Stocks wrapped up the week on a high note, with the S&P 500 closing just shy of the 6,900 mark, reflecting a vibrant market outlook as attentiveness to fluctuations in the bond market intensifies. Investors brace for a busy week ahead, highlighted by the imminent Federal Reserve meeting, which will include a press conference from Chair Jerome Powell.
Wednesday is circled on the calendar for many, poised to deliver quarterly results from tech giants Oracle and Adobe, followed by earnings reports from Broadcom and Costco on Thursday. The economic timetable continues from last week’s labor market focus, with delayed JOLTS data for October set to be released on Tuesday, expected to provide insight into hiring, firing, and employee turnover metrics.
The stage is set for the Federal Reserve’s rate-setting committee, reconvening Tuesday to deliberate ahead of Wednesday’s announcement. Attention is keen on Powell’s address, where market participants will seek hints regarding the central bank’s upcoming monetary policy direction. Recent labor market data, particularly figures from ADP and Challenger, Gray & Christmas indicating unexpected job losses and surging layoffs, have led investors to largely anticipate a 25 basis point rate cut, revising the target from 3.75% to 4.00% down to a new range of 3.50% to 3.75%.
Adding to this perspective are the recent Personal Consumption Expenditures (PCE) readings, which revealed a slowdown in inflation for September, further reinforcing anticipations of the Fed’s looming rate cut. However, as with any engaging narrative, there are complexities at play.
Powell’s remarks during the press conference, scheduled for 2:30 p.m. ET on Wednesday, are set to be crucial. Although the 2 p.m. decision may not sway markets significantly if it lacks expansive commentary, the Q&A session could prove pivotal. This meeting will also unveil the year’s last Summary of Economic Projections, commonly referred to as the “dot plot,” illustrating the Fed’s outlook for the economy over the coming year and beyond.
There’s also speculation surrounding the Federal Open Market Committee (FOMC) membership, as this meeting will be the last with the current voting members, marking a rotation of leadership from the Cleveland, Minneapolis, Dallas, and Philadelphia Fed presidents. Attention toward potential changes in Powell’s leadership has reached new heights, with President Trump indicating a nominee could be named early next year, with Kevin Hassett emerging as a frontrunner despite some market trepidation regarding his possible stewardship.
As the week progresses, investors remain vigilant of economic indicators post-shutdown, recognizing the nuances in available data. The consensus appears to paint a picture of optimism tempered by caution: While stocks exhibit resilience as they cling to record levels, the potential for a “Santa Claus rally” toward year’s end may be jeopardized. Bank of America strategist Michael Hartnett warns that while a rate cut may boost sentiment, the associated pressures could result in rising bond yields, thus affecting stock performance.
Even as Friday’s inflation reading solidified expectations for Wednesday’s cut, doubts linger regarding future cuts in 2026 amid a still-elevated inflation backdrop, leading to a cautious sentiment prevailing in the bond market. The 10-year yield ticked higher as Friday wound down, reflecting growing uncertainty among investors.
Meanwhile, the cryptocurrency bitcoin continues to attract attention, diverging from traditional stock movements this year. After years of fluctuating in tandem with tech stocks, bitcoin is poised for its first significant discrepancy in performance direction since 2014, signaling possible shifts in its role as a store of value.
As the market eagerly anticipates the economic data and earnings releases lined up for the week, all eyes are on how these dynamics will unfold amidst the evolving economic landscape.
