The volatile period of the US stock market welcomes a crucial earnings week. Next week, can the earnings reports from NVIDIA and retailers provide some peace of mind?

It is noted that the recent selling in the US stock market has shaken most of the pillars of this three-year bull market. However, so far, the support of the corporate profit base remains stable and intact. The artificial intelligence boom is facing its first sustained test, as investors are cautious about large-scale borrowing for AI infrastructure development. According to private data and a series of layoff announcements, the labor market still appears unstable. Federal Reserve officials have hinted that there may be no more interest rate cuts this year, as the threat of tariffs on inflation continues to exist. These concerns collectively led to the S&P 500 index falling nearly 1.7% on Thursday, the third drop of over 1% in eight trading days. Other risk assets also suffered, with Bitcoin falling below $10,000 again and small-cap stocks plummeting by 2.8%. For bulls, the market's volatility makes financial reports even more important. With another earnings season coming to an end, it is clear that despite many uncertainties, corporate executives express optimism about future earnings. Data shows that after a 15% profit increase in the third quarter, profit guidance momentum (the ratio of S&P 500 component companies that have raised profit expectations to those that have maintained or lowered expectations) has reached its highest level since 2021. Scott Ladner, Chief Investment Officer at Horizon Investment, said, "This is a very strong earnings season, the core theme is profit expansion," and "the market may experience selling, but with profit margins near historic highs, this may be another opportunity to buy on dips." Improving Profit Momentum These optimistic forecasts will face an initial test next week, when some of the world's largest retailers will release their latest earnings reports. With Walmart Inc. (WMT.US) and Target Corporation (TGT.US) reporting performance, investors will be able to closely observe the performance of American consumers under President Trump's tariff regime. Consumer spending accounts for about two-thirds of the US GDP. In recent years, its resilience has also helped drive the S&P 500 index to consecutive record highs. However, there are reasons to be concerned. Due to the government shutdown dragging down economic prospects and high prices worsening perceptions of personal finances, consumer confidence has plummeted to near historic lows. Investors need to know how long consumers can support themselves under the Trump administration's trade war, weak job growth, and sticky inflation. Investors will be looking for consumer companies including TJX Companies (TJX.US) and Ross Stores, Inc. (ROST.US) to continue the trend of exceeding analysts' expectations in quarterly reports and performance guidance. The optimism of corporate executives is in stark contrast to the spring, when many companies withdrew their annual forecasts or gave gloomy outlooks citing rising costs, lack of consumer confidence, and the lack of business confidence due to Trump's global trade offensive. The current optimistic signal suggests that there may still be room for profit expansion. Data from Bank of America Corp shows that analysts also share a similar optimistic sentiment. Savita Subramanian, Stock and Quantitative Strategy Analyst at Bank of America, pointed out that market forecasters have not lowered their expectations for the fourth quarter yet, and are revising upwards their earnings outlook for 2026. Of course, there are plenty of reasons for companies to remain cautious. While the third quarter earnings were encouraging, "risks to watch include layoffs, tariff cost pressures and uncertainties, overinvestment in AI," Subramanian said in a report to clients on Monday. In addition, the picture painted by profit forecasts may have incomplete risks. Only about one-quarter of the S&P 500 component companies provide quarterly guidance, slightly more than half provide annual guidance, typically in the technology and non-essential consumer goods industries. Most of the large technology companies' profits have met or exceeded expectations, although the outlook for borrowing costs remains unclear. Next week, NVIDIA Corporation will report quarterly earnings after Wednesday's market close, and options traders are betting on one thing: that this report will shake the market. While a strong report could boost NVIDIA Corporation's stock price and lead the market higher, any failure to meet expectations - whether actual or perceived - could bring the rally to a halt and bring heavy downward pressure on the market. According to compiled data, options traders expect the stock to fluctuate in either direction by 6.2%, the highest implied volatility in a year. Data shows that S&P 500 component companies that fail to meet analysts' profit and revenue expectations underperform the benchmark index by an average of 3.9% the day after earnings are released, the second worst performance in a year. Since JPMorgan Chase & Co. and other large banks kicked off earnings season last month, the index has risen 1.2%. "The increased scrutiny on AI seems to be a major reason why the stock market has failed to react positively, as many of the positive profit news comes from tech stocks," said Jeff Buchbinder, Chief Stock Strategist at LPL Financial.