About 70 S&P 500 Companies Report Next Week as Rate-Hike Odds and a Semiconductor Slide Weigh on Stocks

The numbers coming in are good. The market's mood is not.

As of Friday, Oct. 16, 85% of the 46 S&P 500 companies that have reported third-quarter results beat expectations. The index is on track for blended earnings growth of 29%, a figure expected to climb by the end of the season. Next week, about 70 more companies report.

What reports next week

Tesla reports Wednesday, Oct. 21, days after unveiling its long-delayed "flying car" Roadster, developed with SpaceX. Meta Platforms, Procter & Gamble, American Express, Lam Research and Texas Instruments are also on the calendar.

Monday, Oct. 19 brings the October NAHB Housing Market Index at 10:00 a.m. Eastern, plus earnings from W.R. Berkley, Steel Dynamics and Fifth Third Bancorp. ADP's weekly employment figure lands Tuesday, Oct. 20 at 8:15 a.m.

A market carried by a few names

The Magnificent Seven are doing the heavy lifting in the indexes while the average stock struggles. Small caps fell into correction territory on Wednesday.

"It's not a real healthy condition for the market," said Bob Lang, chief options analyst at Explosive Options.

The pain is concentrated in chips and AI infrastructure. The VanEck Semiconductor ETF (SMH) fell for a ninth straight day on Friday, a streak not seen since 2006. Through Thursday, Micron was on pace for a weekly decline of more than 9%, and CoreWeave was down roughly 15% for the week as investors questioned debt-financed AI expansion.

The selling is not a verdict on demand. Anthropic reported third-quarter revenue of $16.8 billion, and Samsung Electronics, the world's largest memory chipmaker, reported third-quarter earnings up 780.3% to $80.2 billion on sales up 126.6%. The worry is whether growth justifies the spending, and whether that spending slows.

Rates and inflation

The Federal Reserve raised its benchmark rate by 25 basis points in September to a range of 3.75% to 4%, its first increase since 2023. September producer prices posted their largest increase since 2022, and consumer inflation remains above the Fed's 2% target. Elevated energy prices following the U.S.-Iran conflict are part of the story.

Fed Chair Kevin Warsh spoke at the IMF and World Bank meetings in Bangkok. He reiterated his opposition to signaling policy decisions in advance and said officials will assess incoming data. Traders took it to mean the Fed holds at its Oct. 27-28 meeting. CME FedWatch puts the odds of no change in October at 72.3%, and a majority of traders expect another quarter-point hike in December. Fed funds futures leave room for two hikes by the end of the year.

Higher rates are already showing up in housing. Market commentator Louis Navellier points to pending home sales at a 12-year low and blames higher mortgage rates.

The bears

Hedge fund manager Paul Tudor Jones said this week that 2027 could be a "really challenging year" for stocks. He cited new equity supply from major tech IPOs and a ballooning U.S. fiscal deficit.

Bank of America said this week that earnings growth is concentrated in energy and technology. Excluding those two sectors, it expects S&P 500 earnings growth to slow to 7% in the third quarter from 12% in the second.

Lang said rates, AI spending and the sustainability of earnings could produce a 5% pullback by year-end. He added that revenue and earnings growth cannot stay at 20% to 30% every quarter, and that persistently costly borrowing would eventually hurt the broader economy.

The bulls

Navellier, writing in a commentary, argues the opposite. He expects banks to post strong results and says UnitedHealth and Johnson & Johnson already beat estimates and raised guidance. He expects Eli Lilly to do the same.

He also leans on the calendar. The fourth quarter is seasonally the strongest of the year, November is the second-strongest month, and 2027 is the third year of the presidential cycle, historically the best for the S&P 500. The current bull market turned four this week, a milestone that historically has been followed by further gains, though possibly more modest ones.

Thursday's tape

Stocks bounced Thursday as money rotated out of tech. The S&P 500 gained 0.3% and the Nasdaq Composite 0.1%, each ending a three-day losing streak. The Dow climbed more than 500 points, about 1.1%. Even so, the S&P 500 was still down nearly 1% for the week through Thursday and the Nasdaq more than 2%.

What to watch

Tesla's Wednesday report is the first marquee test of the week, followed by Meta. Investors will be looking for any sign of slowing AI spending. After that comes the Fed's Oct. 27-28 meeting, where the market is pricing a hold but a December hike remains the majority expectation.