With proper insight and timing, an investor could have profited mightily from electric vehicle (EV) sector in recent years. For instance, had you invested $1,000 into Tesla (NASDAQ: TSLA) when its shares went public in June 2010, you’d have more than $156,000 today. Nowadays, many investors are looking for the next Tesla. If that’s your goal, pay attention to the two companies on this list.

Looking for the next Tesla? Here it is.

While many investors are looking for the next Tesla, it’s fair to mention that it’s still possible to invest in the original Tesla today. The company has a gargantuan $850 billion market value, but that shouldn’t stop you from jumping in.

There are two reasons to believe the stock still has plenty of long-term upside. First, shares are cheaper today than they have been in years. That’s due to a massive dip in revenue growth. Earlier this year, Tesla actually experienced a decline in companywide revenue. As a result, Tesla’s price-to-sales ratio has fallen from the mid 20s to under 10. To be sure, that’s still expensive, but it’s a bargain relative to the company’s history.

A cheap valuation on paper, however, is only attractive if you believe the company is about to turn the corner. Take note of the chart below. Tesla has experienced massive dips in revenue growth before, with its valuation usually following suit. A huge reason that things turned around was a jump in electric vehicle sales, as well as the introduction of new models like the Model 3 and Model Y — both of which resulted in sales spikes that persisted for several years.

According to Bloomberg, “Electric vehicle deliveries have been essentially flat since early 2023, and that’s not likely to change anytime soon.” But fortunately, Tesla has something else up its sleeve. “Tesla’s robotaxi event next week,” Bloomberg reports, “will see Musk lean even harder into the narrative of self-driving vehicles, artificial intelligence and robots.”

Am I buying into Tesla’s robotaxi hype? Not just yet. But Musk has dreamed big before. Sometimes he delivers, and sometimes he doesn’t, but it’s often a smart move to back the horse with a winning track record. And despite the company’s recent missteps, Tesla is still the company to bet on if you’re bullish on EV stocks in general. But if you’re looking for the most upside potential possible, the next stock on this list is for you.

This EV stock has huge growth potential

While Tesla is still a great stock to bet on for those bullish on the EV space, its shares are still expensive and the company’s biggest days of growth are likely behind it. Rivian Automotive (NASDAQ: RIVN) is in the opposite situation. Its biggest days of growth are very much ahead of it, and shares aren’t as expensive as you’d think.

Earlier this year, for example, Rivian was posting revenue growth rates above 80% year over year. Those growth rates came at a time when Tesla’s revenue base was actually shrinking. And while Rivian’s growth rates have converged with Tesla’s more recently, most of that has come from industry pressure and the maturation of its models.

This year, EV sales forecasts have been repeatedly trimmed industrywide, and Rivian’s two existing models, the R1T and R1S, have already been on the market for several years. But that’s all about to change.

Earlier this year, Rivian announced three new models: the R2, R3, and R3X. All are expected to be priced under $50,000 — the magic price point that EV makers need to sell beneath in order to market to mass audiences. Also, while EV sales in general have slowed this year, most long-term forecasts still predict massive growth in the years to come. Passenger EV sales are expected to surpass 30 million by 2027, according to a recent report from Bloomberg. And this figure should grow further to 73 million per year by 2040.

Rivian’s new models aren’t expected to hit the streets until 2026. That gives plenty of time for market conditions to improve as most forecasts predict. And in the meantime, investors can lock in a market capitalization of just $11 billion. That results in a price-to-sales (P/S) ratio of only 2.1 for Rivian versus Tesla’s premium P/S multiple of 8.8.

You’ll need to be comfortable with volatility as Rivian attempts to ramp up its manufacturing capabilities, as well as market new models to a consumer base still skeptical of EVs. But if you truly want to invest in the next Tesla, Rivian has all the characteristics you’d want to see.

Should you invest $1,000 in Tesla right now?

