 1%, those figures are likely to come under even greater scrutiny as investors question the strength of the tech rally that has propelled the market forward.
Deutsche Bank strategist Jim Reid put the many-trillion-dollar question to clients: “Is this simply another temporary wobble in the AI capex story, or is the market finally starting to believe that the size of the check matters more than the promise of what they will buy?”
The market has certainly seen a bit of paranoia in recent days. Data from Jefferies showed it was the most sold sector in its equity trading department on Thursday.
“Investors are becoming increasingly demanding when it comes to AI investment, with attention shifting from revenue growth towards profitability, capital expenditure and tangible returns,” Capital.com analyst Daniela Hathorn said.
On a company-by-company basis, focuses are likely to include Google Search growth and Google Cloud’s TPU sales for Alphabet, Copilot seat growth for Microsoft, and retail margins at Amazon, Gabelli Funds portfolio manager John Belton noted.
But in reality, it’s those bigger questions that are likely to take focus.
“Strong results and reassuring guidance could help restore confidence in the Nasdaq, but disappointing margins or further increases in spending could reinforce concerns about elevated valuations,” Hathorn wrote.
Last week, we closed out some META trades for a profit. Then closed some trades and today re-entered after crossing below the 200-day MA.
Earnings –
DJIA – Bullish
SPX – Flat
COMP – Bearish
Where Will the SPX end October 2026?
10/09/26 SPX Up +1.89%
10/16/26 SPX Down -1.95%
10/23/26 SPX Down -0.47%
10/30/26 …
There is a 2/3rds chance that the market will finish between $7825.99 and $7527.55
Earnings This Week:
Mon: VZ
Tues: BA, KO, HOOD
Wed: GOOGL, MSFT, F, ROKU
Thur: AMZN, SNDK, WTI, INTC
Fri: CVX, BP, AZN, XOM
Econ Reports:
Mon: Chicago Fed National Activity Index, Dallas Fed Manufacturing Survey
Tue: Durable Goods Orders, Case-Shiller Home Price Index, FHFA House Price Index, New Home Sales, Consumer Confidence, Richmond Fed Manufacturing Index
Wed: MBA Mortgage Applications, International Trade in Goods (Advance), Retail Inventories (Advance), Wholesale Inventories (Advance), EIA Petroleum Status, Survey of Business Uncertainty, FOMC Announcement, Fed Chair Press Conference
Thur: GDP, Jobless Claims, Personal Income and Outlays (PCE), EIA Natural Gas Report, Fed Balance Sheet
Fri: Employment Cost Index, Chicago PMI, Mary Daly Speaks, Alberto Musalem Speaks, Farm Prices.
How am I looking to trade?
Looking to protect through the mid-term elections.
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info@hurleyinvestments.com = Email
Questions???
