Morning in New York: The Fed and Tech Giants' Earnings Reports Will Test the Sustainability of the Rally

A daily review and forecast of events in the U.S. stock market by Mikhail Denislamov, Deputy Director of Capital Markets Research at Freedom Broker.

The Fed’s decision will be the main event of the trading session, while Microsoft and Alphabet’s earnings reports this evening could trigger volatility in after-hours trading. At 2:00 p.m. Eastern Time (ET), the Fed will announce its interest rate decision, and at 2:30 p.m. ET, Kevin Warsh’s press conference will begin. We expect the rate to remain in the 3.75–4.00% range: according to the latest available CME FedWatch estimate as of October 27, the probability of this outcome was about 90%. The main point of interest is the signals regarding December. In our base case scenario, we still anticipate one more rate hike before the end of the year. For stocks, a pause without any escalation in rhetoric regarding further tightening would be a favorable outcome.

At 8:30 a.m. ET, preliminary data on wholesale inventories and the goods trade balance for September will be released. The consensus estimate for inventories calls for a 0.5% month-over-month increase, in line with August’s pace. These releases will refine GDP estimates for the third quarter: our latest estimate for growth is 2.6% on an annualized basis, while the consensus at the start of the week was 3.2%.

WTI crude is trading above $101 per barrel this morning amid reports of an attack on the Ras Tanura refinery in Saudi Arabia. The Houthis claimed a missile struck the facility, but Saudi authorities have not yet confirmed this information. The renewed threats to oil infrastructure heighten the risk of supply disruptions and limit the Fed’s ability to soften its rhetoric. At 10:30 a.m. ET, the EIA’s report on oil inventories will provide additional guidance for the market.

In the AI segment, SK hynix’s results continue to provide support: the company reported record quarterly figures and long-term agreements covering more than half of its production capacity for 2027–2028. This makes SK hynix’s future revenue more predictable. For the sector as a whole to continue growing, confirmation from equipment buyers is also needed: cloud companies must demonstrate that increased capital expenditures are accompanied by sufficient growth in revenue and cash flow.

Before the market opens, GE Vernova (GEV), Vertiv (VRT), Amphenol (APH), Phillips 66 (PSX), Biogen (BIIB), and Boston Scientific (BSX) will report earnings. After the market closes, Microsoft (MSFT), Alphabet (GOOGL), ServiceNow (NOW), KLA (KLAC), T-Mobile US (TMUS), Chipotle Mexican Grill (CMG), and Ford (F) will report their results. For Microsoft, the key metric will be Azure’s growth of approximately 45% in constant currencies, as targeted by management. For Alphabet, the focus will be on the performance of Google Cloud, search advertising, and the investment budget. Strong cloud metrics will support the sector, provided that spending forecasts do not undermine the free cash flow outlook.

S&P 500 futures are trading near zero, while Nasdaq-100 futures are trading higher. We assess the risk balance as neutral and expect increased volatility. Signs of sustained demand for AI infrastructure are providing support, while high oil prices, high Treasury yields, and uncertainty ahead of the Fed’s decision remain headwinds.

— Alphabet (GOOGL) is up about 1.4% in premarket trading following a report by The Information about OpenAI’s plans to purchase Google TPUs. The potential deal could boost external demand for the company’s accelerators, though the volume and terms have not yet been disclosed. In today’s earnings report, investors will be interested in the prospects for monetizing the company’s proprietary chips and their contribution to Google Cloud’s growth.

— Visa (V) is down 1.66% in premarket trading. Net revenue for the fourth quarter of fiscal year 2026 rose 13% year-over-year to $12.14 billion, while adjusted EPS rose 17% to $3.48. Payment volume in constant currencies increased by 9%, but incentive payments to customers jumped by 21%. It is this factor that is limiting net revenue growth despite steady consumer demand.

— NXP Semiconductors (NXPI) is down about 7% in premarket trading. Third-quarter revenue rose 19% year-over-year to $3.79 billion, and adjusted EPS came in at $4.20. For the fourth quarter, the company forecasts revenue of $3.75–3.95 billion and adjusted EPS of $4.14–4.58. The midpoint of the forecast implies revenue growth of 2% quarter-over-quarter, following 8% growth in the third quarter. Additionally, the board of directors increased the authorized share repurchase program by $5 billion.