Before you buy stock in Tesla, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Tesla wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $765,523!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

The Smartest Electric Vehicle (EV) Stocks to Buy With $1,000 Right Now was originally published by The Motley Fool

(Bloomberg) — Traders are staring down a series of risks after the stock market’s torrid start to the year, from economic fear, to interest rate uncertainty, to election angst. But perhaps the most important variable for whether equities can keep rolling returns to the spotlight this week: corporate earnings.

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The S&P 500 Index has soared roughly 20% in 2024, adding more than $8 trillion to its market capitalization. The gains have largely been driven by expectations of easing monetary policy and resilient profit outlooks.

But the tide may be turning as analysts slice their expectations for third-quarter results. Companies in the S&P 500 are expected to report a 4.7% increase in quarterly earnings from a year ago, according to data compiled by Bloomberg Intelligence. That’s down from projections of 7.9% on July 12, and it would represent the weakest increase in four quarters, BI data show.

“The earnings season will be more important than normal this time,” said Adam Parker, founder of Trivariate Research. “We need concrete data from corporates.“

In particular, investors are eager to see if companies are postponing spending, if demand has slowed, and if customers are behaving differently due to geopolitical risk and macro uncertainty, Parker said. “It is exactly because there is a lot going on in the world that corporate earnings and guidance will particularly matter now,” he said.

Reports from major companies start arriving this week, with results from Delta Air Lines Inc. due Thursday and JPMorgan Chase & Co. and Wells Fargo & Co. scheduled for Friday.

“Earnings seasons are typically positive for equities,” said Binky Chadha, chief US equity and global Strategist at Deutsche Bank Securities Inc. “But the strong rally and above-average positioning going in (to this earnings season) argue for a muted market reaction.”

Obstacles Abound

The obstacles facing investors right now are no secret. The US presidential election is just a month away with Democrat Kamala Harris and Republican Donald Trump in a tight, fierce race. The Federal Reserve has just started lowering interest rates, and while there’s optimism about an economic soft-landing, questions remain about how fast central bankers will reduce borrowing costs. And a deepening conflict in the Middle East is raising concerns about inflation heating up again, with the price of West Texas Intermediate oil rising 9% last week, the biggest weekly gain March 2023.

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“The bottom line is that revisions and guidance are weak, indicating lingering concerns about the economy and reflecting some election year seasonality,” said Dennis DeBusschere of 22V Research. “That is helping set up reporting season as another uncertainty clearing event.”

Plus, to make matters more challenging, big institutional investors have little buying power at the moment and seasonal market trends are soft.

Positioning in trend-following systematic funds is now skewed to the downside, and options market positioning shows traders may not be ready to buy any dips. Commodity trading advisers, or CTAs, are expected to sell US stocks even if the market stays flat in the next month, according to data from Goldman Sachs Group Inc. And volatility control funds, which buy stocks when volatility drops, no longer have room to add exposure.

History appears to side with the pessimists, too. Since 1945, when the S&P 500 gained 20% through the first nine months of the year, it posted a down October 70% of the time, data compiled by Bespoke Investment Research show. The index gained 21% this year through September.

Bar Lowered

Still, there’s reason for optimism, specifically a lowered bar for earnings projections that leaves companies more room to beat expectations.

“Estimates got a little bit too optimistic, and now they’re pulling back to more realistic levels,” said Ellen Hazen, chief market strategist at F.L.Putnam Investment Management. “It will definitely be easier to beat earnings because estimates are lower now.”

In fact, there’s plenty of data suggesting that US companies remain fundamentally resilient. A strengthening earnings cycle should continue to offset stubbornly weak economic signals, tipping the scales for equities in a positive direction, according to Bloomberg Intelligence. Even struggling small-cap stocks, which have lagged their large-cap peers this year, are expected to see improving margins, BI’s Michael Casper wrote.

Friday’s jobs report, which showed the unemployment rate unexpectedly declined, quelled some concerns about a soft labor market.

Another factor is the Fed’s easing cycle, which has historically been a boon for US equities. Since 1971, the S&P 500 has posted an annualized return of 15% during periods in which the central bank cut rates, data compiled by Bloomberg Intelligence show.

