What you should know this week

Five tumultuous days for markets, marked by rising tensions in the Middle East and a port strike that both began and ended, were capped by a better-than-expected jobs report for September that helped stocks end the week slightly higher .

In the first week of October, the S&P 500 (^GSPC) rose 0.2%, while the Nasdaq Composite (^IXIC) and the Dow Jones Industrial Average (^DJI) rose about 0.1%.

An update on inflation and the start of third-quarter earnings reports will draw investor attention next week.

The Consumer Price Index (CPI) report for October will lead the economic calendar, which will also include updates on consumer sentiment and the release of minutes from the Federal Reserve's September meeting.

On the corporate side, some of America's largest financial institutions, including JPMorgan (JPM), Wells Fargo (WFC) and BlackRock (BLK), will open third-quarter earnings season on Friday. PepsiCo (PEP) and Delta Air Lines (DAL) are also expected to report early this week.

A small step forward

On Friday, the September jobs report dampened fears that the labor market is deteriorating rapidly and will trigger another huge rate cut.

Bureau of Labor Statistics data released Friday showed the labor market added 254,000 jobs in September, more than the 150,000 economists expected. Revisions to both the July and August reports showed the U.S. economy added 72,000 new jobs in those two months than previously reported.

Meanwhile, the unemployment rate fell to 4.1% from 4.2% in August.

Wall Street economists and strategists argued that this would likely eliminate the need for another half-percentage point rate cut by the Fed in November.

“We expect the rate decline should continue, but given today's good data, it is more likely that the Fed will cut rates in 25 basis point (bps) increments,” wrote Rick Rieder, chief investment officer for global fixed income Securities at BlackRock, in a research note Friday. “For a Fed rebalancing to an economy operating at very solid levels, it seems more appropriate for the market to price in a low probability of no rate cut at the next meeting than a low 50 probability -bps cut.”

Price check

While concerns about the Fed's maximum employment share under its dual mandate appear to have subsided for now, inflation remains above the central bank's 2 percent target.

Next week will provide a new update on how quickly price increases are tapering off toward this target.

Wall Street economists expect headline inflation rose just 2.3% annually in September, slowing from August's 2.5% rise. The August data marked the lowest annual inflation reading since the start of 2021. Prices are expected to rise 0.1% month-on-month, down from 0.2% in May.

The story continues

On a “core” basis, i.e. excluding food and energy prices, the CPI is expected to have risen 3.2% in September compared to a year ago, unchanged from August. Monthly core price increases are expected to be 0.2%, down from August's 0.3%.

“Inflation continues to move in the right direction, which will allow further cuts,” wrote U.S. economist Stephen Juneau of Bank of America in a research note previewing the release. “However, we continue to believe that labor data is more relevant to the size of cuts.”

Tesla talk

Tesla will once again be one of the most important individual stocks in focus in the coming week. The electric vehicle maker is set to host its highly anticipated Robotaxi event on October 10th.

Tesla is expected to provide more details on its plans for its fully self-driving project. Adam Jonas, an analyst at Morgan Stanley, wrote in a note to clients that he expected participants to be shown and given a ride in one of Tesla's “cybercabs.”

As Yahoo Finance's Laura Bratton reported, RBC analyst Tom Narayan told Yahoo Finance that while he has high hopes for the future of self-driving robotaxis, the event is unlikely to result in a surge in Tesla stock.

“I think it's hard to get excited about a stock at such a high level,” he said, noting that the launch will showcase Tesla's broad vision for AI and autonomous vehicles – a vision he said that it will likely take several years before it becomes a reality and “makes financial sense” for the electric vehicle maker.

Tesla shares fell about 5% last week ahead of the event as the company announced third-quarter deliveries that fell short of Wall Street estimates.

Enter your earnings

The big banks are heading into a quarter in which Wall Street expects subdued year-on-year profit growth. At the start of the period, consensus forecast earnings growth of 4.7%. This would be the fifth consecutive quarter of growth compared to the same period last year, but also the slowest year-over-year growth since the fourth quarter of 2023.

“The bottom-up consensus is forecasting a sharp and widespread slowdown,” Binky Chadha, chief equity strategist at Deutsche Bank, wrote in a note to clients.

Chadha added that this should result in corporate earnings beating Wall Street expectations, as they often do. However, this does not make Chadha any more optimistic about the stock's performance over the period.

“Earnings seasons are typically positive for stocks, but the strong rally and out-performing positioning suggest a muted market reaction,” Chadha wrote. “This earnings season will also take place against a backdrop that could be overshadowed by geopolitical developments and the turmoil surrounding the US elections.”

Ohsung Kwon, U.S. and Canada equity strategist at Bank of America, told Yahoo Finance that with consensus expectations not for a strong third quarter, most of the focus will be on what companies say about the path forward.

“Now that the easing cycle has begun, what will companies say about the early signs of improvement given the lower interest rate environment?” Kwon said.

Weekly calendar

Monday

Economic data: No notable publications.

Result: duck horn (NAPA)

Tuesday

Economic data:

Result: PepsiCo (PEP)

Wednesday

Economic data: MBA Mortgage Applications October 4 (-1.3% prior), Wholesale Inventory MoM, August Final (0.2% prior); September FOMC meeting minutes

Result: Helen of Troy (HELE)

Thursday

Economic data: Consumer Price Index, monthly comparison, September (+0.1% expected, +0.2% previous); CPI excluding food and energy, month-on-month, September (+0.2% expected, +0.3% previous); Consumer Price Index, year-on-year, September (+2.3% expected, +2.5% previous); CPI excluding food and energy, year-on-year, September (+3.2% expected, +3.2% so far); Real average hourly earnings, year-on-year, September (+1.4% previously); Real average weekly earnings year-on-year, September (+0.9% previously); Initial jobless claims, week ending October 5 (237,000 expected, 225,000 expected)

Result: Delta Air Lines (DAL), Domino's (DPZ), Tilray (TLRY)

Friday

Economic data: Producer price index, monthly comparison, September (+0.1% expected, +0.2% previous); PPI, YoY, September (+1.6% expected, 1.7% previous); Core PPI MoM, September (+0.2% expected, 0.3% prior); Core PPI, YoY, September (+2.7% expected, +2.4% prior); Consumer sentiment at the University of Michigan, preliminary October (70.3 expected, 70.1 previous)

Result: BlackRock (BLK), BNY Mellon (BK), JPMorgan (JPM), Wells Fargo (WFC)

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

Click here for a detailed analysis of the latest stock market news and events affecting stock prices

Read the latest financial and business news from Yahoo Finance