US, China Markets on Edge for a Make-or-Break Week for Retail Investors

Fed Rate Decision, Big Tech Earnings and China’s Fifth Plenum in Focus

Warsh’s Rate Signal and Xi’s Policy Message

Big Tech’s AI Investment Scorecard Is Coming

New York stocks are poised to take their cue this week, from October 26 to October 30, from the Federal Reserve’s interest-rate decision and earnings from major technology companies.

In China, the main focus for equities is the fifth plenary session of the Chinese Communist Party’s 20th Central Committee. Investors are watching for signals on economic policy and whether hopes for stimulus will influence the market.

The biggest variable for Wall Street this week is the Federal Open Market Committee’s regular meeting on October 27 and October 28. As of October 23, markets were assigning a 90% probability to the Fed holding rates steady in October, according to CME FedWatch.

Investors are focused less on the rate decision itself than on the policy path Fed Chair Kevin Warsh signals next. The key question is whether he hints at another rate increase in December.

The September personal consumption expenditures price index, due on October 29, will also be closely watched. Markets expect headline PCE to rise 0.5% from the previous month and core PCE to increase 0.3%. Preliminary third-quarter US gross domestic product data due the same day are forecast to show 3% growth. If both inflation and growth exceed expectations, concern could grow that the Fed will keep policy restrictive for longer.

Corporate earnings will also help shape the market’s direction. Alphabet and Microsoft are due to report on October 28, followed by Amazon and SanDisk on October 29. The central issue is whether heavy spending on artificial intelligence data centers is translating into actual profits.

SanDisk’s earnings and outlook may also serve as a barometer for sentiment toward memory-chip stocks, a sector that has recently seen increased volatility. Political uncertainty ahead of the US midterm elections on November 3 could add to market swings.

In Chinese equities, the fifth plenum running from October 26 to October 29 is the dominant theme this week. It is the last major political event before next year’s 21st Party Congress.

Chinese President Xi Jinping is poised to begin a fourth five-year term at next year’s party congress. The fifth plenum’s main agenda is widely viewed as reinforcing party discipline and strengthening policy execution. Markets are also watching whether Xi uses the meeting to tighten internal discipline and solidify his power base ahead of next year’s Communist Party leadership reshuffle. While the meeting is not primarily intended to unveil stimulus measures, its outcome could still affect policy expectations and investor sentiment.

China’s industrial profits data for January through September, due on October 27, will also be in focus. Markets expect cumulative profit growth to slow to 15.2% from a year earlier, down from the previous reading of 15.7%. The key question is whether the improvement in manufacturing profitability remains intact.

Third-quarter earnings season for companies listed in mainland China will also wrap up at the end of October. Stock performance could diverge across sectors depending on each company’s profitability and investment plans.

Kim Eun-jung, Beijing correspondent, Korea Economic Daily, kej@hankyung.com