Stocks rebounded Monday on the revival of the artificial intelligence trade, as the developer of the Claude large language model and AI assistant filed for what would be the biggest initial public offering (IPO) in stock market history. Markets are also looking forward to quarterly reports from three more Magnificent 7 stocks, as well as this week's Federal Open Market Committee meeting, which begins tomorrow and concludes on Wednesday.
"AI jitters and oil prices have kept stocks off balance," E*TRADE From Morgan Stanley Managing Director Chris Larkin observes, "but this week's lineup of high-profile earnings and economic data may have the potential to push the market out of its trading range — one way or the other."
As Larkin notes, the Fed will probably hold interest rates this week, so "traders will be focused on tech earnings, especially hyperscalers Microsoft and Amazon, to gauge the strength of the AI trade as we head into year-end."
The front-month West Texas Intermediate crude oil futures contract was down 1.8% to $101.48 per barrel. WTI has risen more than 12% in October, as investors, traders and speculators continue to balance risks of escalation after midterm elections in the U.S. with improving flows from the Middle East.
Meanwhile, the yield on the 2-year Treasury was up 3.2 basis points to 4.716%, while yields on the 10-year (-0.2 bps, 4.986%) and the 30-year (-1.6 bps, 5.299%) were lower for the day.
By the closing bell, the tech-heavy Nasdaq Composite had risen 0.8% to 26,169, the broad-based S&P 500 was up 0.7% at 7,676, and the blue-chip Dow Jones Industrial Average had added 0.3% to 52,361.
What the Fed will do (and when the Fed will do it)
Like most market participants, Deutsche Bank Senior U.S. Economist Brett Ryan expects the Fed to hold the target range for the federal funds rate at 3.75% to 4.00% this week. At the same time, Ryan says dissents from a decision to hold are likely.
The economist expects Fed Chair Kevin Warsh's post-meeting press conference to focus on why the FOMC decided not to raise rates, how recent inflation data has impacted the monetary policy outlook and what, if anything, has changed about the committee's assessment of financial conditions amid recent AI-related volatility.
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"Warsh is likely to signal that recent inflation data reinforce expectations from the September meeting that further tightening will likely be needed over time," the economist concludes. "However, skipping October allows officials more time to assess trends in the data."
You can follow updates and commentary about this week's event on our October Fed meeting live blog.
Should you buy ANT stock?
Anthropic has a ticker symbol, and if everything goes according to plan, ANT will start trading on the Nasdaq next month. One analyst who covers the IPO market says it'll be the first major generative AI pure play to come to market.
According to Kiplinger's Tom Taulli, "Investors will need to weigh Anthropic's explosive growth against its massive infrastructure spending, fierce competition, safety risk and lofty valuation before deciding whether to buy the IPO."
Listen to what the hyperscalers say
Alphabet (GOOGL, -1.1%) and fellow Mag 7 members Amazon (AMZN, +0.4%) and Microsoft (MSFT, +1.5%) will report top- and bottom-line results amid rising concern about whether we're in an AI bubble rather than an AI boom.
Stifel analysts say markets will watch consumption trends, as well as free cash flow and capex, with emphasis on Azure for Microsoft, Google Cloud Platform for Alphabet and Amazon Web Services for Amazon.
Stifel suggests Azure will top a consensus forecast for 46% to 48% year-over-year revenue growth, "driven by incremental efficiencies, ramping new data center capacity and a growing OAI (Azure OpenAI) acceleration."
The analysts note that GOOGL is on a streak of four consecutive quarters of accelerating revenue growth, supported by spiking cloud business. For its part, AMZN's sequential revenue acceleration streak is at five quarters and counting.
As Stifel notes, Amazon management has already said it won't have enough capacity in 2026 or 2027 and "demand we already have for 2028 is striking."
Meta Platforms (META, -1.9%) and Tesla (TSLA, +5.2%) posted their most recent results last week.
Apple (AAPL, -1.1%) is scheduled to report after the closing bell next Monday, November 2. Though management hasn't yet confirmed the date, Nvidia (NVDA, +2.4%) is expected to host its earnings event after the closing bell on November 18.