Earnings season, retail sales, and other news affecting your money this week


October is living up to its reputation as a month that often sees dramatic daily swings in the stock market. Last week, the S&P 500 rose for the first time in four weeks after slumping nearly 1.6% in one day.

Two days of trade talks between leaders of the U.S. and China concluded Friday with President Donald Trump saying both sides had reached a "very substantial phase one deal." Even so, the details of the deal remain vague for affected companies, and China is said to want another round of talks before signing on — and there are now doubts on Wall Street as to whether these talks reflect much progress in the ongoing trade spat.

This week, attention will shift to how corporate America fared in the third quarter, with the start of the multiweek period known as earnings season. Traders will learn how uncertainty surrounding trade talks is weighing on U.S. businesses. Meanwhile, the monthly retail sales report is due, and traders will monitor whether consumers are becoming more cautious.

Here's what to watch and how the news will affect your wallet.

Banks kick off earnings season

What's happening: This week marks the start of earnings season, or the period when publicly traded companies report results for the most recent quarter. Banks and other financial institutions dominate this week's earnings calendar, with J.P. Morgan Chase, Wells Fargo, American Express, and BlackRock reporting results beginning on Tuesday.

Why it matters: Wall Street is bracing for reports that show profit growth slowed in the third quarter. If analysts are correct and profit growth did indeed slow again, that will mark three straight quarters of earnings declines — the first time this has happened since mid-2016.

Traders will be looking for themes behind the lackluster results, such as uncertainty surrounding further tariffs and trade talks between the U.S. and key partners like China and the European Union. They will also be keen to hear what executives forecast for upcoming quarters to see if they're concerned that profit will slow even further.

What it means for you: Expect some wild swings in the market in the weeks ahead as investors react to earnings reports. Some individual stocks — Container Store, Travelzoo, and Netflix, for example — tend to be especially volatile, with average one-day changes in excess of 10% after they report earnings, according to Bespoke Investment Group. That said, some market watchers say this earnings season could end up being "not as bad as feared."

Economists expect consumers increased spending

What's happening: The monthly retail sales report for September is scheduled for release Wednesday. This details how much American consumers spent on things like clothing and food.

Why it matters: The Federal Reserve cut interest rates two times in July and September amid signs of slower economic growth. Even so, U.S. consumers have been largely resilient. Hiring has been steady, and though confidence surveys have weakened slightly — with consumers citing uncertainty surrounding trade — Americans have continued spending money.

This week, traders will see if spending increased at a slower pace in September, compared with August, as economists currently project.

What it means for you: Perhaps you haven't made any changes to your shopping habits, but what your neighbors do matters to the overall economy. Traders currently forecast that the Fed will cut interest rates for a third time when central bankers convene later this month, and slower consumer spending would be another reason for doing so. If central bankers do cut rates, that will make it cheaper to borrow money and perhaps boost spending again.

The bottom line

There's likely to be some bumpiness in the weeks ahead during earnings season, which can rattle investors. But it's important to put the recent moves in context. The S&P 500 is up 18% this year — and compared with five years ago, this benchmark has risen more than 50%.

Any further turbulence in the market — be it this week or the weeks ahead — can be a good opportunity for long-term investors to buy stocks at lower prices. And no matter what happens in any given week, it's important to keep perspective and remain consistent with your investment strategy.

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