📈 Big earnings and big data

🔍 The focus this week: The biggest stocks and the biggest economy

This week is massive for US investors: five of the Magnificent Seven companies are set to report their latest earnings. And the US will release two important updates on how the world’s biggest economy is performing, with its third-quarter growth figures and key monthly jobs data.

The Magnificent Seven shares have been driving the S&P 500 higher for the past couple of years. So it’s no surprise that investors will want to pay close attention as Alphabet, Microsoft, Amazon, Meta, and Apple open their books this week. Analysts predict that these five companies – along with Nvidia and Tesla – saw their earnings grow by 18% in the third quarter compared to the same period last year. Take those seven out of the S&P 500, and the rest of the index is expected to report zero profit growth, according to FactSet. In other words, the serious seven are projected to continue to be the top contributors to the index’s earnings growth, just as they have been in recent quarters. That’s important: with stock valuations already high in the US, strong profit growth will be essential to keep the market rally going.

Of course, another big factor for investors who are riding the current bull market is how the US economy is holding up and what that means for the future direction of interest rates. The Federal Reserve Bank of Atlanta's GDPNow model – which provides a real-time economic growth estimate based on the latest data – projects that US economic output rose at an annualized 3.4% rate in the third quarter, which would mark an acceleration from the second quarter’s 3% pace. That’s good news for the economy, sure, but it could stir mixed feelings in investors. On the one hand, strong growth should boost corporate earnings. But on the other, a resilient US economy could force the Federal Reserve to slow its pace of interest rate cuts, potentially weighing on the stock market’s high valuations.

📅 On the calendar

👀 What you might’ve missed last week

Global

Asia

✍️ What does all this mean?

The International Monetary Fund (IMF) lowered its global growth forecast for next year and warned of rising geopolitical risks, from wars to trade protectionism. Its latest outlook predicts that economic output will expand by just 3.2% in 2025, slower than the 3.3% it previously estimated. It left its projection for this year unchanged at 3.2%. Looking to 2025, the IMF bumped up the outlook for US growth by 0.3 percentage points, thanks to the country’s strong consumer base. But it bumped down the eurozone’s outlook by the same amount, blaming the persistent drag in Germany and Italy’s manufacturing sectors.

The price of gold hit another all-time high last week, touching $2,760 an ounce on Wednesday, putting its year-to-date gain at over 30%. Several factors have been driving the rally. First, interest rates are falling in most of the world, shrinking the opportunity cost of owning gold, which holds value but doesn’t generate income. Second, central banks are snapping up the metal to diversify their US-dollar-heavy reserves. Third, heightened economic and geopolitical risks are boosting demand for safe-haven assets, like gold.

China unveiled some of its sharpest cuts to lending rates in years, as policymakers sought to boost the economy to get it closer to the country’s 5% year-end growth target. On Monday, the People’s Bank of China said that the country’s one-year prime rate, which is set by big Chinese banks and acts as a benchmark for consumer and business loans, would fall to 3.1% from 3.35% – the steepest drop on record. Meanwhile, the five-year loan prime rate, which underpins mortgages, would be lowered to 3.6% from 3.85%.