The S&P 500 Index jumped to a record high last week as the earnings season gained steam, and after Donald Trump confirmed that his meeting with Xi Jinping would take place on Thursday this week. It ended the week at $6,691, meaning that it has jumped by 15% this year.
This article examines the top news that will likely drive the S&P 500 Index and its ETFs, such as SPY, IVV, and VOO, this week.
Earnings season to accelerate
The main catalyst for the S&P 500 Index and its ETFs, like VOO and SPY this month is the earnings season. According to FactSet, 87% of all companies in the index have already published their earnings so far.
The average earnings growth for this season was 9.2%, marking the ninth consecutive quarter of growth for the index. It was also a higher growth rate than what analysts were expecting before the earnings started.
Some of the companies that reported strong results were banks like Morgan Stanley, JP Morgan, GE Aerospace, BlackRock and BlackRock.
This week’s earnings will be more important for the index as they are the biggest companies in the index, including popular names like Microsoft, Google, Microsoft, Meta Platforms, Amazon, Eli Lilly, Visa, and UnitedHealth. As such, this week will largely mark the end of the season.
These earnings will be important because it will shed light on the growing artificial intelligence industry, which has helped to drive the S&P 500 Index and other indices in the United States.
Hyperscalers like Microsoft and Meta Platforms, which have spent billions of dollars on AI will likely provide clarity on whether they plan their spending spree. At the same time, they will provide more information on whether their investment is having a positive impact on the earnings.
Federal Reserve interest rate decision
The other important S&P 500 Index news will be the upcoming Federal Reserve interest rate decision, which will come out on Wednesday this week.
Analysts have priced in a rate cut now that inflation is not growing as fast as they were expecting.
A report released by the Bureau of Labor Statistics (BLS) showed that the headline Consumer Price Index rose to 3.0% in September, lower than the median estimate of 3.1%.
Core inflation, which excludes the volatile food and energy prices, dropped from 3.1% in August to 3.0% in September.
At the same time, the labor market is struggling, with the private sector losing over 36,000 jobs in September, according to ADP. Therefore, a combination of a weak labor market and a largely contained inflation means that the Fed has a reason to cut interest rates. A rate cut will be bullish for the S&P 500 Index and other American indices.
Trump-Xi meeting
The third key catalyst for the S&P 500 Index will be a meeting between Donald Trump and Xi Jinping at the APEC Summit in South Korea, which will happen on Thursday this week.
This meeting comes at a time when relations between the US and China has deteriorated to the worst level in years.
Donald Trump started it all by imposing large tariffs on Chinese goods immediately after he became president in January. It then accelerated in April when he delivered his Liberation Day speech and ramped up his tariff pressure.
Unlike other countries, China fought back as it had spent years preparing for this trade war. Ultimately, tariffs of the two countries jumped to over 135%, and China deployed its strongest weapon in the form of rare earth materials, which largely crippled the US manufacturing sector.
China comes into this meeting from a point of strength as it has tools to punish the US and has demonstrated that it can thrive without sales to the US. For example its exports jumped in September, even as those to the US plunged by 27%. A deal between China and the US will be bullish for the S&P 500 Index.
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