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Stocks end week on dour note ahead of 3rd anniversary of

bull

market

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JPMorgan ( JPM ), Goldman among bank reports due in coming week

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S&P 500 earnings expected to rise nearly 9% in Q3

By Lewis Krauskopf

NEW YORK, Oct 10 (Reuters) - Investors will look to

major banks' quarterly earnings reports in the coming week to

help gauge the U.S. economy's health as the federal government

shutdown has interrupted the flow of new data.

Major U.S. equity indexes slumped on Friday, stalling the

market's momentum, after comments from President Donald Trump

ratcheted up trade tensions with China. Stocks ended the week on

a dour note just before the benchmark S&P 500 is set to

mark the third anniversary of the start of its current bull

market run on Sunday.

Markets had been overbought and due for some volatility,

said Matthew Miskin, co-chief investment strategist at Manulife

John Hancock Investments.

"At the end of the day, it's going to come back to the

economy," Miskin said. "It's going to come back to corporate

profits, and earnings season is right around the corner."

With the U.S. stock market's valuation around its highest level

in five years and some concerns about over-inflated investor

enthusiasm for technology and artificial intelligence, a strong

third-quarter earnings season will be critical for equities to

maintain their momentum. Despite Friday's sharp decline, the S&P

500 remains up over 11% year-to-date and within roughly 3% of

its all-time high.

"The market just keeps grinding higher," said Garrett

Melson, portfolio strategist at Natixis Investment Managers

Solutions. "The key underpinning of that is stronger earnings

outlooks. ... When you look at the fundamentals, things continue

to look good."

The record-breaking run for U.S. stock indexes has been

accompanied by recent strong gains for other assets, including

gold, silver and bitcoin. Several high-profile officials have

recently made cautious comments about markets, including

Kristalina Georgieva, head of the International Monetary Fund,

and JPMorgan ( JPM ) CEO Jamie Dimon.

JPMorgan ( JPM ) is among the major banks kicking off the

earnings season when it reports on Tuesday, along with Goldman

Sachs ( GS ), Wells Fargo ( WFC ) and Citigroup ( C/PN ). Bank of

America ( BAC ) and Morgan Stanley ( MS ) are due on Wednesday.

Recent weak labor market data has raised concerns about

growth and prompted the Federal Reserve to restart interest rate

cuts.

"Banks are a window into the U.S. economy," said Irene

Tunkel, chief U.S. equity strategist at BCA Research. "If we see

that consumers are still spending, if we see that demand for

loans is improving, then I will start to think that perhaps

we're not really edging towards contraction."

Other companies due to report next week include healthcare

company Johnson & Johnson ( JNJ ) and asset manager BlackRock ( BLK )

. S&P 500 companies overall are expected to have

increased earnings by 8.8% in the third quarter from a year

earlier, according to LSEG IBES.

"A lot of the bullishness is built around the expected

earnings growth," said Chuck Carlson, chief executive officer at

Horizon Investment Services. "If we start to see cracks in that,

that would not be good for the market in general."

Attention also will be on Washington to see if Republican and

Democratic lawmakers break an impasse and end a government

shutdown that began on October 1. Markets have largely shrugged

off the shutdown so far, but investors have warned that risks to

the economy will increase the longer it goes on, while it is

already hamstringing U.S. travel.

Another issue for investors is the interrupted publication of

key economic reports by government agencies. The monthly

employment report, due on October 3, already has been delayed.

Investors have been concerned that the shutdown also could

affect next week's data, including releases related to inflation

and retail sales.

The monthly consumer price index report, which is closely

watched for inflation trends, will be published on October 24,

the U.S. Bureau of Labor Statistics said on Friday, after the

CPI report was originally scheduled for this coming Wednesday.

While the CPI report will allow the Social Security

Administration to meet deadlines necessary for payment of

benefits, the BLS said no other releases will be rescheduled or

produced until regular government services resume.

If the shutdown drags on through next week, there will be an

impact on the October employment report when it is released,

"which would make the numbers harder to interpret," Michael

Pearce, deputy chief U.S. economist at Oxford Economics, said in

a note on Friday.

"With much of the regular economic data unavailable during

the shutdown," Pearce wrote, "the data fog is thickening."