Those gains have been even stronger when rate-cutting cycles hit in non-recessionary periods. In those cases, large caps posted an averaged annualized return of 25% compared with 11% when there was a recession, while small caps gained 20% in non-recessionary periods compared with 17% when there was a recession.

“Unless earnings are a major disappointment, I think the Fed will be a bigger influence over markets between now and year-end simply because earnings have been pretty consistent,” said Tom Essaye, founder and president of Sevens Report Research. “Investors expect that to continue.”

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The Federal Reserve’s pivot to lower interest rates will have ripple effects throughout the economy and send investors looking for passive income to new places. As yields fall in vehicles like high-yield savings accounts, investors could turn to high-quality, high-yield dividend stocks. Consumer spending and healthcare are two pillars of the U.S. economy, and great places to look for such stocks.

I’ve identified three stocks with generous yields and the financials to afford their payouts. These companies also boast durable business models that should thrive through recessions, giving income-focused investors peace of mind.

1. Pfizer

Current yield: 5.8%

Pharmaceutical giant Pfizer (NYSE: PFE) was a big winner during COVID-19’s height due to its vaccine and treatment products, which created a temporary growth wave. However, the tide has gone out over the past couple of years, and the stock has plunged to multi-year lows as revenue and earnings contract.

But the company is poised to resume growth, with analysts anticipating 8% to 9% annual earnings growth for the next three to five years. Pfizer has pivoted its business to focus on oncology, using its pandemic profits to acquire Seagen for $43 billion last year.

Management raised Pfizer’s dividend by 2.4% last December, a sign of confidence the payout is safe. The payout ratio is also getting healthier. The dividend is approximately 64% of estimated 2024 earnings, so Pfizer seems poised to continue extending its streak of 15 years of increases. The stock trades at only 11 times its estimated 2024 earnings, a sharp discount to the broader market and an attractive price for a business with high single-digit earnings growth.

Pfizer represents a rock-solid income investment with the potential for capital appreciation ahead.

2. Altria

Current yield: 8%

Tobacco companies are renowned dividend stocks, and Altria (NYSE: MO) is an excellent example, having showered shareholders with cash for decades. The company sells Marlboro cigarettes and leading brands of cigars, chewing tobacco, and smokeless products in the United States. The company is also a Dividend King, meaning that it has raised its dividend for more than five decades, a testament to how durable the tobacco industry is despite declining smoking rates.

The dividend remains in good financial health, with a payout ratio of 80% of estimated 2024 earnings. That dividend is backed by an investment-grade balance sheet and a multi-billion-dollar stake in Anheuser-Busch, which the company could liquidate as needed.

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Altria’s cigarette shipments decline almost annually, but a combination of price increases and share repurchases continues inching earnings higher. Analysts estimate that the company will grow earnings by an average of 3% to 4% over the next three to five years, which means the dividend will continue inching higher, too.

Shares trade at 10 times Altria’s estimated 2024 earnings, but I’d hesitate to call the stock a bargain due to its low growth. However, you don’t need much when getting an 8% dividend yield. Those ultimately concerned with investment income will struggle to find a similarly safe yield this high.

3. Realty Income

Current yield: 5%

Real estate is one of society’s oldest industries, and real estate investment trusts (REITs) like Realty Income (NYSE: O) enable people to invest in real estate without directly owning property. REITs acquire and lease real estate, and then distribute most of their income to shareholders. That makes Realty Income an excellent dividend stock.

The company has paid and raised its dividend for 29 consecutive years, and the payout ratio is still just 75% of this year’s estimated funds from operations (FFO). Plus, Realty Income pays a monthly dividend, a perk for investors who want regular cash flow to help pay their bills.

Realty Income has thrived through economic ups and downs because it focuses on renting to retail businesses that people use regardless of what the economy is doing. Think grocery stores, restaurants, convenience stores, and pharmacies. Realty Income leases over 15,000 properties, so it’s a vast and diverse portfolio that generates steady rental income for the company.

Lower interest rates are a bonus for REITs like Realty Income because they often borrow to fund their property acquisitions. Cheaper borrowing costs should make Realty Income more profitable.

