After focusing squarely on earnings over the past two weeks, investors will turn their attention to a
policy meeting in the week ahead and some major economic data.
While there are about 83
companies and five
components due to report quarterly profits next week, analysts say the third-quarter earnings news has mostly been factored into the market. So far, some 323 S&P firms have posted earnings, and the results are coming in well ahead of expectations. Analysts now expect year-over-year profit growth of 19.4% for the third quarter and 22.1% for the fourth.
"Most of the major companies have already reported, and although there are still a lot left, the earnings story is old now," said Peter Cardillo, chief strategist at Global Partners Securities. "It's already been digested and discounted."
Perhaps the most pivotal event for investors in the week ahead will be the Federal Reserve policy meeting. Analysts aren't expecting any move on interest rates -- the fed funds rate currently sits at a 45-year low of 1% -- but they will be listening for any changes in the central bank's policy statement.
The Fed has maintained that it will keep rates on hold for a "considerable period," and futures markets aren't pricing in a hike in rates until next June. But the economy has been showing signs of strength recently. Weekly jobless claims have been declining, and economic growth is expected to climb almost 6% in the third quarter.
"Sooner or later, the Fed will revert to a less aggressive stance," said Robert Gay, global head of fixed-income research at Commerzbank.
Investors will get more clues about the state of the economy next week. Existing-home sales and new-home sales are both expected to be released Monday, followed by durable-goods orders and the conference board's consumer confidence index Tuesday.
The employment cost index and weekly unemployment claims are both due Thursday, as is the advance reading on third-quarter gross domestic product. Analysts say the economy probably grew at a rate of 5.8% in the quarter after a 3.3% climb in the second.
While that's pretty outstanding, some economists worry that it's not sustainable, noting that a lot of the strength in the quarter came from tax cuts and other one-time items that aren't likely to be repeated.
The Chicago purchasing manager's index will be released Friday, along with personal income and spending data and the University of Michigan's consumer sentiment survey.
On the earnings front, look out for Dow components
Procter & Gamble
on Monday. Fellow Dow member
is expected to chime in on Wednesday, followed by
Although earnings have been strong overall, several companies disappointed investors last week, sending stocks lower.
slashed jobs after reporting a weaker-than-expected profit in the third quarter. It also cut earnings estimates for the full year. Meanwhile, shares of
plunged after the firm reported a drop in deferred revenue.
For the week, the Dow Jones Industrial Average fell 1.4% to 9582, while the S&P 500 was down 1% to 1029. The Nasdaq shed 2.4% to 1866. A selloff in stocks was good news for bonds, which had lost ground in the previous three weeks. The yield on the 10-year note fell 17 basis points for the week, the largest decline since June 13.