— Seagate Technology (STX) is down about 3% in premarket trading. Revenue for the first quarter of fiscal year 2027 rose 61% year-over-year to $4.23 billion, while adjusted EPS came in at $7.68. The Q2 guidance, which calls for revenue in the range of $4.7–4.9 billion and adjusted EPS of $9.00–9.40, exceeded consensus estimates. The negative reaction to the strong results indicates high expectations.

— Teradyne (TER) is down about 4% in premarket trading, despite beating its own Q3 guidance. The adjusted EPS forecast for Q4 is $1.95–2.25. A management conference call is scheduled for today at 8:30 a.m. ET. The main focus will be on comments regarding demand for AI chip testing and the outlook for orders in 2027.

— Robinhood Markets (HOOD) is trading about 7% lower in premarket trading. Third-quarter revenue rose 12% year-over-year to $1.42 billion, but adjusted EPS fell 3% to $0.60. Revenue from cryptocurrency trading fell by 55%, and net interest income declined by 9%. Growth in options and event-driven contracts has not yet translated into higher earnings per share.

— Enphase Energy (ENPH) is down about 18% in premarket trading. Its revenue forecast for the fourth quarter came in at just $225–255 million, compared with the market’s expectation of about $300 million. Sales to end-users in Q3 rose by only 1% quarter-over-quarter, compared to the company’s own guidance of about 10%; in Q4, the company expects sales to decline by approximately 10%. The forecast reinforces doubts about the timing of a recovery in demand for residential solar systems.

Trading on October 27 on U.S. stock exchanges ended mostly higher. The S&P 500 gained 0.60%, the Nasdaq-100 rose 1.29%, the Dow Jones rose by a symbolic 0.03%, and the Russell 2000 gained 1.16%. The technology sector (XLK: +1.70%) led the gains, driven by strength in semiconductor manufacturers. The energy sector (XLE: −2.05%) posted the largest decline amid a pullback in oil prices (WTI: −1.7%). Six of the eleven sectors closed in the red, while the equally weighted RSP gained only 0.11% compared to 0.56% for the SPY. Gains within the S&P 500 remained concentrated among the largest technology companies, although the Russell 2000’s outperformance confirms demand for small-cap companies as well.

The main driver was the easing of concerns regarding the financing of AI infrastructure. Broadcom (AVGO: +4.00%), NVIDIA (NVDA: +0.90%), and AMD (AMD: +5.45%) collectively contributed about 23 basis points to SPY’s gains. The announced $63 billion financing structure for Broadcom’s equipment, which will be leased to Anthropic, boosted confidence in the delivery of future shipments. However, Broadcom’s obligations to support the residual value of the equipment leave some risk with the supplier. Oracle (ORCL: +3.55%) was buoyed by announcements regarding the expansion of its OCI computing offerings, including Google TPUs and Cerebras solutions. Investors have likely begun to place greater weight on order prospects once again, although the availability of financing alone does not resolve the issue of the return on AI investments.

Macroeconomic data pointed to economic stability but did not provide a clear signal of accelerating demand. The Conference Board’s Consumer Confidence Index for October rose to 91.7 points, compared with a consensus estimate of 81.0 points and a revised September reading of 84.2 points. Perceptions of the labor market improved, while plans to purchase durable goods and spend on most services declined. Orders for durable goods increased by 1.8% month-over-month, compared with an expected 1.9%, following a 0.1% increase in August. The resilience of current activity is coupled with more subdued signals for the coming months. For the market, this supports corporate earnings expectations while uncertainty regarding the Fed’s next moves persists.

The December WTI contract fell 1.7% to $100 per barrel on hopes that diplomatic talks regarding Iran would continue. The decline in oil prices eased pressure on companies’ expected costs, although no confirmed agreements on resuming supplies have emerged. The yield on two-year Treasuries rose by 2 basis points to 4.73%, while the yield on 10-year Treasuries rose by 1 basis point to 4.99%. Thus, the stock rally occurred without support from falling bond yields. The Dow Jones’ performance was held back by a decline in Boeing (BA: −10.69%) following weak results from its commercial aircraft division. The market’s recovery continued to be driven primarily by corporate signals from the AI sector, which underscores the importance of upcoming earnings reports from major cloud companies for sustained growth.

This article was AI-translated and verified by a human editor