What to Expect in the Week Ahead (PLTR, ARM, QCOM Earnings; US Presidential Election and Fed Interest Rate Decision)

Qualcomm is expected to address its dispute with Arm and outline its strategy to leverage its own designs to expand in the artificial intelligence device market. Adjusted revenue is projected to have increased for the fourth consecutive quarter, driven by a rebound in IoT sales and sustained strength in its handsets, automotive, and technology licensing segments. However, in light of the lukewarm reception to Apple’s latest iPhone model, Qualcomm's forecast for the upcoming quarter remains uncertain, as noted by BI.

Markets have largely ignored a significant downside deviation in nonfarm payrolls and a weaker-than-expected ISM manufacturing reading, attributing this softness to hurricanes and other temporary disruptions. However, Tuesday's upcoming U.S. presidential election is a more pressing issue currently overshadowing these economic indicators.

The polls indicate a very close race, and the outcome is critical. The winner will have significant influence over trade policy. Former President Donald Trump, in particular, would likely exert this power robustly if re-elected. The composition of Congress, whether it results in a Republican sweep or a divided government, will play a crucial role in determining the likelihood of extending the Tax Cuts and Jobs Act of 2017, a decision that affects personal tax cuts for numerous Americans.

While the election is undeniably a key focus, the markets may have excessively dismissed the payroll and ISM reports. The shortfall in payrolls was primarily due to a drop in employment in the professional and business sectors, noticeable across various states, including those not affected by hurricanes. Notably, a significant portion of this slowdown occurred in temporary services, which often serve as a barometer for business cycles, suggesting a continued cooling in the labor market. The upcoming ISM Services data on Tuesday will provide further insights into whether service employment is also experiencing a slowdown.

From the Federal Open Market Committee's (FOMC) perspective, which is set to announce its rate decision on Thursday, the data observed between meetings are generally seen as mediocre and are consistent with a continued pattern of rate reductions. Historically, Fed Chair Jerome Powell has responded to signals from the Beige Book, which recently indicated subpar performance, and is unlikely to disregard the recent unexpected downturns and revisions in nonfarm payrolls as the markets have. Anticipating a dovish stance from Powell at the November FOMC meeting, the Fed is expected to reduce rates by 25 basis points in November, with a similar cut likely in December, according to Bloomberg.