Realty Income trades at almost 15 times its estimated 2024 FFO, a fair price given the company’s bright outlook and reliable and growing dividend.

Should you invest $1,000 in Pfizer right now?

Before you buy stock in Pfizer, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Pfizer wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $765,523!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 30, 2024

Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer and Realty Income. The Motley Fool has a disclosure policy.

3 High-Yield Dividend Stocks That Are Screaming Buys Right Now was originally published by The Motley Fool

Conventional wisdom is that Nvidia (NASDAQ: NVDA) will continue to dominate the artificial intelligence (AI) chip market, as it has since the introduction of ChatGPT. Yet, there’s a barrage of competition coming not only from merchant competitors and cloud giants producing their own in-house accelerators but also from AI chip start-ups.

One such start-up, Cerebras, just filed a prospectus ahead of an impending initial public offering (IPO). After reading, I think Cerebras is a name every Nvidia investor should monitor closely. But is it really a threat to the graphics processing unit (GPU) giant?

What is Cerebras?

Cerebras was founded in 2016 by current CEO Andrew Feldman and a group of technologists who had founded and/or worked at a company called SeaMicro over a decade ago. SeaMicro made efficient high-bandwidth microservers and was later acquired by Advanced Micro Devices in 2012.

Cerebras sold its first AI chips in 2019 and has recently seen a big acceleration in demand, leading to this recent IPO filing.

Cerebras’ giant chip

Cerebras’ big differentiator is that its AI chips, which it calls wafer-scale engines (WSEs), are huge. And by huge, we’re talking a chip that takes up an entire semiconductor wafer. A foundry usually produces many chips per wafer, some of which have defects and are discarded. But Cerebras goes for one giant chip per wafer.

The result is a massive processor 57 times larger than an Nvidia GPU, with 52 times more compute cores, 880 times the on-chip memory, and 7,000 times more memory bandwidth. One Cerebras WSE has a remarkable 4 trillion transistors — that’s 50 times the 80 billion transistor count of Nvidia’s H200! Like Nvidia, Cerebras’ chips are produced by Taiwan Semiconductor Manufacturing.

The theory behind making a giant chip is that by doing more processing on the chip, the WSE does away with the need for the Infiniband or Ethernet-based networking connections that string hundreds or thousands of GPUs together. According to Cerebras, this architecture allows WSEs to achieve over 10 times faster training and inference than an 8-GPU Nvidia system.

In a recent interview, Feldman said recent tests showed Cerebras chips were 20 times faster for inference than Nvidia’s. Sound impressive? When Feldman was asked at a summer conference how much market share Cerebras planned to take from Nvidia, he answered, “All of it.”

Financials show a big acceleration

Not only does Cerebras talk a big game, but it’s also shown impressive revenue acceleration and improving profitability this year, as you can see:

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Data source: Cerebras S-1. H1 = first half of the corresponding year.

As you can see, between the first half of 2023 and the first half of 2024, Cerebras’ revenue jumped a whopping 1,474%. While gross margin technically declined, from 50.5% to 41.1%, that was mainly because virtually all of last year’s revenue came from higher-margin services. Cerebras’ hardware gross margins actually went up over that time. Even better, operating losses narrowed by $40 million, a great indication that the company will be profitable if it scales.

That exponential scaling should continue into next year. According to the filing, Cerebras’ largest customer, Abu Dhabi’s G42, agreed to purchase $1.43 billion of equipment through the end of 2025. That’s sixfold growth over the current 2024 run rate.

Risks to the Cerebras story

There are a couple of risks to the Cerebras story, however. One is that producing one massive chip can lead to lots of defects. Whereas Nvidia or any other chipmaker can throw out all the bad chips on a wafer, Cerebras has to take the whole thing, opening its WSEs to imperfections.

To get around this, Cerebras says it has created “redundant” cores and interconnects on its chips, as Cerebras assumes many chips will have defects. “Flaws are designed to be recognized, shut down, and routed around,” the filing says.

However, building redundancy also means Cerebras can’t get all the potential the surface area of its chip could otherwise get. Obviously, management believes the “big chip” architecture more than makes up for this inefficiency.

