Investing.com – Market Overview

Tesla (NASDAQ:TSLA) will be the first among the Magnificent Seven tech companies to report earnings as earnings season ramps up. Global finance leaders are gathering in Washington, and oil prices are expected to remain volatile. Here’s what to expect in the markets this week.

1. Tesla Reports

With earnings season underway, Tesla is among the first major U.S. tech companies to report, with results expected after the market closes on Wednesday.

This month, Tesla shares have dipped following the announcement of its long-awaited robotaxis, which some investors felt lacked essential details. Year-to-date, Tesla shares have dropped about 11%, underperforming the S&P 500, which has gained 22.5%.

Despite investors feeling optimistic about the U.S. economy after a strong jobs report and a 50 basis points rate cut from the Federal Reserve last month, a disappointing earnings report from Tesla could rekindle concerns over tech stock valuations. Current high valuations—approximately 22 times forward earnings for the S&P 500—paired with elevated expectations for corporate results and potential volatility from the upcoming U.S. presidential election, could leave stocks vulnerable to a pullback.

2. Semiconductor Earnings

This week is busy for corporate earnings, with results expected from Texas Instruments (NASDAQ:TXN) and Lam Research (NASDAQ:LRCX), following significant volatility in the semiconductor sector last week.

Chip stocks fell on Tuesday after ASML (AS:ASML), Europe's largest tech firm, gave a conservative forecast for 2025 sales and bookings. However, shares rebounded on Thursday after TSMC (BVMF:TSMC34), known for producing advanced chips for AI applications, reported a better-than-expected quarterly profit, up 54%.

Semiconductors and related equipment make up 11.5% of the S&P 500.

Other companies releasing earnings this week include Coca-Cola (NYSE:KO), IBM (NYSE:IBM), General Motors (NYSE:GM), and Verizon (NYSE:VZ).

3. U.S. Data

It will be a relatively calm week on the U.S. economic calendar. However, investors will receive updates on the housing sector through reports on both existing and new home sales, along with durable goods orders, consumer sentiment, and initial jobless claims.

On Wednesday, the Fed will present its Beige Book, detailing economic conditions across its 12 districts. Several regional Fed officials will also speak throughout the week, including Minneapolis Fed President Neel Kashkari and San Francisco Fed President Mary Daly.

4. IMF Meetings

Global central bank heads and finance ministers will meet in Washington from Monday for the annual International Monetary Fund and World Bank meeting, to discuss strategies for managing low growth and high debt.

Recently, the IMF projected that global public debt will surpass $100 trillion by the end of this year, largely driven by the U.S. and China. High debt levels can lead to adverse market reactions and may limit the capacity to respond to economic shocks.

Additionally, Russian President Vladimir Putin will host a BRICS leaders summit from Tuesday, aiming to gain support amidst ongoing tensions with the West. Leaders from Brazil, India, China, South Africa, Egypt, the UAE, and Saudi Arabia are expected to attend.

5. Oil Prices

Oil prices are likely to stay under pressure after a 7% decline last week, as energy traders react to a pessimistic demand outlook for China and the ongoing Middle East conflict.

Brent prices finished over 7% lower, while U.S. crude futures dropped 8%, marking the largest weekly fall since early September. Recent data revealed China's economy grew at its slowest pace in early 2023 in the third quarter, despite better-than-expected consumption and industrial output in September.

Weakness in China's economy, coupled with the shift towards electric vehicles, is expected to affect demand significantly, according to analysts. Meanwhile, uncertainty surrounding the Middle East conflict remains. U.S. President Joe Biden indicated a potential route toward resolving the situation between Israel and Iran, but Hezbollah’s recent statements suggested an escalation in hostilities, dampening hopes for a swift resolution.

— Reuters contributed reporting