Earnings season may be only half over, but the focus on profits should subside next week as investors turn their attention to the coming election and Friday's jobs report, the last major data release before the Nov. 6 contest.
More bellwether companies are scheduled to report results in what will be another "peak week" of the earnings season. Such a flurry of numbers normally holds Wall Street's attention and can lead to market swings. But volume and volatility may be slight next week, with market participants opting to remain on the sidelines ahead of the jobs data and the election.
The U.S. government's October jobs report will give a snapshot of the current labor market. It could also give a bit of a lift to President Barack Obama, should it come out better than anticipated, or help Republican candidate Mitt Romney – if it is worse than forecast.
Polls currently indicate that President Obama is a slight favorite to win on Nov. 6, but the race will be tight. The most recent Reuters/Ipsos poll of likely voters shows the president ahead - 47 percent to 46 percent.
The Standard & Poor's 500 Index fell 1.5 percent this week, largely because of a spate of earnings disappointments. The Dow Jones industrial average slid 1.8 percent this week, and the Nasdaq composite index dropped 0.6 percent.
What's notable, however, is that rebounds have been brief and quick to attract sellers.
Some investors cited the approaching election as a barrier to committing new capital to the market. "Not many people have the stomach to plop down their bets when polling is so close," said Hayes Miller, the Boston-based head of asset allocation in North America at Baring Asset Management. "For the most part, investors will wait and see what happens."
Miller, who helps oversee more than $50 billion in assets, said the trend of caution would be especially pronounced in the health care, financial and energy sectors - three areas that may face different regulatory outlooks, depending on the election's outcome.
"These are the ones really in play," he said.
Expectations for the next nonfarm payrolls report, set for release on Friday, are by no means certain, either. Analysts expect 124,000 jobs were added in October - up 10,000 from September. However, the unemployment rate is also seen ticking higher - to 7.9 percent from 7.8 percent.
A payroll surprise in either direction could further cloud expectations for the election's outcome. "A big change in payrolls could cause some uncertainty over the winner," said Jerry Harris, president of asset management at Sterne Agee, in Birmingham, Alabama. "I don't expect a big surprise, but while the S&P doesn't seem especially vulnerable at these levels, I don't think it is in a hurry to go up, either."
The market will also have to contend with the weather. Hurricane Sandy is expected to hit the U.S. East Coast early in the week. New York City officials were considering closing down bus and subway lines next week.
At the New York Stock Exchange, the plans call for business as usual. The exchange issued a statement on Friday saying it has contingency plans to have the market running, adding that it has back-up power generation facilities. The Big Board will make accommodations for critical staff and traders.
Rival marketplace NASDAQ OMX said in a statement that it has plans to make sure its systems are ready. It will communicate with its members before, up to and after the storm.
EARNINGS IN PLAY, IF NOT IN FOCUS
While the market at large may be waiting on news events, individual stocks could still be volatile as earnings season grinds along. More than half of the S&P 500 components have reported results so far. Next week, though, will bring reports from some marquee names such as Dow components Chevron and Pfizer, as well as S&P 500 stalwarts Visa, Ford Motor and Starbucks.
This earnings season, a number of high-profile companies have missed estimates, including this week's sour notes from Apple Inc, United Technologies and DuPont.
With 54 percent of the S&P 500 companies having reported results so far, 62.5 percent have topped earnings expectations, under the 67 percent average over the past four quarters. Just 37 percent have topped revenue forecasts, well under the 55 percent over the past four quarters.
The earnings disappointments led to some intensive selling, driving the Dow industrials down 243.36 points on Tuesday alone. The S&P 500 has ended down in five of the past seven trading sessions. Those declines have pushed the benchmark S&P under its 50-day moving average of around 1,434, leading some analysts to believe it may be ready for a bounce.
"We'll use any pullback as an opportunity to buy," said Chip Cobb, senior vice president at Bryn Mawr Trust Asset Management in Bryn Mawr, Pennsylvania. "Even though we've seen a number of companies miss expectations and be overly cautious, we're focusing on how a majority have beaten."
Cobb said next week he was especially looking to results from U.S. Steel Corp. Its stock is down almost 20 percent so far this year. "Steel companies have been participating really poorly, and I'm anxious to see if that will continue," he said.