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Q3 earnings pick up, Netflix ( NFLX ) on Tuesday, Tesla due

Wednesday

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Delayed Sept CPI release out on Friday

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Focus also on US-China trade developments

By Lewis Krauskopf

NEW YORK, Oct 17 (Reuters) - Earnings reports from

companies led by Tesla and Netflix ( NFLX ) will

provide a deeper look at U.S. corporate profits in the coming

week, and a delayed U.S. inflation release will mark another

test for the stock market, which has become shakier even as it

remains around record highs.

The fourth year of the S&P 500's bull run kicked off this

week with some significant gyrations after a long period of

market calm. The CBOE market volatility index on Thursday

ended at its highest closing level in nearly six months.

"The market is becoming more volatile, but it's also coming

off of a very non-volatile period where we didn't have a lot of

risk catalysts bubbling to the top," said Michael Reynolds, vice

president of investment strategy at Glenmede. "Once you have

valuations hit sort of full levels, as we're seeing now almost

across the board, you have to be on the lookout for incremental

risk catalysts."

The spark for the latest bout of volatility has been a

surprise rise in U.S.-China trade tensions after tariffs had

receded as a major issue for markets in the past few months.

Stocks slumped last Friday after the U.S. threatened to

implement a 100% increase in tariffs by November 1 after the

country balked at China's rare earth controls.

U.S.-China back and forth will be key for markets in the coming

week, said Doug Beath, global equity strategist at Wells Fargo

Investment Institute, with the expectation that U.S. President

Donald Trump and Chinese leader Xi Jinping will meet later this

month. Sharp declines in shares of regional banks on Thursday

that weighed on markets also kept investors on edge.

Stocks are on pace for a strong year. The benchmark S&P 500 is

up nearly 13% year-to-date and within roughly 2% of its record

high. But along with recent rockiness, there are signs the

market is weakening under the surface.

The percentage of S&P 500 stocks trading in some form of an

uptrend has declined from 77% in early July to 57% as of

Tuesday, according to Adam Turnquist, chief technical strategist

for LPL Financial, who analyzed the stocks compared to their

moving averages over short-to-long term timeframes. The

percentage of stocks trading in a downtrend has increased from

23% to 44% over that period since early July.

That "narrowing gap highlights emerging cracks in the

market's foundation," Turnquist said in written commentary.

Similarly, Kevin Gordon, senior investment strategist at Charles

Schwab, said he will be watching the extent to which massive

stocks are responsible for the market's gains going forward.

"If you have a fewer number of companies that are actually

moving higher, but the indexes do move higher because of the

megacaps, that's a really important divergence," Gordon said.

Attention will be on third-quarter earnings after major

banks started the reporting season on a strong note. Aside from

streaming giant Netflix ( NFLX ) and electric vehicle maker Tesla, other

companies due to report in the coming week include consumer

companies Procter & Gamble ( PG ) and Coca-Cola,

aerospace and defense giant RTX and tech stalwart IBM ( IBM )

.

The corporate results and executive comments will offer a

view into the economy at a time investors are lacking their

typical data flow due to the U.S. government shutdown. Because

of the ongoing shutdown, which began on October 1, releases

including the monthly employment data have been delayed.

"(Corporate) reports and what companies say is really our

best chance at assessing what the broader economic health is,"

Gordon said.

The government has said it will release the U.S. consumer

price index for September on Friday, nine days after it was

originally scheduled, saying the CPI data allows the Social

Security Administration to meet deadlines related to timely

payment of benefits.

The CPI report, which is closely watched for gauging

inflation trends, will be released days before the Federal

Reserve's next monetary policy meeting on October 28-29. The

U.S. central bank is widely expected to cut interest rates by a

standard quarter percentage point again, after weakening jobs

data prompted the Fed to lower rates last month for the first

time this year.

"We'd really have to see something out of left field in

terms of notable inflation pressures to knock the Fed off of a

rate cut path at the October meeting," Glenmede's Reynolds said.