Major earnings reports and economic data will be in focus next week as investors seek clarity on how the Federal Reserve will proceed from here. Wall Street has some concerns as they head into the thick of earnings season next week. A FactSet estimate that accounts for reports that have already come in and forecasts for the ones that haven’t is showing S & P 500 earnings are on pace to have fallen 0.7% in the third quarter. But next week will bring the lion’s share of results including mega-cap darlings Alphabet, Amazon , Meta Platforms and Microsoft . Investors will assess how businesses are positioning for the possibility of a higher-for-longer interest rate environment. Disappointing results for the megacaps in particular could bode trouble not only for their respective stocks, but also for a broader market that has relied on their outperformance for its gains this year. While the S & P 500 is higher by 12% in 2023, the equal-weighted index is about flat. Of note, Tesla shares sank more than 9% on Thursday following a pessimistic economic outlook from CEO Elon Musk during the company’s earnings call. “We’re getting some weaker than expected numbers right now,” Sam Stovall, chief investment strategist at CFRA Research. “And I think that’s causing investors to worry that maybe earnings are not going to be growing as much as we had anticipated.” To be sure, the strategist thinks it’s too early to call how the rest of the season will turn out. Wall Street was headed for a losing week. It would be the S & P 500’s first weekly loss in three weeks. The Dow Jones Industrial Average was on pace for its third one-week decline in four weeks. This comes as the 10-year Treasury yield breached a key 5% psychological level. US10Y 3M mountain 10-year Treasury yield Will the Fed hike? Investors will also deliberate a slew of economic reports next week that take on greater significance ahead of the Oct. 31 to Nov. 1 Fed policy meeting. While markets are pricing in near certainty that policy makers will keep rates at their current levels following the November meeting, according to the CME FedWatch Tool . However, less certain is what the central bank will do later. Markets are pricing in a 24% likelihood of a 25 basis point hike in December, and a roughly 30% chance of an increase in January, the FedWatch tool shows. Market participants worry that reports that come in stronger than expected could provide grounds for the Fed to hike again this year. The third-quarter advance report for the gross domestic product that’s set to come out Thursday is expected to show the U.S. economy grew 3.5% quarter over quarter, according to FactSet. The personal consumption expenditure, the Fed’s preferred inflation gauge, is expected to have risen 0.6% in September, higher than the prior reading of 0.4%. Meanwhile, Atlanta Federal Reserve President Raphael Bostic on Friday said the Fed is not likely to cut interest rates until well into 2024. “The Fed has started to signal to the market that its strategy could be higher for longer, meaning to keep interest rates higher before cutting them, but that they were most likely about done with the rate hikes,” said Ed Clissold, chief U.S. strategist at Ned Davis Research. “But if inflation and economic growth proves to be stronger than expected, the Fed may feel compelled to signal that it’s not done raising rates.” “And so, another hike or two in early 2024 does not seem to be priced into the market currently, and that could be problematic for risk asset like stocks,” Clissold said. Navigating uncertainty All this is adding to uncertainty for investors as they monitor higher bond yields.. This week, the 10-year Treasury yield briefly broke through the 5% level, a level that technical analysts expect could be breached again before the benchmark rate peaks. Fairlead Strategies founder Katie Stockton sees next resistance level at 5.25%, though she added bond yields are “overstretched” in the short term. “I think this move in rates eventually causes something to kind of freeze up and break,” said Rob Ginsberg, managing director at Wolfe Research. “I’m not sure if it’s the economy or another banking issue. I just know something will feel the implications of this violent move in rates.” CFRA’s Stovall agrees that the added uncertainty in markets sets the stage for additional choppiness ahead. “Corrections can occur in price and time,” Stovall said. “And I think right now, the market is going through a correction in time because it doesn’t know what’s going on with the Fed, does not know what’s going on with the economy.” Week ahead calendar All events ET. Monday Oct. 23 8:30 a.m. Chicago Fed National Activity Index (September) Tuesday Oct. 24 9:45 a.m. S & P Global PMI Composite preliminary (October) 9:45 a.m. S & P Global PMI Manufacturing (October) 9:45 a.m. S & P Global PMI Services (October) 10 a.m. Richmond Fed Index (October) Earnings: Alphabet , Microsoft , F5 , Visa , Texas Instruments , General Electric , NextEra Energy , Raytheon Technologies , Sherwin-Williams , Dow, Inc. , General Motors , 3M , PulteGroup , Halliburton , Coca-Cola , Kimberly-Clark , Corning Wednesday Oct. 25 8 a.m. Building permits final (September) 10 a.m. New home sales (September) Earnings: Hilton Worldwide , General Dynamics , Old Dominion Freight Line , T-Mobile US , Boeing , Hess , Meta Platforms , Raymond James Financial , Align Technology , Whirlpool , International Business Machines , O’Reilly Automotive Thursday Oct. 26 8:30 a.m. Durable goods orders (September) 8:30 a.m. GDP (Q3) 8:30 a.m. Initial claims ( week ended Oct. 21) 8:30 a.m. Wholesale inventories preliminary (September) Earnings: Honeywell International , Keurig Dr Pepper , Northrop Grumman , PG & E , Mastercard , Amazon , Royal Caribbean Group , Tractor Supply , United Parcel Service , Willis Towers Watson , Hasbro , Southwest Airlines , Comcast , Hershey , Intel , L3Harris Technologies , Ford Motor , DexCom , Capital One , Chipotle Mexican Grill , Enphase Energy Friday Oct. 27 8:30 a.m. Personal eonsumption expenditure (September) 8:30 a.m. Personal income (September) Earnings: Phillips 66 , Chevron , AbbVie , Stanley Black & Decker , Exxon Mobil , Colgate-Palmolive , T. Rowe Price Group