Market Volatility Ahead: Election and Interest Rate Decision Loom
This week, investors are bracing for a potentially turbulent ride as the election and a Federal Reserve interest-rate decision take center stage. The Dow Jones Industrial Average, S&P 500, and Nasdaq all ended last week in the red, with losses of 0.2%, 1.4%, and 1.5%, respectively. Despite this, the year-to-date performance remains strong, with the Dow up 12%, the S&P 500 up 20%, and the Nasdaq up 22%.
Earnings Season in Full Swing
The earnings calendar is packed this week, with a slew of big-name companies set to report. On Monday, Palantir Technologies, Marriott International, and American International Group will take the spotlight. Tuesday will see Apollo Global Management, Yum! Brands, DuPont, Cummins, and Archer-Daniels Midland report, followed by Qualcomm, McKesson, Novo Nordisk, Toyota Motor, and Take-Two Interactive on Wednesday. Thursday will bring reports from Motorola, Arista Networks, Airbnb, Becton, Dickinson, and Duke Energy, and Paramount Global will wrap up the week on Friday.
Earnings Trends So Far
With 349 S&P 500 companies having reported so far, earnings are coming in 8.4% higher than in the prior-year quarter. The Communication Services and Technology sectors are leading the charge, with gains of 24% and 19%, respectively. Meanwhile, the Energy sector is lagging behind, down 27%. For the full year, Argus forecasts earnings growth of 7%-9%.
Fed Interest Rate Decision Takes Center Stage
The Federal Reserve’s interest-rate decision on Thursday is the main event on the economic calendar this week. With odds of a 25-basis-point rate cut essentially at 100%, according to the CME FedWatch tool, all eyes will be on Chairman Powell’s statement at the press conference following the rate announcement.
Other Key Economic Indicators
In addition to the Fed’s decision, investors will be keeping a close eye on several other key economic indicators this week. Factory Orders will be updated on Monday, followed by the U.S. Trade Deficit and ISM Services on Tuesday. Consumer Sentiment will round out the week on Friday.
Argus Chief Economist’s Call of the Week
Chris Graja, Argus Chief Economist, is highlighting the Institute for Supply Management’s Services Index for October as his Call of the Week. As Graja notes, “This is an early and important indicator of 4Q economic activity. Consumer spending on services represents more than 45% of GDP.” With the Services Index printing at a healthy 54.9 in September, Graja expects a small uptick to 55 in October, just above the consensus of 53. This suggests the economy is healthy and will continue to grow.
Services Sector Growth
The services category has been a key driver of growth, expanding 2.6% in 3Q and contributing 1.21 points of the 2.8% increase in 3Q GDP, according to the U.S. Bureau of Economic Analysis. Last week’s October jobs report delivered a mixed bag of information, with Nonfarm Payrolls posting at 12,000 for October compared to a strong (but revised lower) 223,000 for September.
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