Stocks are expected to emerge from October with a tailwind, but will immediately face a Federal Reserve meeting in the early days of November that could help decide the course of trade for the rest of the year. The Fed is widely expected to raise its target federal funds rate by three-quarters of a point on Wednesday, but it’s what central bankers signal about December and beyond that will matter most. Some economists expect that by the mid-December meeting, the central bank will be ready to cut the size of its rate hike to half a percentage point, or 50 basis points. There is also plenty of economic data in the week ahead, the most important being Friday’s September jobs report. Additionally, the coming week is also the busiest of the corporate earnings season, with around a third of S&P 500 companies reporting results. “The key is Nov. 2 and what the Fed has to say,” said Quincy Krosby, chief global strategist at LPL Financial. She said policymakers like San Francisco Fed President Mary Daly have suggested the central bank may slow the pace of rate hikes at some point, and many market participants now expect this happening in December. “The market is looking for either outright commentary or clues, either in the release or in the press conference. … That’s going to be important,” Krosby said. “Historically, the market waits for the latest Fed rate hike to be introduced and then the market climbs higher. The question is, with the context we have…is the market waiting for that latest rate hike or using the transition to a less hawkish policy to start investing?” As investors grew more confident the Fed could slow, stocks rallied and bond yields fell. Yields fall when bond prices rise, and the closely watched 10-year yield was at 4.01% on Friday afternoon from its recent high of 4.32% the previous Friday. Patrick Palfrey, senior U.S. equity strategist at Credit Suisse, said the Fed may not signal on Wednesday that it will reverse its aggressive policy, regardless of current investor expectations. “The question for the Fed is how to balance the gradual slowdown we’ve seen in inflation against a still-booming economy,” he said. “Ultimately, to get inflation under control, the Fed will have to stay engaged.” Keith Lerner, chief market strategist at Truist, said the rate hike decision could have a big impact on how the market trades during a generally positive period for stocks. “You think the main market driver this year. It’s aggressive central bank tightening,” he said. It’s the Season For equities, historically, the home stretch to the end of the year in a midterm election year has been a time of rising tide. So far, the Dow Jones Industrial Average is up 14.4% for October, on track to end the month Monday with its best monthly gain since 1976. The S&P 500 is up more than 8.8% for the month . The Dow gained 5.7% on the week, the S&P 500 gained 5.7% and the Nasdaq Composite rose 2.2%. But even if the final months of 2022 are positive for stocks, Lerner expects gains to be limited. On Friday, it went from neutral to less attractive for equities. He said there could be more upside for stocks, but he expects the S&P 500 to peak at around 4,100 to 4,150 over the next three to six months, suggesting a gain of around 5% to 6.5% from the current level. “There’s going to be a ton of fundamental and technical resistance there,” he said. He said there is also the possibility of a recession on the horizon. But for now, “You’ve got the seasons. You’ve still got underweight investors, and now you’re getting some momentum as we try to break above the 50-day moving average again,” he said. he declares. The 50-day moving average is 3,841 for the S&P 500, and it was well above this Friday afternoon for the second time last week. The S&P closed at 3,901 on Friday. so supportive,” Lerner said. Palfrey said earnings so far this quarter have been better than expected, despite high-profile failures and weak forecasts from big tech names like Amazon, Meta Platforms and Alphabet. “I think at the end of the day we still believe [investors should] stay focused on assets that benefit from inflation,” he said. “Whether it’s hard dollar assets or commodities or sectors that benefit from inflation. These sectors have done better recently than technology and communications services. The earnings season revealed a bifurcation that For example, energy was the best performer in October, up almost 24%, followed by industrials, up around 14%. Technology gained about 9%, while communications services, which includes Meta and Alphabet, rose less than 1%. “Globally, [with] earnings backdrop this season, we are much better than most investors feared,” Palfrey said. “And conversations about the fact that we’re headed into a recession imminently have largely disappeared from my daily conversations with clients. LPL strategist Krosby said the upcoming midterm elections could be a factor at play in the market. “Based on the sectors that are doing well, it looks like the market is smelling a Republican victory,” she said. Congressional, or simply traffic jams, include Energy, Healthcare, Industrials, and Defense. Week Ahead Schedule Monday Logistics XPO, PriceSmart, Marriott Vacations, American Water Works, Vornado Realty, Loews e, Denny’s , Devon Energy, Edison International, Extra Space Storage, Mondelez, Caesars Entertainment, Simon Property Group, Fox Corp., Toyota, BP, Sony, Gartner, Marathon Petroleum, Yum China, Owens-Illinois, Genworth, Assurant, Chesapeake Energy, Liberty Global, Cheesecake Factory, Healthpeak Properties, Prudential Financial, McKesson, Match Group Federal Reserve begins two-day meeting: 00 am JOLTS Wednesday Gains: Qualcomm, Booking Holdings, CVS Health, Paramount Global, Etsy, eBay, Roku, Robinhood, NuSkin, Hostess Brands, Yum Brands, Humana, Glaxo SmithKline, Generac, Zimmer Biomet, Cedar Fair, Entergy, Estee Lauder, Tupperware, Apollo Global Management, The New York Times, Scotts Miracle-Gro, Steve Madden, Brinker International l, ODP, Emerson Electric, Cognizant Technology, CH Robinson, MGM Resorts, CF Industries, Marathon Oil, Allstate, Transocean, MetLife, Sunco r Energy, APA 8:15 a.m. ADP Employment 10:00 a.m. Vacant Housing 2:00 p.m. the Fed 2:30 p.m. Briefing by Fed Chairman Jerome Powell Thursday Earnings: Amgen, PayPal, ConocoPhillips, Starbucks, DoorDash, Block, Marriott, Peloton, Amerisource Bergen, Shake Shack, Crocs, Datadog, Moderna, Teva, Zoetis, Barrick Gold, CyberArk Software, Bausch Health, Spirit AeroSystems, Kellogg, Intercontinental Exchange, Dropbox, Expedia, Allscripts Healthcare, Carvana, Viavi Solutions, Schrödinger, Murphy Petroleum, Tempur Sealy, AmerisourceBergen, Restaurant Brands, Regeneron Pharmaceutical, Cigna, Virtu Financial, Air Products, Ball Corp., Iron Mountain, Dun and Bradstreet, Hyatt Hotels, Cummins, Papa John’s, GoDaddy, Lions Gate Entertainment, WW International, Twilio, GoPro, Illumina, Yelp, Rocket Companies, EOG 8:30 Initial jobless claims 8:30 a.m. International Trade 8:30 a.m. Productivity and Costs 9:45 a.m. PMI Services 10:00 a.m. ISM Services 10:00 a.m. Factory Orders Friday Gains: Hershey, CBO E Global Markets, FuboTV, Liberty Broadband, DraftKings, Duke Energy, Fluor, AMC Networks, Cardinal Health 8:30 a.m. Saturday job Earnings: Berkshire Hathaway
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