Four out of the seven megacap companies are expected to report earnings this week, and the risk-off sentiment that has been saturating markets appears likely to persist.

Big Earnings

Four megacap corporations' Q3 results are due this week, marking the start of the earnings season. This will be a crucial test for a group of stocks whose gains have helped the S&P 500 rise this year.

Tuesday is the reporting day for Microsoft and Alphabet, Wednesday is the reporting day for Meta, and Thursday is the reporting day for Amazon.

The majority of the S&P 500's 10% year-to-date gain has come from those stocks, along with Apple, Nvidia, and Tesla, so any negative results might have a significant impact.

US Data

This week, market observers will receive a new update on the health of the American economy thanks to statistics on third-quarter growth and the Fed's preferred inflation gauge, the core personal consumption price index.

Due to solid consumer spending, economists anticipate that the third quarter's gross domestic product will increase at an annualised pace of 4.1%.

On a yearly basis, it is anticipated that the core personal consumption expenditures price index, which excludes volatile food and gasoline prices, would rise by 3.7%.

On Thursday, Fed Chair Jerome Powell said that although increasing market interest rates may make central bank intervention less essential, the stronger-than-expected U.S. economy may necessitate tighter policy.

Wobbled Sentiment

The markets are in a risk-off mode as investors stress over the possibility of more interest rate increases and the potential for the Israel-Hamas conflict to escalate. The atmosphere was also dampened by Tesla's last week's weaker-than-anticipated earnings report.

After reaching 5% on Thursday for the first time since July 2007, the benchmark 10-year Treasury yield dropped on Friday as a result of comments made by Fed Chair Jerome Powell (see below).

Due to this, investors have flocked to other conventional safe-haven assets like the dollar, gold, short-term Treasuries, or money-market funds, which are now offering more alluring returns since interest rates started to rise early last year.

ECB

On Thursday, the ECB will host its most recent policy meeting, and the general opinion is that interest rates will stay the same.

Policymakers have suggested that it is time to stop while they evaluate the impact of monetary tightening so far after the ECB increased its deposit rate at each of its past 10 meetings, reaching a current record high.

Market players will be watching for any hints that December might be the year's final rate increase.

The Eurozone is scheduled to disclose the widely anticipated October PMI data on Tuesday, ahead of the meeting on Thursday. Concerns over the prospects for the bloc's economy have been highlighted by recent economic statistics due to decreasing consumer expenditure in the face of persistently rising inflation.

(Sources: investing.com, reuters.com)