Tesla earnings, Jerome Powell speech, retail sales highlight key week on Wall Street

Wall Street enters one of the most important weeks of the year Monday as investors hope that early signs of a robust third quarter earnings season will offset the surge in geopolitical risks and renewed rate and inflation concerns. 

Tesla  (TSLA) - Get Free Report, Netflix  (NFLX) - Get Free Report, AT&T  (T) - Get Free Report and Johnson & Johnson  (JNJ) - Get Free Report are just a few of the 56 S&P 500 companies set to report September quarter earning over the next five days, following on from a solid start last week paced by better-than-expected updates from UnitedHealth Group  (UNH) - Get Free Report and JPMorgan Chase  (JPM) - Get Free Report.

JPMorgan CEO Jamie Dimon, however, cautioned investors that geopolitical risks in Europe, the Gulf region and China had combine to the point where "this may be the most dangerous time the world has seen in decades".

That likely puts extra emphasis on earnings results over the next three weeks as investors look for reasons to extend bets on an end-of-year rally for the S&P 500 amid 'flight-to-safety' plays from global investors in a high interest rate environment that has pushed more than $1 trillion into money market funds this year, talking the total to a record $5.7 billion.

Bank of America's Savita Subramanian notes that this third quarter earnings season is the first since the end of 2021 that hasn't seen downward revisions heading into the start of reporting, adding that "macro data and other indicators that we track generally point to a beat" in overall S&P 500 profits. "We see more green shoots than red flags," she said.

Data from the London Stock Exchange Group suggests collective S&P 500 profits are likely to rise 2.2% from last year to a share-weighted $468.8 billion, paced by the communications services sector (which includes Google parent Alphabet  (GOOGL) - Get Free Report and Facebook owner Meta Platforms  (META) - Get Free Report).

Earnings growth is expected to accelerate into the final months of the year, as well, with current forecasts pegging S&P 500 profits to expand by 10.6% from the same period last year to $482.5 billion.

Tesla's third quarter earnings, slated for after the close of trading on Wednesday, will likely be the key release of the week and set the tone for risk markets heading into the end of the month.

Analysts are estimating that its overall bottom line fell nearly 30% from a year earlier to 74 cents a share, even as revenue rose about 12% to around $24.16 billion.

The difference is likely to be reflected in the group's closely tracked automotive margins, a key profit metric, which have been narrowing sharply over the past 12 months following Tesla's price-cut strategy. 

Beyond the earnings parade, investors will also navigate key reading of September retail sales Tuesday as markets bet that the resilient U.S jobs market, which added 336,000 new positions last month, translates into solid consumer spending.

Economists expect headline sale to rise 0.3% from August, a slower pace of growth than recorded over the summer months, with a focus on whether the surge in oil and gasoline prices is pulling spending from discretionary categories such as restaurants and clothing stores. 

Beyond earnings and data, markets are also likely to key on a series of Fed speakers out in the field this week, including a stacked agenda Thursday that includes an address to the Economic Club of New York from Chairman Jerome Powell, which will come just hours after weekly jobless claims data which is again expected to underscore broader resilience, and inflation pressures, in the job market. 

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