Stocks closed another week at record highs as investors began digesting quarterly earnings and the debate over what the Federal Reserve will do at its November meeting intensified.
The Nasdaq (^IXIC), the S&P 500 (^GSPC) and the Dow Jones Industrial Average (^DJI) all rose more than 1% this week, with both the Dow and S&P 500 closing at record highs on Friday. .
Over the next week, a monthly retail sales report will lead the economic calendar as investors assess whether or not the economy will accelerate again after a surprisingly strong jobs report in September.
In corporate news, results from Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS) will round out the gains for major banks, while reports from United Airlines (UAL) and Netflix (NFLX) will also highlight the week .
A construction example for no-cut November
Speculation has increased over the past week that the Federal Reserve will not cut rates further at its November meeting. September’s jobs report, which included another decline in the unemployment rate and one of the highest monthly wage growth rates of the year, helped allay fears that the labor market was deteriorating rapidly.
On Thursday, the latest Consumer Price Index (CPI) report showed that core prices rose more than expected. On Friday, the latest Producer Price Index (PPI) told a similar story, with core prices rising 2.8%, compared to Wall Street expectations for a 2.6% increase.
Some have argued that given this data — and the recent minutes of the Fed’s September meeting, which showed that “some” officials would have supported a smaller rate cut — the central bank is likely to keep rates steady in November.
“As long as inflation doesn’t move so dramatically towards 2% and there isn’t a crisis in the labor market, which I don’t expect, I don’t think there’s anything that gives the Fed a reason to make further cuts this year. Eric Wallerstein, chief market strategist at Yardeni Research, told Yahoo Finance.
As of Friday, markets estimated a roughly 18% chance that the Fed would not cut spending in November, compared to a 3% chance a week earlier, according to the CME FedWatch Tool.
Read retail
Stronger than expected economic figures have fueled the ‘no cut’ discussion. Investors will get another update on that front this week with the release of the September retail sales report on Thursday.
Economists expect retail sales to rise 0.2% in September from the previous month. In August, retail sales rose 0.1%, defying the decline economists had predicted.
“Retail sales in particular could be a key market mover as range variance has increased and consumer health surveillance has intensified,” Jefferies economics team led by Thomas Simons wrote in a note to clients on Friday. “We would caution against reading too deeply into a miss consensus (positive or negative) because retail sales measures expenditure with a very heavy weight towards goods rather than services, and this is measured in nominal terms . The weakness may simply be due to persistent disinflation or deflation of goods.”
Netflix is taking the big screen
Big banks have largely passed Wall Street’s test to open earnings season. Investors’ focus will continue to be on the financial sector early in the week, with reports from Morgan Stanley, Goldman Sachs and Bank of America, before shifting to Netflix results after the bell on Thursday.
The streaming giant’s shares are up about 50% this year and are trading near an all-time high. Wall Street expects Netflix to report earnings per share of $5.16 on revenue of $9.77 billion. This would mean a profit growth of almost 40% compared to the previous year.
But Wall Street is fiercely debating whether or not the stock can sustain its massive run. In the near term, Citi analyst Jason Bazinet believes Netflix’s announcement of further price increases in the US could be a catalyst for the stock.
“We expect Netflix shares to trade higher following a price increase announcement in the US, but we expect the shares to ultimately trade lower as investors’ hopes for $25 earnings per share by 2025 are dashed ,” Bazinet wrote.
Revenues increase
The 10-year government bond (^TNX) is hovering around 4.1% for the first time since late July.
The 10-year yield has now added roughly 30 basis points in the past week as investors have scaled back expectations for rate cuts amid signs that inflation could be more persistent than initially thought, while economic growth data remains stable.
For much of the past few years, higher yields have been a headwind for stocks. But Michael Kantrowitz, chief investment strategist at Piper Sandler, told Yahoo Finance on Thursday that rates probably haven’t risen enough yet to cause too much headwind.
“I don’t think this increase in interest rates is that worrying for stocks as a whole,” Kantrowitz said. “But where it does show up is leadership.”
Kantrowitz pointed out that sectors like Real Estate (XLRE) and the small-cap Russell 2000 Index (^RUT), which had benefited from investors’ anticipation of lower rates, lagged the recent rise in 10-year yields.
For now, Kantrowitz added, rising interest rates will be the deciding factor market leadership outweighs their weight on the S&P 500 index.
“If rates continue to rise, I don’t think it’s a big problem for stocks unless it lasts for a few months,” he said.
Monday
Economic data: NY Fed 1-year inflation expectations, September (3% earlier)
Income: No significant income.
Tuesday:
Economic data: Empire Manufacturing, October (0.5 expected, 11.5 earlier)
Income: Bank of America (BAC), Charles Schwab (SCHW), Citi (C), Goldman Sachs (GS), JB 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%); Import price index month-on-month, September (-0.3% expected, -0.3% earlier); Export price index month-on-month, September (-0.3% expected, -0.7% earlier)
Income: Abbott (ABT), Alcoa (AA), ASML (ASML), Citizens (CIA), Discover Financial Services (DFS), Morgan Stanley (MS)
Thursday
Economic data: First unemployment claims, week ending October 12 (previously 258,000); Retail sales month-on-month, September (0.2% expected, 0.1% prior); Retail sales excluding cars and gasoline, September (0.3% expected, 0.2% earlier); Philadelphia Fed Business Outlook, October (2.9 expected, 1.7 prior); Industrial production, month-on-month, September (0% expected, 0.8% earlier); NAHB housing market index, October (42 expected, 41 previously); Leading Index, March (-0.1% expected, +0.1% prior); Existing home sales, month-on-month, March (-5.1% expected, 9.5% earlier)
Income: Netflix (NFLX), Blackstone (BX), Travelers (TRV), First National Bank (FBAK), Western Alliance (WAL), WD-40 (WDFC)
Friday
Economic data: Housing starts month-on-month, September (-0.9% expected, 9.6% earlier); Construction permits month-on-month, September (-0.3% expected, 4.9% earlier)
Income: Ally Financial (ALLY), American Express (AXP), Comerica (CMA), Procter & Gamble (PG)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for an in-depth analysis of the latest stock market news and events affecting stock prices
Read the latest financial and business news from Yahoo Finance
