This week is poised to be a hectic one for investors, featuring a Federal Reserve meeting, the latest U.S. jobs report, and earnings from tech giant Apple, all of which could shape the course for stocks and bonds in the remaining part of the year. Here are the key highlights to kick off your week.
Federal Reserve Meeting: Investors eagerly await the Federal Reserve’s policy meeting scheduled for Wednesday, where they hope to gain insights into policymakers’ perspectives on the economy and interest rate outlook. While many investors believe the Fed has concluded its tightening cycle, some anticipate the possibility of another rate hike when the central bank convenes again in December. If the Fed signals its intent to maintain current interest rates into the next year, it might reinforce expectations of further increases in Treasury yields, which have recently reached their highest levels in over 15 years and have contributed to a notable decline in the S&P 500. Although the S&P 500 has fallen by more than 10% since its year-high in late July, it is still up nearly 8% for the year.
Nonfarm Payrolls Data: The highlight of this week’s economic data will be Friday’s release of the nonfarm payrolls report for October. Following an impressive addition of 336,000 jobs in September, economists are expecting more modest job growth of 182,000, which would still reflect a strong labor market. The unemployment rate is anticipated to remain at 3.8%, while wage growth is expected to ease to 4% year-on-year, marking a post-pandemic low. This could bolster the Fed’s belief that inflation pressures are subsiding, potentially reducing the need for further interest rate hikes. In the lead-up to Friday’s data, market participants will keep an eye on Tuesday’s third-quarter employment costs data for any signs of moderating wage growth.
Earnings: Apple, the largest company by market value, will take center stage in what promises to be another eventful week of U.S. corporate earnings, with the company’s report scheduled for Thursday. Apple’s shares, alongside other mega-cap U.S. tech and growth companies, have played a significant role in driving equity indexes higher this year. Despite a few disappointments from some Big Tech players during the third-quarter earnings season, the tech-heavy Nasdaq 100 index is down 11% from its peak but remains up nearly 30% for the year. Other companies set to report their earnings this week include McDonald’s on Monday, Caterpillar and Pfizer on Tuesday, Mondelez on Wednesday, and Starbucks and Eli Lilly on Thursday.
Bank of England: The Bank of England will convene for its second-to-last meeting of the year on Thursday. Officials will need to decide whether to resume raising interest rates, having paused in September after 14 consecutive rate hikes. Investors are anticipating the BoE to maintain rates at a 15-year high of 5.25% while keeping the possibility of further hikes open. Policymakers are also expected to emphasize the need to maintain rates at their current levels for an extended period, despite signs that the economy is stagnating. The BoE will update its quarterly forecasts, which previously indicated modest economic growth of just 0.5% for both 2023 and 2024. Governor Andrew Bailey recently described the economic outlook as “very subdued.”
Eurozone Inflation and GDP: Following the European Central Bank’s decision to keep interest rates steady, all eyes will turn to data on inflation and gross domestic product (GDP) ahead of its final meeting of the year. Preliminary data on consumer price inflation is expected to show the headline rate slowing to 3.2% in October, edging closer to the ECB’s 2% target, despite ongoing concerns about high energy costs. GDP data for the third quarter is anticipated to reveal a 0.1% contraction in the Eurozone economy, with an annual growth rate of just 0.2%. In a recent statement, ECB President Christine Lagarde hinted at a steady policy outlook and pushed back against expectations of rate cuts.