Bank of America: Payrolls, midterms and tech earnings—what catalysts should US stocks watch this week?

How will nonfarm payrolls affect the rate-hike outlook?

Bank of America expects US nonfarm payrolls to increase by 75 thousand in October, above the market consensus of 65 thousand and the 29 thousand recorded in September; private-sector employment is expected to rise by 70 thousand. Initial jobless claims remain low, but slowing weekly ADP employment growth recently and seasonal factors could weigh on the data.
The bank expects the unemployment rate to remain at 4.2%; a larger decline in labor force participation could bring it down to 4.1%.
After the Federal Reserve held rates steady in October, Bank of America still expects one hike each in December 2026 and March 2027, taking the terminal rate to 4.25%–4.5% and keeping it there through the end of 2027. The bank sees a risk that the slower pace of hikes could fall behind developments and does not rule out 25–50 basis points of additional hikes beyond its base case.

Bank of America's base case is that Democrats retake the House and Republicans retain the Senate. Given limited scope for legislation, the bank does not expect the election result to materially change its economic outlook through 2028, with the fiscal deficit remaining at roughly 6% of GDP.
If Republicans control both chambers, deficit-financed defense spending could provide upside to growth; data center regulation is the main downside risk. Bank of America sees state and local regulation as a more significant constraint and also notes that both parties could support some AI restrictions.

Bank of America forecasts Apple revenue of 113 billion dollars and earnings per share of 1.97 dollars for the fourth quarter of fiscal 2026, below the market estimates it uses of 114 billion dollars and 1.99 dollars, respectively. The bank is watching rising component costs, gross margin resilience and services revenue growth.
The staggered launch of iPhone models, together with the company's price increases in response to higher component costs, has led Bank of America to adopt a more conservative forecast: it expects iPhone shipments of 247 million units in fiscal 2027, down 9 million units from its previous forecast and below the market estimate of 260 million units.
Bank of America expects margin pressure to be temporary, with its model showing gross margin improving from the end of fiscal 2027 through fiscal 2028; however, gross margin in the first quarter of fiscal 2027 will also be affected by remaining tariff refunds and memory inventory conditions.

Bank of America expects AMD to beat third-quarter estimates and raise fourth-quarter guidance, but notes near-term headwinds in PCs and supply. Market consensus for 2027 data center revenue has already reached 71 billion dollars, up 120% year over year, versus the company's previous guidance for growth of more than 100%.
Bank of America believes agentic AI demand, the Venice product launch, a product mix with higher core counts and selling prices, and the ramp-up of Helios from the fourth quarter into 2027 could push data center revenue growth above 125%–130%, or revenue above 73 billion–74 billion dollars.
A higher-end CPU mix could partly offset GPU dilution of gross margin in 2027; customer financing and project deployment execution remain important constraints on the bank's forecast.

Bank of America expects Arista's third-quarter revenue to rise about 43% year over year and maintain a similar growth rate in the fourth quarter, driven by demand across AI, cloud, enterprise and campus businesses, as well as improved supply.
The bank expects the company to provide an outlook for 2027; its own model forecasts revenue growth of 28% that year. Expanding AI networking deployments, more cloud customers, the start of the 1.6T cycle and gains in enterprise and campus market share could drive growth above the model's forecast; uneven spending by large cloud customers and gross margin pressure from the related sales ramp are constraints.