Retail and Big Tech in Focus as Q3 Earnings Season Winds Down

Add in the housing statistics, other economic releases and the bond yields and this is a defining week for investors. Over 90% of the S&P 500 companies have now reported so the investor focus switches to the remaining heavyweight contributors and what their overall performance may portend.

Key Takeaways

• Nvidia Q3 earnings today stand out in an otherwise thin week of major reporting setting market trends.

• Retail giants Walmart and Target round up a big earnings week, giving some sense of consumer spending ahead of the holiday season.

• Economic data will also feed into investor sentiment and Fed policy expectations with housing trends and bond yields in focus.

• Fundamentally, Big Tech earnings will continue to be a key driver throughout the year.

Q3 Earnings Season i Review

Overall, third-quarter 2023 earnings results have generally been upbeat: an upside year-over-year in earnings of 6.8% as reported by the S&P 500. Year-over-year revenue growth is up an equally impressive 5% across sectors. Earnings gains really reported in eight out of 11 key sectors in all-that is indicative of very strong performance such sectors as technology, health, and consumer discretionary.

But investor psychology has been anything but uniform over the past few weeks. Even as Big Tech retailers have underpinned a huge portion of this year's S&P 500 gains, smaller-cap complexes like the Russell 2000 have failed to recover their poise-a testimony to uneven growth. The Dow, S&P 500 and Nasdaq had a down week, with trading indexes between -2% and -5%.

Nvidia Takes Center Stage

Undoubtedly, among all the reports this week, Nvidia can be said to be the most anticipated in the week. Nvidia will report Q3 results after Wednesday's closing bell. One of the best performers in the S&P 500 this year, Nvidia has taken an authoritative lead in determining the broader market-from key contributions to AI and data center technology to its valuation propelling it into a core member of Big Tech Earnings.

Analysts expect the company to report revenue growth on the back of strong demand for AI-related products and services. The report will not just indicate the trend at Nvidia but also set the trend for the entire technology sector. According to a team of analysts at Bank of America, this earnings report by Nvidia could well decide the market's near-term direction as the company acts as a leading indicator of investor sentiment.

Retail Earnings Provide Consumer Insights

Beyond Big Tech, this week’s earnings reports from major retailers like Walmart, Target, and Lowe’s will offer valuable insights into consumer behavior. These companies serve as bellwethers for the retail sector, reflecting trends in spending habits ahead of the crucial holiday shopping season.

In other words, discussions of how inflation pressures bit into consumer purchasing power, combined with broader economic uncertainty, are set to dominate the earnings calls for both Walmart and Target. Additionally, the consensus Black Friday projections will come in focus, too, in that they give certain cues to broader retail performance in the fourth quarter.

For Lowe’s, its results may indicate how the housing market slowdown has affected home improvement spending. Together, these reports will provide a comprehensive picture of consumer health and its implications for the broader economy.

Economic Data and Market Sentiment

Besides earnings reports, a spate of key economic indicators is on tap this week. Reports include the Homebuilder Confidence Index, Housing Starts, and Building Permits-all showing which way the real estate market takes. These updates have grown increasingly more vital in recent times, as mortgage rates seesaw with manipulation of Federal Reserve policies, thus helping to underpin demand for housing and general economic stability.

Other focus is the bond yields. For the moment, the 10-year Treasury yield is 4.45%, while that of 2-year stands at 4.30%. With the Fed's current funds rate, these numbers are indicative that a December rate cut of 25 basis points is still probable. Investors, for this reason, will be closely watching the changes in market dynamics that might be induced.

Big Tech Earnings Taking Their Toll on the Market

That could have very important implications for the S&P 500 and Nasdaq, highly susceptible to Big Tech earnings. Given its position as one of the leading indicators of market performance, this company will most likely shape short-term trading sentiment and provide guidance on analyst expectations of the sector.

Beyond this, however, the leads Nvidia has built in AI and data centers hint toward a bigger role of technology in driving innovation and profitability. Analysts nonetheless opine that even though Nvidia still outperformed, high valuation places this stock in a position whereby slight misses make markets skittish.

Conclusion

With the Q3 earnings season heading to a close, focus would squarely fall on Big Tech companies and retail giants for direction in the markets. One highly anticipated report by Nvidia may set the tone for technology, while Walmart and Target will give insight into consumer spending.

Couple that with key economic data and the trend of the bond yield this week, investors surely have their plate full to interpret, setting the indicator for the outlook of the broader market. It is all set to be important in setting sentiment and expectations, as it would give way to the holiday period going into the final quarter of the year.