The Dow Jones and Nasdaq 100 have remained under intense pressure in recent days as concerns about the artificial intelligence (AI) sector persist. The tech-heavy Nasdaq 100 Index (NDX) slumped to 28,840, its lowest level since September 16 and about 8% below this year’s peak.
The Dow Jones has also retreated, falling to 52,220, a modest decline from its year-to-date high of 54,757. This article examines some of the top stock market news this week.
Earnings season is the main event
The main event that will move the stock market this week will be the earnings season, which will see hundreds of American companies publish their numbers. The most notable ones will be companies in the Magnificent Seven group, including popular names like Amazon, Microsoft, Google, and Apple.
These companies are important because they account for a big share of the stock market as they have a market capitalization of over $15.2 trillion. They will also provide more hints on whether they will continue spending in the artificial intelligence sector.
In addition to these companies, other big names like GE Vernova, KLA Corporation, SK Hynix, ServiceNow, Eli Lilly, Mastercard, and Intel will publish their earnings.
Federal Reserve interest rate decision
The other important catalyst for US stocks will be the upcoming Federal Reserve interest rate decision on Wednesday. Economists expect the bank to leave interest rates unchanged between 3.75% and 4%.
Kevin Warsh has already hinted that the Fed will not deliver a second consecutive interest rate hike this meeting. Besides, recent data showed that the labor market softened last month, with the economy adding 29k jobs, much lower than the expected 90k.
The challenge, however, is that inflation has remained at an elevated level, with the headline and core CPI moving above 2% in the last five years.
In addition to the Fed decision, the stock market will react to the upcoming macro data, including personal consumption expenditure (PCE), GDP, and consumer confidence.
Soaring crude oil prices
The Dow Jones and Nasdaq 100 indices will also react to the ongoing crude oil prices,with Brent trading at $117. The West Texas Intermediate (WTI) has soared to $103 as investors anticipate another US strike against Iran.
Recent reporting suggests that Trump aims to launch major attacks after next week’s midterm elections. Iran, on the other hand, has warned that it has more targets to attack, including desalination plants, data centers, airports, and energy infrastructure.
With the midterm elections over, there are concerns that Trump will aim to escalate to force Iranians to capitulate. Such a move will lead to higher oil prices, affecting the stock market.
AI jitters
The stock market has been under pressure recently because of the ongoing jitters on the artificial intelligence (AI) industry. Some popular analysts like Ken Griffin and Ray Dalio have warned about the sector, with Gartner flagging the divergence between AI spending and revenue.
Gartner believes that impairments worth billions of dollars will be announced in the next few years. These jitters have pushed most AI stocks much lower, affecting the broader market. It has also led to a big increase in their dividend yields. Therefore, markets will react to any new developments on this.