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after the federal reserve’s interest rate meeting in september, u.s. stocks have achieved four consecutive weekly gains. the shift in monetary policy has boosted market risk appetite, while new signs of strength in the labor market have eased concerns about an economic recession, and expectations of aggressive interest rate cuts have receded.

in the coming week, the impact of geopolitical factors cannot be ignored, and inflation and the earnings season will become key factors affecting market trends.

what will be the subsequent trend of u.s. stocks (source: xinhua news agency)

prospects for u.s. soft landing strengthen

the resilience of the u.s. economy once again makes the prospect of a soft landing brighter.

as the most watched indicator last week, the u.s. department of labor said that the united states added 250,000 new jobs in september, far exceeding market expectations. employment growth in august and july was also revised upward. the unemployment rate, which once caused concern, fell to 4.1% from 4.2%.

in addition, the latest job openings and labor turnover survey (jolts) showed that u.s. job openings rose to a three-month high of 8.04 million in august. the hiring rate fell to 3.3%, the same level as the lowest since 2013, excluding early data from the 2020 epidemic. the service industry, the backbone of the economy, is growing at the fastest rate in a year and a half. the institute for supply management (ism) service industry index climbed to 54.9% in september, the highest level since february 2023.

bob schwartz, senior economist at oxford economics, said in an interview with china business news that the september employment report was much better than expected and wage growth accelerated. on the other hand, he believes that the strong ism service industry index is another signal that the economy is still expanding rapidly. “consumer spending continues to grow at a strong rate and should be well supported this year and next as financial conditions relax. "there is still plenty of room for improvement once political uncertainty subsides."

interest rate pricing has changed, with mid- and long-term u.s. bond yields rising strongly. the 2-year u.s. treasury bond, which is closely related to interest rate expectations, rose 36.7 basis points on the week to 3.93%, the largest increase in 16 months. the benchmark 10-year u.s. treasury note rose 22.9 basis points on the week to 3.98%. the probability of a 25 basis point interest rate cut in november has risen to nearly 90%, according to data from cme group fed watch.

barclays believes that the latest non-agricultural report undermines the view that external labor demand is losing momentum and strengthens the continued resilience of economic activity and the possibility of a soft landing. the bank expects the fed to cut interest rates by 25 basis points at its november and december policy meetings.

it is worth noting that fed chairman powell also cooled down aggressive easing in his latest speech last week. "overall, the economy is in good shape and we intend to use our tools to keep it there. if the economy develops as expected, there will be two more cuts by the end of the year, a total of 50 basis points," he said.

schwartz told cbn news that given the fed's focus on the labor market when deliberating future interest rate cuts, the strike will muddy the employment data and potentially complicate its decision. however, the overall impact is temporary, and the labor market and economy are healthy enough to support a 25 basis point rate cut at the november meeting.

market sentiment remains positive

u.s. stocks continued their rebound since mid-september. as of last friday's close, the dow jones industrial average set its 34th closing record this year. the s&p 500 is less than 1% away from its all-time high.

dow jones market statistics showed some divergence across sectors last week. the surge in crude oil futures pushed up the energy sector by 7%, followed by communication services which rose by 2.2%. utilities and financial industry, industrial and technology stocks rose. the raw materials and real estate sectors that led the previous week led the decline. the technology sector has attracted attention, among which openai announced a new round of financing of us$6.6 billion, with a post-investment valuation reaching us$157 billion. many institutions have raised the target price of meta.

in terms of market sentiment, bank of america's cross-asset bull indicator, which quantifies investor sentiment through fund flows, positioning data and market technology, rose to 6 from 5.4, the largest weekly gain since december 2023, indicating that investors the mood remains positive. the bank said this was helped by strong inflows into emerging market equities and strong technical indicators in credit markets.

according to the schedule, the third quarter earnings report of the u.s. stock market is expected to officially start next week, when jpmorgan chase, wells fargo and blackrock will start.

david kostin, chief u.s. equity strategist at goldman sachs, issued a report raising his forecast for s&p 500 earnings per share in 2025 from $256 to $268, an increase of 11% from the previous year. taking into account expectations for profit growth in 2025, the 12-month target for the s&p 500 was raised to 6,300 points from 6,000 points.

charles schwab wrote in its market outlook that u.s. stocks were hit last week by the situation in the middle east and strikes at east coast ports. of note is the potential impact of recent developments on future inflation, which could translate into higher prices, complicating the fed's job and translating into higher market volatility. at present, inflation data has been moving towards the fed's target, the economic fundamentals are solid, and market participants appear to agree with the fed's slowing pace of easing.

the agency believes that there are many potential market drivers in the coming week, such as monthly inflation data (consumer price index on the 10th, industrial producer price index on the 11th) and the third quarter earnings season. stronger-than-expected u.s. economic data appears to be the main driver of the stock market's recent moves and is expected to push markets higher. however, according to information obtained at the barclays global financial services conference in september, there is a cautious attitude towards the earnings reports of major banks. it’s worth mentioning that factset currently predicts third-quarter earnings growth for the s&p 500 at 4.6%, down from 7.8% at the beginning of the quarter.