U.S. stocks are approaching historical highs, entering one of the busiest weeks of the year. This week, the latest data on the Fed's preferred inflation indicator, PCE, the October non-farm employment report, and earnings reports from tech giants Alphabet (GOOGL.US), Apple (AAPL.US), Amazon (AMZN.US), Microsoft (MSFT.US), and Meta (META.US) will determine the direction of the U.S. stock market as November begins.

Late last week, Tesla's (TSLA.US) stock surge pushed the Nasdaq Composite Index up by about 0.9%, just a step away from its all-time high. Meanwhile, the S&P 500 Index fell by more than 0.3%, and the Dow Jones Industrial Average fell by more than 2.6%.

This week, data on U.S. economic growth in the third quarter, job vacancies, service and manufacturing activities, and consumer confidence will also be released, in addition to a busy corporate earnings season, with 169 S&P 500 Index constituent companies expected to report quarterly results. Companies such as Ford (F.US), AMD (AMD.US), McDonald's (MCD.US), Eli Lilly (LLY.US), and Exxon Mobil (XOM.US) will all be closely watched.

U.S. Economic Report Card

Recently, the market has increasingly anticipated a so-called soft landing for the U.S. economy, where the inflation rate drops to the Fed's 2% target without a significant downturn in economic growth.

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A series of economic data in the coming week will test investors' bets. First, the Bureau of Economic Analysis is scheduled to release the third-quarter Gross Domestic Product (GDP) estimate on Wednesday. The U.S. economy is expected to continue on a solid path, with an annualized growth rate of 3% for the quarter, consistent with the growth in the second quarter.

On Thursday, the latest data on the Fed's preferred inflation indicator will be released. Economists expect the annual "core" personal consumption expenditure (excluding the more volatile food and energy categories) for September to reach 2.6%, down from 2.7% in August. Economists predict that core personal consumption expenditure (PCE) will grow by 0.3% compared to the previous month, which was 0.1%.

On Friday, the Bureau of Labor Statistics will release the latest data on the U.S. employment situation. According to data from Bloomberg, the October employment report is expected to show that the U.S. economy added 125,000 non-farm jobs, with the unemployment rate remaining stable at 4.1%. In September, the U.S. economy added 254,000 jobs, and the unemployment rate dropped to 4.1%.

Michael Reid from RBC Capital Markets wrote in a report to clients last Thursday: "After two hurricanes, a strike, and consecutive holidays, we expect a lot of noise in Friday's October employment report."

Considering various factors that could affect job growth, Reid wrote that the unemployment rate will "provide the best interpretation of this month's job market."Entering a busy week for economic data, according to data from the CME FedWatch Tool, the market estimates a 96% chance of the Federal Reserve cutting interest rates at the November meeting.

Tech giants are releasing earnings密集ly.

37% of the constituent companies in the S&P 500 Index have already announced their quarterly earnings. Based on the currently disclosed data, the index's annualized earnings growth rate is 3.7%. According to FactSet's data, this will be the slowest annualized growth rate since the second quarter of 2023.

The performance of large technology companies will test this statement in the coming week. FactSet recently pointed out that the annualized earnings of the "Seven Sisters" tech stocks are expected to grow by 18.1% year-on-year this quarter, while the earnings of the other 493 companies in the S&P 500 Index are expected to grow by only 0.1%.

The rebound of tech stocks late last week brought several tech giants back near historical highs. Apple, Alphabet, Amazon, Meta, and Microsoft are expected to announce their quarterly financial reports this week, which is expected to push artificial intelligence back into the market's focus. Investors will closely watch these companies' investment in this emerging technology and their corresponding profitability.

In view of the recent significant increase in large tech stocks, Nancy Tengler, CEO and Chief Investment Officer of Lafer Tengler Investments, also issued a warning that the market reaction after the release of financial reports may be relatively flat. Tengler said, "You may see companies like Microsoft exceed expectations, historically, with a probability of about 76%, and you may get nothing from the stock price."

The rise in U.S. Treasury yields is not entirely bad.

Economic data over the past month has surprised Wall Street. The Citi Economic Surprise Index, which measures whether U.S. economic data is better or worse than expected, has soared to its highest level since April.

At the same time, the yield on the 10-year U.S. Treasury bond has also been rising, increasing by about 50 basis points over the past month, hovering around 4.2%. In some cases, raising U.S. Treasury yields may be unfavorable to the stock market, but as Callie Cox, Chief Market Strategist at Ritholtz Wealth Management, pointed out on X, stock strategists believe that if the rise in yields coincides with strong economic growth, it may still be a welcome sign for the stock market.

Gargi Chaudhuri, Chief Investment and Portfolio Strategist for BlackRock Americas, said, "(Yields) gradually rising... for the right reasons, with expectations of higher growth, have historically been favorable for those with earnings growth. Therefore, keeping quality at the core of the portfolio remains very important."