A rough five days for markets, marked by rising tensions in the Middle East and the start and end of a port strike, capped off with a better-than-expected September jobs report, with stocks closing modestly higher this week.
In the first week of October, the S&P 500 Index (^GSPC) rose 0.2%, while the Nasdaq Composite Index (^IXIC) and the Dow Jones Industrial Average (^DJI) rose about 0.1%.
Over the coming week, updates on inflation and the start of third-quarter earnings reports will grab investors’ attention.
October’s Consumer Price Index (CPI) report will headline the economic calendar, which will also feature updates on consumer sentiment and the release of the Federal Reserve Board’s September meeting minutes. .
On the corporate side, some of the nation’s largest financial institutions, including JPMorgan (JPM), Wells Fargo (WFC) and BlackRock (BLK), begin their third-quarter earnings season on Friday. PepsiCo (PEP) and Delta Air Lines (DAL) are also scheduled to report early in the week.
small step forward
On Friday, September jobs data eased concerns that the labor market was deteriorating rapidly and would prompt another deep interest rate cut.
Labor market payrolls rose by 254,000 people in September, more than the 150,000 that economists expected, according to Bureau of Labor Statistics data released Friday. Revisions to both the July and August reports show the U.S. economy added 72,000 more jobs in the past two months than previously reported.
Meanwhile, the unemployment rate fell to 4.1% from 4.2% in August.
Wall Street economists and strategists argued that this would likely allow the Fed to cut rates by another 0.5 percentage points in November.
“We believe rates should continue to fall, but given today’s strong data, we believe the Fed is likely to cut interest rates by 25 basis points (bps),” said Rick Rieder, chief investment officer of global fixed income at BlackRock. more likely to take action,” Rick Rieder, chief investment officer of global fixed income at BlackRock, said in a research note. Friday. “With the Fed recalibrating towards an economy operating at a very solid level, markets would be better off pricing in a small probability of ‘no rate cut’ at its next meeting rather than a lower probability of 50%.” It seems that there is. -bps cut. ”
price check
Concerns about the maximum employment portion of the Fed’s dual mandate appear to have eased for now, but inflation remains above the central bank’s 2% target.
Over the next week, we’ll likely get another update on how quickly price growth declines toward that goal.
Wall Street economists expect headline inflation to rise at an annual rate of 2.3% in September, slowing from August’s 2.5% rise. August data shows year-on-year inflation at its lowest level since the beginning of 2021. Prices are expected to rise by 0.1% from the previous month, down from 0.2% in May.
the story continues
The “core” CPI, which excludes food and energy prices, is expected to rise 3.2% year-on-year in September, unchanged from August. Monthly core price growth is expected to be 0.2%, lower than August’s 0.3%.
“Inflation continues to trend in the right direction, making further rate cuts possible,” Stephen Juneau, U.S. economist at Bank of America, said in a research note announcing the announcement. “However, we continue to believe that labor data is more important when it comes to the scale of layoffs.”
Tesla story
Tesla will again be one of the important individual stocks to watch next week. The electric car maker is scheduled to hold its long-awaited robotaxi event on October 10th.
Tesla is expected to announce further details about its plans for a fully self-driving project. Morgan Stanley analyst Adam Jonas said in a note to clients that attendees can expect to be escorted to one of Tesla’s “cyber taxis” for a ride.
As reported by Laura Bratton of Yahoo Finance, RBC analyst Tom Narayan told Yahoo Finance that although he has high expectations for the future of self-driving robotaxis, this event could send Tesla stock soaring. said it was low.
“I think it’s hard to get excited about a stock at such a high level,” he said, noting that the announcement will demonstrate Tesla’s big-picture vision for AI and self-driving cars, and that it will become a reality. That will likely take several years, he said. “It makes economic sense” for EV manufacturers.
Tesla shares fell about 5% last week ahead of the event after the company announced third-quarter vehicle deliveries were lower than Wall Street expectations.
Please enter your income
Big banks are off to a slow start to the quarter with weaker year-over-year profit growth that Wall Street expects. Going into the reporting period, consensus is forecasting revenue to increase 4.7%. This is the fifth consecutive quarter of increase compared to the same period last year, but the lowest year-on-year increase since the fourth quarter of 2023.
“The bottom-up consensus is for a sharp and broad-based economic slowdown,” Binky Chadha, chief equity strategist at Deutsche Bank, said in a note to clients.
Chadha added that this should result in corporate earnings exceeding Wall Street expectations. But that doesn’t make Chadha any more bullish on the stock’s performance during the reporting period.
“Earnings season is typically positive for stocks, but continued strong gains and above-average positioning have dampened market reaction,” Chadha said. “This earnings season will also be held under the potentially overshadowed noise surrounding geopolitical developments and the U.S. election.”
Oson Kwon, U.S. and Canadian equity strategist at Bank of America, told Yahoo Finance that a strong third quarter is not expected by consensus, so what companies say about their future direction will depend on what they say about their future direction. He said that would be the focus.
“Now that the easing cycle has begun, what are companies going to say about…early signs of improvement given the low interest rate environment?” Kwon said.
weekly calendar
Monday
Economic data: No notable announcements.
Revenue: Duckhorn (NAPA)
Tuesday
Economic data:
Revenue: PepsiCo (PEP)
Wednesday
Economic Data: MBA Home Loan Applications October 4 (-1.3% m/m), Wholesale Inventory m/m, August Final (0.2% m/m). September FOMC Minutes
Earnings: Helen of Troy (HELE)
Thursday
Economic data: September consumer price index, month-over-month (expected +0.1%, previously +0.2%). CPI excluding food and energy, month-on-month, September (expected +0.2%, previous +0.3%). Consumer price index, year-on-year change, September (expected +2.3%, previous +2.5%). CPI excluding food and energy, compared to the same month last year, September (forecast +3.2%, previous +3.2%). Real average hourly wage in September compared to the same month last year (1.4% increase last time). Actual average weekly earnings in September compared to the same month last year (previously increased by 0.9%). Number of new unemployment insurance applications for the week ending October 5th (estimated 237,000, previously 225,000)
Revenue: Delta Air Lines (DAL), Domino’s Pizza (DPZ), Tilray (TLRY)
Friday
Economic data: Producer price index for September, m/m (expected +0.1%, previously +0.2%). September PPI, year-on-year (expected increase of 1.6%, previous increase of 1.7%). Core PPI for September compared to the previous month (expected 0.2% increase, previous 0.3% increase). Core PPI in September compared to the previous year (forecast +2.7%, previous +2.4%). University of Michigan Consumer Sentiment, October preliminary figure (expected 70.3, previous 70.1)
Earnings: BlackRock (BLK), BNY Mellon (BK), JP Morgan (JPM), Wells Fargo (WFC)
Josh Schafer is a reporter for Yahoo Finance. X Follow him at @_joshschafer.
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