Wall Street Braces for a Pivotal Week of Apple Earnings, the Midterm Elections and the Jobs Report After a Bruising AI Sell-Off

After one of the roughest days for technology stocks in months, Wall Street enters a week packed with events that could set the direction of markets for the rest of the year: earnings from Apple and other technology giants, US midterm elections and a crucial jobs report.

US stock futures ticked higher on Sunday, November 1, as investors prepared for the busy week, according to CNBC. The modest rebound followed a sharp decline on Friday, October 30, when the S&P 500 fell about 1.8%, hitting an intraday low of 7,527.56 and closing at 7,580.07, according to TheStreet Pro. It was the first close below the index's 100-day moving average since April 8.

The AI sell-off

Technology stocks led Friday's losses. Intel fell 28.6% after its outlook disappointed investors, and Alphabet dropped 12.6% after missing expectations, according to TheStreet Pro. ServiceNow, F5, Fortinet and Twilio were among the S&P 500's weakest performers for the week.

The sell-off reflected growing investor concern about the returns on massive AI investments. Technology companies are spending hundreds of billions of dollars on data centres, chips and power, and investors have become more sensitive to signs that spending is outpacing revenue or that growth is slowing.

Goldman Sachs' derivatives desk said that "for the first time, we are now seeing flows catch up to the bear thesis," with Friday's trading focused on downside protection for the index and semiconductor stocks, according to TheStreet Pro. The VIX volatility index closed at 19.42 after touching 23.93 during the day.

A narrowing market

The S&P 500 has fallen about 3% since the third-quarter earnings season began, while the equal-weight version of the index, which gives every company the same weight regardless of size, has outperformed, according to TheStreet Pro. In October, the equal-weight index returned 5.0%, compared with a 0.9% decline for the standard S&P 500.

This divergence suggests that while the largest technology stocks have struggled, many other companies have performed well, reflecting a rotation away from the AI giants that dominated market gains in recent years.

Strong earnings, slowing momentum

Corporate earnings have been strong overall. FactSet puts blended third-quarter S&P 500 earnings growth at 30.2%, with 82% of companies beating estimates, according to TheStreet Pro. However, earnings growth for the "Magnificent Seven" technology giants has trailed the other 493 companies, largely because of accounting charges at Meta and Alphabet.

"Earnings growth is strong, but it's no longer accelerating," Goldman Sachs said.

Monday: Apple's moment

Apple reports results on Monday, November 2, the first earnings call hosted by new chief executive John Ternus, who succeeded Tim Cook in September. Analysts expect revenue to rise nearly 11% to $113.39 billion, but rising memory chip costs are expected to slow profit growth. Palantir, Vertex Pharmaceuticals, Progressive and Marriott also report on Monday.

Apple's shares have outperformed other Big Tech stocks this year, rising about 27%, partly because it has spent less heavily on AI infrastructure.

Tuesday: the midterms

The US midterm elections on Tuesday, November 3, will determine control of Congress. The outcome could affect policy on taxes, spending, trade and regulation. A Democratic win would change the trade debate in Congress but would not fully roll back US tariffs, according to Reuters analysis. Markets typically experience some volatility around elections, but historically stocks have often performed well in the months following midterms as uncertainty fades.

AMD, Amgen, Arista Networks, Pfizer, Eaton, Marathon Petroleum and Booking Holdings report on Tuesday, according to TheStreet Pro.

Wednesday and Thursday

On Wednesday, the US Treasury announces its quarterly refunding plans, with speculation about reductions in longer-maturity bond issuance. Qualcomm, McDonald's, Uber, CVS Health and McKesson report. On Thursday, several Federal Reserve officials speak, and ConocoPhillips, Parker Hannifin and Southern Company report.

Central banks in the United Kingdom, Norway and Sweden are also due to announce decisions during the week.

Friday: the jobs report

The week ends with the October jobs report on Friday, November 6. The Bloomberg consensus forecast is for 65,000 new nonfarm payrolls and an unemployment rate of 4.2%, according to TheStreet Pro. The data will influence expectations for Federal Reserve policy. The Fed held interest rates at 3.75-4% at its meeting last week, with two members favouring a hike because of inflation concerns linked to high energy prices.

Why it matters for India

Wall Street's direction has significant implications for Indian markets. Foreign portfolio investors, who have been selling Indian equities, are influenced by US interest rates, the dollar and global risk sentiment. A sharp sell-off in US technology stocks can affect Indian IT companies, whose clients include major US corporations, though Indian IT stocks recently staged their strongest weekly rally in 18 years.

The outcome of the US midterms could also affect trade policy, including tariffs that impact Indian exporters.

The bond market backdrop

The US Treasury market will also be in focus. The quarterly refunding announcement on Wednesday will set out how much the government plans to borrow and in what maturities. Large budget deficits have increased government borrowing, putting upward pressure on long-term yields. Higher yields raise borrowing costs for companies and households and can weigh on stock valuations, particularly for high-growth technology companies.

Global central banks

Central banks around the world are navigating the inflationary effects of high energy prices. The Bank of Canada raised rates recently, the Bank of Japan held rates and accelerated sales of its stock holdings, and the Reserve Bank of Australia decides on rates on Tuesday. Decisions by the Bank of England, Norway's Norges Bank and Sweden's Riksbank later in the week will add to the picture of global monetary policy.

Lessons from history

Historically, the period after US midterm elections has often been favourable for stocks, as political uncertainty fades and investors focus again on economic fundamentals. However, past patterns are no guarantee of future performance, and this year's combination of an AI-driven market, elevated energy prices and uncertain monetary policy makes the outlook unusually complex. Investors will be balancing strong overall corporate earnings against concerns about stretched valuations in technology stocks, and the coming week's events could determine which of these forces prevails into year-end.

What comes next

By the end of the week, investors will have a clearer view of Big Tech's outlook, the political landscape in Washington and the health of the US labour market. With volatility elevated and sentiment towards AI stocks fragile, the coming days could prove decisive for whether the recent sell-off deepens or gives way to a recovery heading into the final weeks of the year.