A second risk, and likely the biggest, is Cerebras’ customer concentration. Right now, AI company G42 from the United Arab Emirates accounts for 87% of Cerebras’ sales in the first six months of 2024. G42 and affiliated entities are also behind next year’s $1.43 billion order, meaning that concentration will only grow.

Concentration is somewhat expected in the early stages of a company’s growth. But should anything go wrong with the relationship or G42 itself, it could seriously derail Cerebras’ plans. G42’s close affiliation with a foreign government — the UAE’s national security advisor is the company’s founder and largest shareholder — certainly poses a risk should there be a geopolitical flare-up.

Cerebras is one to watch

When it goes public, Cerebras will be a new AI player on the block and will probably sell for a high valuation. So, investors should be cautious about how much they pay for the stock when it comes to market.

Nevertheless, the company has a differentiated architecture from the rest of the pack. Therefore, it’s certainly worth watching whenever it goes public — especially if you’re a big Nvidia or AMD shareholder.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $765,523!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 30, 2024

Billy Duberstein and/or his clients have positions in Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

Is This Company an “Nvidia Killer?” What to Know About Cerebras’ IPO was originally published by The Motley Fool

(Bloomberg) — The world-beating rally in Chinese stocks is failing to convince many global fund managers and strategists.

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Invesco Ltd., JPMorgan Asset Management, HSBC Global Private Banking and Wealth, and Nomura Holdings Inc. are among those viewing the recent rebound with skepticism and waiting for Beijing to back up its stimulus pledges with real money. Some are also concerned many stocks are already reaching overvalued levels.

Chinese shares have skyrocketed since late-September as a barrage of economic, financial and market-support measures reinvigorated investor confidence. The Hang Seng China Enterprises Index, which comprises Chinese stocks listed in Hong Kong, has jumped more than 30% over the past month, making it the best performer among more than 90 global equity gauges tracked by Bloomberg.

“In the short term, sentiment could overshoot but people will go back to fundamentals,” said Raymond Ma, Invesco’s chief investment officer for Hong Kong and Mainland China. “Because of this rally, some stocks have become really overvalued” and they lack a clear value proposition based on their likely earnings performance, he said.

Stimulus announced by Beijing has included interest-rate cuts, freeing-up of cash at banks, billions of dollars of liquidity support for stocks, and a vow to end the long-term slide in property prices. While there’s plenty of optimism that could underpin a sustainable equity rally, there have been a number of false dawns before, most recently a rally in February that completely unwound.

The surge in the past two weeks has seen Chinese equities reassert their influence over broader emerging-market gauges, and dented the performance of fund managers who had been running underweight positions in the biggest developing-nation economy. The durability of the rebound will not only matter for the year-end performance of index-tracking funds, but also have direct implications for nations that have trading and investment links with China.

Ma at Invesco, who was one of relatively few China bulls coming into this year, said he’s in no rush to add to his investments now.

“There are a group of stocks whose share prices are up by 30% to 40% and almost at historical highs,” he said. “Whether in the next 12 months the fundamentals will be as good as before their peak, that’s more uncertain to me. That would be the category we would like to trim.”

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More Needed

JPMorgan Asset Management is just as cautious.

“Additional policy steps would be needed to boost economic activity and confidence,” said Tai Hui, Asia Pacific chief market strategist in Hong Kong. “The policies announced so far can help to smoothen out the de-leveraging process, but the balance-sheet repairing would still need to take place.”

Hui also pointed to global uncertainties that may crimp the nascent stock rally.

“With the U.S. elections only a month away, many investors would argue that the U.S. view of China as an economic and geopolitical rival is a bipartisan consensus,” he said. Moreover, “foreign investors may choose to wait for economic data to bottom out and for this new policy direct to solidify,’ he said.

Slowing Growth

HSBC Global Private Banking remains concerned the steps China has taken aren’t enough to reverse the nation’s slowing long-term growth outlook.

