*

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

next week

*

Meta, Microsoft ( MSFT ) shares stumble after results; Alphabet,

Amazon ( AMZN )

gain

*

Private data including ADP employment in focus as shutdown

set

to delay jobs report

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.

The S&P 500 on Friday ended October up 2.3% for the

month, its sixth straight month of gains, despite wobbling this

week 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 for a 13.8% increase

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. 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%.

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 about 23%.

But history suggests stocks could push higher into year

end. Since 1950, there have been 21 times that the S&P 500 has

increased at least 15% through the first 10 months of the year.

In all but one instance the index has also posted gains in the

final two months, according to Truist Advisory Services.

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.

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. Amazon ( AMZN ) shares also surged on Friday after strong

growth at its cloud unit, while easing fears it was falling

behind in the AI race.

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 18%. 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.