Earnings Season and Rate Hike Loom Large for S&P 500 ETFs in October

The upcoming earnings season and interest rate decision by the Federal Reserve are set to be major catalysts for S&P 500 ETFs in October. The earnings season is expected to start on October 13, with top companies like JPMorgan, UnitedHealth, Johnson & Johnson, and Bank of America releasing their quarterly results.

Analysts are optimistic about the earnings season, anticipating a growth jump of 29% last quarter. However, the actual figure often surpasses expectations, as seen in the second quarter where the final figure was over 50%, exceeding initial projections of 25%. The robust AI spending by companies like Microsoft, Google, and Meta Platforms is driving this growth, with funds being allocated to areas such as memory, GPU, optical devices, and servers.

Micron's revenue in the fourth quarter of its fiscal year was over $54 billion, exceeding its guidance of $50 billion. The company's performance is a testament to the strong demand for AI-related products. Rising oil and gas prices have also contributed to higher earnings growth, with companies like ExxonMobil, Chevron, and Marathon Petroleum reporting strong numbers.

The Federal Reserve will deliver its interest rate decision on October 28, with economists expecting a hike in rates. However, whether to raise or leave them unchanged will depend on the upcoming macro data. The nonfarm payrolls report on Friday and the headline and core inflation data on October 14 will be crucial indicators of the Fed's decision.

The developments between the US and Iran are also expected to impact the S&P 500 index, with lower oil prices contributing to a calm market. However, with the US midterm elections approaching, there is a risk that tensions may escalate, driving oil prices higher and bond yields soaring. The ten-year yield has already jumped to 5.2%, while the 30-year yield has soared to 5.636%.