“More significant fiscal easing is still needed to sustain the recovery momentum and shore up growth to achieve the 5% 2024 GDP growth target,” said Cheuk Wan Fan, chief investment officer for Asia at the private bank in Hong Kong. “For now, we stay neutral on mainland China and Hong Kong equities based on our expectation of China’s GDP growth decelerating from 4.9% in 2024 to 4.5% in 2025.”

‘Go Further’

Still, some remain bullish, saying valuations are cheap due to the three-year selloff.

“The rally can run, there’s a lot of money that still needs to rebalance. especially from global investors,” Matthew Quaife, global head of multi-asset investment management at Fidelity International in Hong Kong, said on Bloomberg Television.

“We know valuations are still below mean and could run further from a technical view. This could have more legs and how much it goes into earnings is a bigger question,” he said.

Potential Bust

Nomura Holdings Inc. is among the most pessimistic, warning the rally may quickly turn from boom to bust.

In the most gloomy scenario, “a stock market mania would be followed by a crash, similar to what happened in 2015,” Nomura economists led by Ting Lu in Hong Kong wrote in a note to clients. That outcome may have a “much higher probability” than more optimistic scenarios, they said.

Bond ‘Challenges’

Some investors and strategists are also wary about what the stimulus blitz means for the nation’s bonds and currency.

China’s bonds have dropped since the stock rally started, ending at least temporarily a period in which yields set successive record lows as investors bought haven assets.

“There are still major challenges to be resolved, and it’s not an easy road,” said Lynn Song, chief economist for Greater China at ING Bank in Hong Kong. “We need to ensure that this policy blitz is effective in stabilizing the downward trajectory of the housing market and not just result in a rush of hot money to equities.”

Bonds may become a beneficiary if the stock market cools, Song said. “There’s certainly a risk we could revert back to the previous months’ environment if anything goes wrong in the next steps ahead.”

Yuan traders will be watching out on Tuesday for the central bank’s daily reference rate, the level around which the currency is allowed to trade. The onshore yuan has strengthened more than 1% in the past month to approach the key level of 7 per dollar. A break of that barrier may trigger a further rally.

What to Watch

• China publishes FX reserves data for September

• A swath of countries release inflation data, including Thailand, Brazil, Mexico, Chile and Argentina

• Central banks in India, Peru and South Korea announce interest-rate decisions

• Mexico and India release industrial production data

–With assistance from Shulun Huang and Carolina Wilson.

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©2024 Bloomberg L.P.

A turbulent five days for markets, featuring rising tensions in the Middle East and a port strike that both started and stopped, was capped off by a better-than-expected September jobs report that helped stocks close marginally up on the week.

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

An update on inflation and the start of third quarter earnings reports will grab investor attention in the week ahead.

The October Consumer Price Index (CPI) report will headline an economic calendar that will also feature updates on consumer sentiment and the release of the 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 kick off third quarter earnings season on Friday. PepsiCo (PEP) and Delta Air Lines (DAL) are also scheduled to report earlier in the week.

A small step forward

On Friday, the September jobs report cooled concerns that the labor market is rapidly deteriorating and will prompt another jumbo-sized rate cut.

Data from the Bureau of Labor Statistics released Friday showed the labor market added 254,000 payrolls in September, more additions than the 150,000 expected by economists. Revisions to both the July and August report showed the US economy added 72,000 more jobs during those two months than previously reported.

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

This, Wall Street economists and strategists argued, likely takes another half-percentage-point interest rate cut from the Fed in November off the table.

“We think that the rate descent should continue, but with today’s strong data it’s more likely that the Fed will move in 25 basis point (bps) cut increments,” BlackRock chief investment officer of global fixed income Rick Rieder wrote in a research note on Friday. “For a Fed that is recalibrating to an economy that is operating at a very solid level, it seems more appropriate for the market to price in a small probability of “no cut” at the next meeting, rather than a small probability of a 50-bps cut.”

Price check

While concerns about the Fed’s maximum employment portion of its dual mandate appear to have eased for now, inflation remains above the central bank’s 2% target.

The week ahead will provide a fresh update on how quickly price increases are falling toward that goal.

