Wall Street trading desks turn bullish, say not to bet against Big Tech earnings, rate cut
Wall Street is warning clients not to bet against the stock market, with both central bank and corporate catalysts ahead. The market roared to all-time records on Friday as the release of September consumer inflation data overshadowed concerns around both tariffs and sky-high valuations. Now, traders are looking to the two-day Federal Reserve meeting and five earnings reports due this week from Magnificent Seven companies to see if stocks can push still higher. “Over the last two weeks we had a more cautious stance on markets,” JPMorgan’s trading desk wrote to clients early Monday. “While we did see a [volatility] spike and some churn, markets ultimately moved higher. Now, as we enter the bulk of Mag7 earnings with a series of trade deals expected to be formally announced this week, the setup is much cleaner.” Fed funds futures are pricing in a near certainty that the Federal Reserve will lower benchmark rates a quarter point, to 3.75% to 4.00%, at the end of policymakers’ meeting on Wednesday, according to the CME FedWatch tool. Investors will closely monitor Fed Chair Jerome Powell’s post-decision press conference, though they question if he will be able to provide an outlook for economic policy given that so much economic data has been delayed due to the four-week-old federal government shutdown. Alphabet , Meta Platforms and Microsoft all report earnings after the bell Wednesday, followed by Apple and Amazon on Thursday. “Calling it a ‘big week’ feels like an understatement,” Morgan Stanley’s research team said. After this week, however, so long as the government stays shuttered, Barclays’ sales and trading desk told clients there are few market catalysts until Nvidia reports earnings in mid-November. “Thanks to the government shutdown, this leaves the market with no catalysts … at a time where both systematic and discretionary positioning is under-risked vis-à-vis the level of” the S & P 500, Barclay’s team wrote. “You do not want to be short that positioning dynamic nor a quiet tape.” Similarly, JPMorgan said it is “tactically bullish” on the belief that the Magnificent Seven earnings due to be reported this week will exceed expectations. “We are removing our cautious tone,” traders at the nation’s largest bank said, “which ultimately proved to be the wrong call.” Stock futures jumped Monday morning amid rising hopes for a trade agreement with China. Barclays called a scheduled meeting Thursday between President Trump and Chinese President Xi Jinpeng in South Korea “crucial,” but said the outcome of the talks has been “derisked” following preliminary weekend negotiations between the two sides. “Consolidation apparently is not in the market’s vocabulary these days as buyers continue stepping into weakness and the grind higher persists,” Wolfe Research technical analyst Rob Ginsberg wrote to clients over the weekend.
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