Stocks closed another week at record levels as investors began to digest quarterly earnings releases and debate intensified over what the Federal Reserve would do at its November meeting.
During the week, the Nasdaq (^IXIC), S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) rose more than 1%, with the Dow and S&P 500 both closing at all-time highs on Friday. .
Next week, the monthly retail sales report will top the economic calendar as investors evaluate whether or not the economy is accelerating following a surprisingly strong September jobs report.
In corporate news, results from Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS) will round out big bank earnings, while reports from United Airlines (UAL) and Netflix (NFLX) will also highlight big bank earnings. . week.
Construction issue for not cutting November
Last week, speculation grew that the Federal Reserve would not cut interest rates further at its November meeting. The September jobs report, which included another decline in the unemployment rate and one of the highest monthly additional payroll numbers of the year, helped ease concerns that the labor market is deteriorating rapidly.
On Thursday, the latest Consumer Price Index (CPI) report showed core prices rising more than expected. On Friday, the latest Producer Price Index (PPI) showed a similar story, with core prices rising 2.8%, compared to Wall Street expectations for a 2.6% increase.
Some have argued that in light of this data — as well as recent minutes from the Fed’s September meeting that revealed that “some” officials would have supported a smaller rate cut — the central bank is more likely to keep interest rates steady in November.
“As long as inflation doesn’t get too close to 2% and there’s no crisis unfolding in the labor market, which I don’t expect, I don’t think there’s anything that gives the Fed a reason to cut further this year,” said Eric Wallerstein, chief markets strategist. At Yardeni Research, for Yahoo Finance.
As of Friday, markets were anticipating a roughly 18% chance that the Fed would not cut interest rates in November, up from the 3% chance seen the previous week. According to CME FedWatch.
Read hash
Stronger-than-expected economic data helped drive the “no easing” discussion. Investors will have another update in this section this week with the release of the September retail sales report on Thursday.
Economists expect retail sales to rise 0.2% in September compared to the previous month. In August, retail sales rose 0.1%, defying the decline economists had expected.
“Retail sales, in particular, could be an important market driver as chain variability increases and scrutiny on consumer health intensifies,” Jefferies economic team led by Thomas Simons wrote in a note to clients on Friday. “We would caution that one should not delve too deeply into error versus consensus (whether bullish or bearish) because retail sales measures spending with a very heavy weighting toward goods rather than services, and is measured in nominal terms. Weakness may just be a cause.” “For continued deflation or deflation in commodities.”
Netflix takes the big screen
Big banks have largely passed Wall Street’s test for their opening earnings season. Investors’ focus will remain on financials at the start of the week with reports from Morgan Stanley, Goldman Sachs and Bank of America before turning to Netflix’s results on Thursday after the bell.
The streaming giant’s stock is up nearly 50% this year and is trading near its all-time high. Wall Street expects Netflix to report earnings per share of $5.16 on revenue of $9.77 billion. This represents earnings growth of approximately 40% compared to the previous year.
But Wall Street is hotly debating whether or not the stock can sustain its phenomenal run. In the near term, Citi analyst Jason Bazinet believes Netflix’s announcement of further price hikes in the US could be a catalyst for the stock.
“We expect Netflix shares to trade higher following the US price hike announcement, but expect shares to ultimately trade lower as investors’ hopes for $25 per share earnings in 2025 are dashed,” Bazinet wrote.
Returns are rising
10-year Treasuries (^TNX) hovered near 4.1% for the first time since late July.
10-year bonds added nearly 30 basis points over the past week as investors trimmed their expectations for interest rate cuts amid signs that inflation may be firmer than initially thought while economic growth data remained flat.
For most of the past few years, rising yields have been a headwind for stocks. But yields likely won’t rise enough to act as a headwind yet, Michael Kantrowitz, chief investment strategist at Piper Sandler, told Yahoo Finance on Thursday.
“I don’t think this rise in interest rates is all that there is to worry about for stocks overall,” Kantrowitz said. “But where it shows up is in leadership.”
Kantrowitz noted that areas such as real estate (XLRE) and the Russell 2000 small-cap index (^RUT), which have benefited from investors anticipating lower interest rates, have lagged amid the recent rise in the 10-year bond yield.
Kantrowitz added that rising interest rates are the deciding factor at the moment Leading the market more than it affects the S&P 500.
“If interest rates continue to rise, I don’t think it’s a big problem for stocks unless it lasts for, say, a few months,” he said.
Monday
Economic data: New York Fed one-year inflation forecast, September (previously 3%)
Profits: There are no noticeable profits.
Tuesday:
Economic data: Empire Manufacturing, October (0.5 expected, 11.5 previously)
Profits: Bank of America (BAC), Charles Schwab (SCHW), Citi (C), Goldman Sachs (GS), J.B. Hunt (JBHT), Johnson & Johnson (JNJ), Progressive (PGR), State Street (STT), United Airlines (UAL), UnitedHealth Group (UNH), Walgreens Boots Alliance (WBA)
Wednesday
Economic data: MBA Mortgage Applications, week ending October 11 (previously -5.1%); Monthly Import Price Index, September (-0.3% expected, -0.3% previously); Monthly Export Price Index, September (-0.3% expected, -0.7% previously)
Profits: Abbott (ABT), Alcoa (AA), ASML (ASML), Citizens (CIA), Discover Financial Services (DFS), Morgan Stanley (MS)
Thursday
Economic data: Initial jobless claims, week ending October 12 (previously 258,000); MoM Retail Sales, September (0.2% expected, 0.1% previously); Retail sales excluding auto and gas, September (0.3% expected, 0.2% prior); Philadelphia Fed Business Forecast, October (2.9 expected, 1.7 previously); Industrial Production, Monthly, September (0% expected, 0.8% previously); NAHB Housing Market Index, October (42 expected, 41 previous); Leading Index, March (-0.1% expected, +0.1% previously); Existing Home Sales, Monthly, March (-5.1% expected, 9.5% previously)
Profits: Netflix (NFLX), Blackstone (BX), Travelers (TRV), First National Bank (FBAK), Western Alliance (WAL), WD-40 (WDFC)
Friday
Economic data: Housing Starts MoM, September (-0.9% expected, 9.6% previously); Building Permits MoM, September (-0.3% expected, 4.9% previously)
Earnings: Ally Financial (ALLY), American Express (AXP), Comerica (CMA), Procter & Gamble (PG)
Josh Schaeffer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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