Dow Jones, Nasdaq, S&P 500 weekly preview: Markets brace for pivotal earnings week

Investing.com -- The Dow Jones Industrial Average fell Friday as Thursday's tech selloff spread to other corners of the market, while U.S. oil prices climbed above $100 a barrel on renewed fears of a flare-up in the U.S.-Iran conflict.

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The Dow dropped 652.82 points, or 1.23%, to 52,215.16. The S&P 500 slipped 0.52% to 7,623.68, and the Nasdaq Composite fell 0.21% to 25,955.34.

Technology stocks had pulled back Thursday as investors weighed the impact of heavy corporate borrowing and rising rates on AI-linked names. Microsoft edged higher Friday, while chipmakers fared better still, with Micron Technology up 2.5% and U.S.-listed shares of SK Hynix gaining 4%.

The 10-year Treasury yield rose to around 4.999%, after dipping below 5% Thursday for the first time in a month amid growing caution over the scale of borrowing financing AI data center construction.

For the week, the S&P 500 fell 0.5%, and the Nasdaq lost 0.7%, while the Dow rose 0.4%.

Investors face a pivotal stretch this week, with earnings from major AI players and a Federal Reserve policy meeting set to test a market rally that has grown increasingly fragile. Following Meta's results last week, Alphabet, Microsoft and Amazon headline a heavy slate of reports, with roughly a third of S&P 500 companies due to post results.

Strong corporate profit growth has helped drive this year's stock gains despite headwinds including surging Treasury yields and rising energy costs tied to the Middle East conflict.

Reports from chipmakers Intel and SanDisk could also sway sentiment around the AI trade. Other notable companies reporting include Eli Lilly, Exxon Mobil, Chevron, Caterpillar, ServiceNow, and Mastercard, among others.

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The Fed's policy meeting Wednesday will bring renewed focus to the rate outlook. The central bank raised rates in September for the first time since 2023 to combat above-target inflation, but fed funds futures late Friday implied less than a 10% chance of another hike this week, according to LSEG data.

Investors are skeptical the Fed will move just a week before the midterm elections, though markets see roughly an 80% probability of a hike at the December meeting.

HSBC: "We've been max Overweight stocks and max Underweight sovereign bonds since mid-March. Given the constant narrative bingo, we just can't have the same level of conviction any longer. Heading into the midterms, there may well be worries about AI regulation in the event of a 'Blue Wave' as well as renewed geopolitical concerns around the Middle East. We tactically continue to like SPW over NDX and over European/EM equities as a result.

JPMorgan: "Once the latest geopolitical anxiety peaks, then the rollover in bond yields that we called for earlier this month, and which has already led to anticipated broadening trade, a rebound in SPW vs SPX, as well as in Value vs Growth – see our report – will eventually also start being interpreted more favourably by the overall equity index."

But there's already been substantial damage to multiples. Lower yields should also give valuations some reprieve. So any dips related to the above two factors – as well as further likely turmoil in France – will likely be a good buying opportunity in the next few weeks again – more for equities than credit though."

Yardeni Research: "When we lowered S&P 500 year-end target a month ago, it had nothing to do with the market's fundamental underpinnings. Our concerns remain valuation-related in light of rising uncertainties in the investment backdrop. But don't be tricked by scary surprises that send stocks southward; they could be attractive buying opportunities, say Ed and Elias, given the robust economic growth and corporate earnings we continue to expect. Today, they explain why prospective frights from four directions—geopolitical, U.S. political, the Fed, and AI—could turn out to be opportunities in disguise."

Goldman Sachs: "Going forward, the trajectory of the labor market and interest rates will ben key determinants of household equity demand, which in turn will help determine the near- and long-term path of U.S. equities."

RBC Capital Markets: "With the S&P 500 down just 2% from its recent peak as of the 10/22/26 close, we remain on guard for a 5-10% pullback in the S&P 500 in the near term, which would take the index into the 7000-7400 range. We have not changed our 12-month S&P 500 price target of 8,150, noting that the signals from our models have returned to where they were at the time of our last update in September. We continue to see the Growth/Value trade in the U.S. as a tug of war but think a new phase of Value leadership has begun, which tends to coincide with U.S. underperformance relative to non-U.S."

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