The Nasdaq Composite and the S&P 500 indices have moved sideways in the past few weeks and are all hovering near their all-time highs. NDX trades at 26,400 points, down from the year-to-date high of 27,217, while the SPX is at 7,711, down from 7,820. This article looks at the key news that will move these blue-chip indices this week.
Nasdaq Composite and S&P 500 to react to US-Iran tensions
US stocks will react to the escalating tensions between the US and Iran. The US launched an attack against Iranian launchers near the Strait of Hormuz. This was the first attack since the recent escalation ended.
Iran will likely respond by launching attacks against key US targets in the Middle East. It may also decide to boost the level of retaliation since officials know that the US military is struggling with low ammunition levels.
An escalation will make the energy situation worse. Indeed, Brent and the West Texas Intermediate (WTI) benchmarks rose to $90 and $85, respectively. Gasoline prices remain above $4 a gallon, while diesel prices have jumped to the highest level in years.
Soaring energy prices will affect inflation, which has remained elevated this month. Data released last week showed that the headline and core personal consumption expenditure (PCE) remained above 3% in May this year.
Higher inflation will likely push the Federal Reserve to hike interest rates in the December meeting. In a statement at the Jackson Hole Symposium, Kevin Warsh maintained that the bank will use all the tools available to lower the country’s inflation.
US nonfarm payrolls data
The other key catalyst for the Nasdaq Composite and S&P 500 will be the upcoming US macro data. The most important one will be the upcoming nonfarm payrollsreport on Friday this week. Economists expect this report to show that the economy added over 84k jobs in August after shedding 23k in July this year. An improvement in hiring will raise the possibility of the Fed hiking interest rates.
Before the official report, there will be some more jobs reports. The Bureau of Labor Statistics (BLS) will release the JOLTS jobs openings report on Tuesday. ADP will also release the closely watched private nonfarm payrolls (NFP) data.
The other key macro data to watch this week will be the upcoming manufacturing and services PMIs, which will provide more color on the state of the US economy.
Top corporate earnings
The S&P 500 and Nasdaq 100 indices will also react to several important corporate earnings from the United States. Broadcom, a top technology company, will release its earnings on Tuesday. These are important numbers because it has become one of the most important providers of services to companies in the AI space, including OpenAI.
Oracle, another top player in the AI infrastructure industry, will also release its financial results, which are expected to show that growth continued. Its main challenge is that its debt has continued rising this year.
Some of the other top companies that will release their earnings this week are names like Dell, Palo Alto Networks, Medtronic, Credo Technology Group, Snowflake,, HP Enterprise, Ciena, and Zscaler.
These earnings cap a strong season, where most companies released strong numbers, with the earnings growth rising to 50%.