Wall Street economists expect headline inflation rose just 2.3% annually in September, a slowdown from the 2.5% rise seen in August. August data marked the slowest year-over-year inflation reading since early 2021. Prices are set to rise 0.1% on a month-over-month basis, a decrease from the 0.2% reading seen in May.

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On a “core” basis, which strips out food and energy prices, CPI is forecast to have risen 3.2% over last year in September, unchanged from August. Monthly core price increases are expected to clock in at 0.2%, below the 0.3% seen in August.

“Inflation continues to move in the right direction, which will allow further cuts,” Bank of America US economist Stephen Juneau wrote in a research note previewing the release. “However, we continue to think labor data matters more for size of cuts.”

Tesla talk

Tesla will once again be one of the key individual stocks in focus during the upcoming week. The electric vehicle maker is expected to host its highly anticipated robotaxi event on Oct. 10.

Tesla is expected to provide further details on its plans for its full self-driving project. Morgan Stanley analyst Adam Jonas wrote in a note to clients he expects attendees will be shown and given rides 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 a future of self-driving robotaxis, the event is unlikely to send Tesla stock soaring.

“I think it’s difficult to get excited on a stock on something so high level,” he said, noting that the launch will showcase Tesla’s big-picture vision for AI and autonomous vehicles — a vision that he said will probably take several years to become “financially meaningful” for the EV maker.

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

Enter earnings

Big banks are set to kick off what Wall Street expects to be a subdued quarter for year-over-year earnings growth. Entering the reporting period, consensus projects earnings to grow 4.7%. This would mark the fifth straight quarter of growth compared to the same period a year prior but would also be the slowest year-over-year growth since the fourth quarter of 2023.

“The bottom-up consensus forecasts a sharp and broad slowing,” Deutsche Bank chief equity strategist Binky Chadha wrote in a note to clients.

Chadha added that this should set up company earnings to surpass Wall Street’s expectations as they often do. It does not, however, make Chadha more bullish on how stocks might perform during the reporting period.

“Earnings seasons are typically positive for equities, but the strong rally and above-average positioning going in argue for a muted market reaction,” Chadha wrote. “This earnings season will also take place against a backdrop that could see it overshadowed by geopolitical developments and noise around the US elections.”

Bank of America US and Canada equity strategist Ohsung Kwon told Yahoo Finance that with consensus not expecting a strong third quarter, much of the focus will be on what companies say about the path forward.

“Now that the easing cycle has started, what are companies … going to say about any early indications of improvement given the lower rate environment?” Kwon said.

Weekly calendar

Monday

Economic data: No notable releases.

Earnings: Duckhorn (NAPA)

Tuesday

Economic data:

Earnings: PepsiCo (PEP)

Wednesday

Economic data: MBA mortgage applications Oct. 4 (-1.3% prior), Wholesale inventories month-over-month, August final (0.2% prior); FOMC September meeting minutes

Earnings: Helene of Troy (HELE)

Thursday

Economic data: Consumer Price Index, month-over-month, September (+0.1% expected, +0.2% previously); CPI excluding food and energy, month-over-month, September (+0.2% expected, +0.3% previously); Consumer Price Index, year-over-year, September (+2.3% expected, +2.5% previously); CPI excluding food and energy, year-over-year, September (+3.2% expected, +3.2% previously); Real Average Hourly Earnings, year-over-year, September (+1.4% previously); Real Average Weekly Earnings, year-over-year, September (+0.9% previously); Initial jobless claims, week ended Oct. 5 (237,000 expected, 225,000 prior)

Earnings: Delta Air Lines (DAL), Domino’s (DPZ), Tilray (TLRY)

Friday

Economic data: Producer Price Index, month-over-month, September (+0.1% expected, +0.2% previously); PPI, year-over-year, September (+1.6% expected, 1.7% previously); Core PPI, month-over-month, September (+0.2% expected, 0.3% previously); Core PPI, year-over-year, September (+2.7% expected, +2.4% previously); University of Michigan consumer sentiment, October preliminary (70.3 expected, 70.1 previously)

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

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

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