*

Solid Q3 earnings season sees 130 more S&P 500 reports

next week

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Meta, Microsoft ( MSFT ) shares stumble after results

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Private data including ADP employment in focus as shutdown

set

to delay jobs data

By Lewis Krauskopf

NEW YORK, Oct 31 (Reuters) - A resilient U.S. stocks

rally heads into a busy week of corporate results, with

investors concerned about the strength of the artificial

intelligence trade and about how aggressively the Federal

Reserve will cut interest rates.

On Thursday, the S&P 500 backed off somewhat from

record highs but the benchmark index remained on pace for its

third straight week of gains, despite wobbling after megacap

companies posted mixed results. Doubt also grew that more

interest rate cuts were imminent after the Fed eased by a

quarter point on Wednesday, as expected.

Following the October

monetary policy meeting, Fed Chair Jerome Powell said an

interest rate cut at the next meeting in December was "not a

foregone conclusion." Investors had expected that move to be

almost a done deal.

Corporate earnings have broadly topped expectations.

Third-quarter S&P 500 profits are on pace to have climbed 12.5%

from a year earlier, according to LSEG IBES. More than 130 index

companies will report in the coming week.

Making some investors nervous, the rally has lifted the S&P

500's forward price-to-earnings multiple above 23, putting the

market's valuation around its highest since the dot-com bubble

25 years ago, according to LSEG Datastream.

"If we assume that we're getting close to the ceiling on

valuations as investors may be reluctant to pay multiples closer

to what they were in the tech bubble, I think earnings will have

to do the heavy lifting to drive returns forward," said Angelo

Kourkafas, senior global investment strategist at Edward Jones.

The first week of November kicks off a traditionally rosy

period for stocks. Still, given the strong performance so far in

2025, some investors question whether some year-end cheer has

been pulled forward. The S&P 500 is up 16% year-to-date, while

the Nasdaq Composite has gained 22%.

Since 1950, November ranks as the best performing month and

December the third-best for the S&P 500 on average, according to

the Stock Trader's Almanac. November has an average gain of

1.87% in that time, with December averaging an increase of

1.43%, just behind April's 1.47%.

With 44% of S&P 500 companies that reported as of Wednesday, 83%

exceeded earnings expectations. That beat rate would be the

sixth highest on record if it holds, according to strategists at

Ned Davis Research.

Still, there have been hiccups. On Thursday, shares of Meta

Platforms ( META ) and Microsoft ( MSFT ) slid following their

quarterly reports. Both announced spending increases to fuel AI

expansions.

Alphabet also boosted its projected capital

spending, but its shares rose as investors were more accepting

of the Google parent's ability to fund its plans from its cash

flow.

Enthusiasm over AI has helped drive the S&P 500 up 90% since the

bull market began just over three years ago. But investors are

wary of potential overexuberance tied to the theme and eager for

evidence that AI investments are paying off.

"Investors want to know not only what the growth prospects

look like, which has been the focus as these stocks have

skyrocketed ... but also how much are they spending and what

sort of return does that imply," said Eric Kuby, chief

investment officer at North Star Investment Management.

Tech companies reporting next week include semiconductor

firms Advanced Micro Devices ( AMD ) and Qualcomm ( QCOM ) and

data analytics company Palantir Technologies ( PLTR ). Palantir ( PLTR )

and AMD shares both have more than doubled this year, while

Qualcomm ( QCOM ) shares are up about 15%. Other companies set to report

next week include McDonald's and Uber ( UBER ).

Investors concerned about a weakening labor market are

particularly on guard for corporate staffing announcements

because the government shutdown has halted release of most

official economic reports. Amazon ( AMZN ) said this week it

will reduce its global corporate workforce by about 14,000

people, with more cuts expected next year.

"With a lack of data from the United States government on

anything really, and then these signs that companies are laying

people off, that makes me a bit nervous," said Robert Pavlik,

senior portfolio manager at Dakota Wealth Management.

The U.S. shutdown, which started on October 1, is now the

second-longest ever behind the 2018-2019 shutdown that lasted 35

days. Monthly jobs data scheduled for release on November 7 is

set to be delayed, so investors gauging the economy's health

will rely more on alternative data, including the ADP employment

report and University of Michigan consumer sentiment reading.

That data takes on added significance after Powell's

comments left prospects for future cuts more in doubt.

"We are in a data vacuum, so these alternative sources are

gaining more importance as the Fed is trying to calibrate its

path for interest rates," Kourkafas said.