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Top 5 things to watch in markets in the week ahead

2024-10-21 09:17:47

Investing.com -- Tesla (NASDAQ:TSLA) will be the first of the Magnificent Seven tech companies to report as corporate earnings kick into high gear. Global finance leaders are due to gather in Washington and oil prices look set to remain volatile. Here's your look at what's happening in markets for the week ahead.

1. Tesla reports

With earnings season kicking into high gear, Tesla will be one of the first U.S. big tech companies to report, with results due after the close of trade on Wednesday.

Tesla shares have taken a hit this month, following the unveiling of its long-awaited robotaxis, which some investors viewed as lacking in concrete details. Year-to-date, Tesla shares have underperformed the S&P 500, losing around 11% compared to the broader index's 22.5% gain.

Though investors are more upbeat about the U.S. economy after a robust jobs report and last month’s 50 bps rate cut from the Federal Reserve, a soft earnings report from Tesla could revive worries about tech stock valuations.

Stretched valuations - the S&P 500 is trading at nearly 22 times forward earnings - along with high expectations for corporate results and potential volatility around the upcoming U.S. presidential election, could leave stocks vulnerable to a pullback.

2. Semiconductor earnings

In what’s set to be a packed week for corporate earnings, results from Texas Instruments (NASDAQ:TXN) and equipment company Lam Research (NASDAQ:LRCX) will likely be in focus after a volatile week for the semiconductor sector last week.

Chip shares tumbled on Tuesday after equipment maker ASML (AS:ASML), Europe's biggest tech firm, projected lower-than-expected 2025 sales and bookings. But the group rebounded on Thursday after TSMC (BVMF:TSMC34), which produces advanced chips used in AI applications, reported a forecast-beating 54% jump in quarterly profit.

Semiconductor and related equipment stocks account for 11.5% of the weight of the S&P 500.

Other names due to report earnings in the coming week include Coca-Cola (NYSE:KO), IBM (NYSE:IBM), General Motors (NYSE:GM) and Verizon (NYSE:VZ).

3. U.S. data

It’s set to be a relatively quiet week on the U.S. economic calendar, but investors will get an update on the health of the housing sector with reports due out on both existing and new home sales. There are also reports on durable goods orders, consumer sentiment and initial jobless claims.

On Wednesday, the Fed will publish its Beige Book, a readout on economic conditions in the central bank’s 12 districts.

Market participants will also get a chance to hear from several regional Fed officials during the week, including Minneapolis Fed President Neel Kashkari, Kansas City Fed President Jeffrey Schmid, San Francisco Fed President Mary Daly, Philadelphia Fed President Patrick Harker and Richmond Fed President Thomas Barkin.

4. IMF meetings

Global central bank heads and finance ministers will gather in Washington from Monday for the annual meeting of the International Monetary Fund and World Bank to debate how countries can navigate low growth and high debt.

Last week the IMF warned that global public debt is forecast to exceed $100tn by the end of this year, driven by the U.S. and China.

High debt levels can spark adverse market reactions and limit budgetary efforts to react to economic shocks, the IMF said.

Meanwhile, Russian President Vladimir Putin is to host a summit of BRICS leaders from Tuesday, as the Kremlin seeks support in its standoff with the West. Russia says leaders from Brazil, India, China, South Africa, Egypt, the UAE and Saudi Arabia, which account for a third of global economic output, will be there.

5. Oil prices

Oil prices look set to remain under pressure after dropping around 7% last week as energy traders parsed the gloomy demand outlook for top importer China and the ongoing conflict in the Middle East.

Brent settled more than 7% lower, while U.S. crude futures lost around 8%, marking their biggest weekly declines since early September.

Data on Friday showed that China’s economy grew at the slowest pace since early 2023 in the third quarter, though September consumption and industrial output beat forecasts.

A combination of economic weakness in China along with the move towards the electrification of transport looks set to weigh on the demand outlook, analysts said.

Meanwhile, uncertainty remains over how the conflict in the Middle East will develop. U.S. President Joe Biden said on Friday there was an opportunity to deal with Israel and Iran in a way that potentially ends their conflict in the Middle East for a while.

But Lebanon's Hezbollah militant group said on Friday it was moving to a new and escalating phase as it battles Israeli troops, dashing hopes that the death of Hamas leader Yahya Sinwar would speed up an end to the escalating war in the region.

--Reuters contributed reporting

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