Week Ahead on Wall Street: Vibe Check

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The Risks Are A-Changing

Fears about an impending recession were extinguished last week when the monthly jobs report came in blazing hot. The U.S. economy added 254,000 jobs in September, exceeding consensus estimates by more than 100,000 jobs.

This has left investors searching for direction. Is the Federal Reserve going to continue lowering interest rates? Are consumers flush with cash and powering a roaring economy? These questions will take time to answer, but data coming out this week will help point in the right direction.

First, minutes from the last FOMC meeting will help offer a glimpse into the minds of Federal Reserve officials. While the minutes aren’t precise transcripts of everything said (those are released with a five year lag), the general views of committee members at the time of the meeting are shared.

By examining the tenor of discussions that took place, investors can gauge the central bank’s assessment of the economy, inflation, and the labor market. If they seemed particularly worried about upside risk (i.e. the economy is stronger than thought and doesn’t need as much support from rate cuts), investors could significantly lower their rate cut expectations. Conversely, if central bankers were more focused on recession risk, investors might expect the Fed to look through last week’s strong data.

In addition to the meeting minutes, the University of Michigan will release the preliminary readings for October consumer sentiment. Though the initial reading will get revised at the end of the month, the snapshot will show how consumers feel about personal finances and the broader economy. With unemployment moving lower, an improvement in consumer sentiment could confirm the idea that the economy is running on all cylinders and not at a significant risk of a downturn. That would lower the Fed’s urgency to lower interest rates, which could push mortgage rates higher again. Potential homebuyers wouldn’t like that, but that’s the push-and-pull when it comes to interest rates and economic strength. 

Last but not least, earnings season kicks off this week with several big banks and blue chip companies set to report results. Due to the variety of industries represented, the tone for the rest of earnings season usually gets set during this first week. That can make or break market momentum through year-end, making this a consequential time for investors.

Economic and Earnings Calendar

Monday

• August Consumer Credit: Borrowing activity gives insight into broader economic activity. 
• September Treasury Statement: This summarizes the U.S. federal government budget by tracking government revenues and expenditures.
• Fedspeak: Fed Governor Michelle Bowman will speak at an event hosted by the Independent Bankers Association of Texas. Minneapolis Fed President Neel Kashkari will take part in a moderated Q&A hosted by the Bank Holding Company Association. Atlanta Fed President Raphael Bostic will moderate a conversation with Atlanta Hawks CEO Steven Koonin. St. Louis Fed President Alberto Musalem will give a speech on the economy and monetary policy, followed by a moderated discussion and Q&A.

Tuesday

• September NFIB Small Business Optimism: This measures how small business owners feel about current and future economic conditions. 
• August Trade Balance: Trade, made up of exports and imports, is an important driver of economic activity.
• Fedspeak: Fed Governor Adriana Kugler will give the keynote speech at the European Central Bank Conference on Monetary Policy. Atlanta Fed President Raphael Bostic will give a speech on the economic outlook. Boston Fed President Susan Collins will speak at the annual Regional & Community Bankers conference. Vice Chair Philip Jefferson will participate in a moderated conversation discussing the discount window (a lending facility provided by the Fed to help banks manage liquidity needs).
• Earnings: PepsiCo (PEP)

Wednesday

• August Wholesale Inventories and Sales: Wholesalers often operate as an intermediary between manufacturers and retailers, serving as a key part of the goods supply chain. 
• FOMC Meeting Minutes: The Federal Reserve releases detailed notes of every FOMC meeting three weeks after their conclusion. Investors often look for more information on Fed officials’ views for hints on the outlook for interest rates and the economy.
• Weekly Mortgage Applications: Mortgage activity gives insight on demand conditions in the housing market.
• Fedspeak: Atlanta Fed President Raphael Bostic will give welcoming remarks at a Greater Atlanta Home Builders association meeting. Dallas Fed President Lorie Logan will speak at the Greater Houston Partnership Future of Global Energy Conference. Chicago Fed President Austan Goolsbee will give opening remarks at the Chicago Payments Symposium. Vice Chair Philip Jefferson will participate in a moderated conversation discussing the discount window. Boston Fed President Susan Collins will speak at the 39th Annual Meeting of the Worcester Regional Research Bureau. San Francisco Fed President Mary Daly will participate in a moderated conversation at Boise State University, followed by Q&A.

Thursday

• September Consumer Price Index: The CPI is one of the most popular indicators for tracking consumer price trends and is a marquee release for market watchers. CPI has come down notably from its peak in 2022 and is near pre-pandemic levels.
• Weekly Jobless Claims: This high frequency labor market data gives insight into filings for unemployment benefits. Jobless claims have continued to show a labor market that remains strong despite having cooled.
• Fedspeak: Fed Governor Lisa Cook will give a speech on entrepreneurship and innovation. Richmond Fed President Tom Barkin will participate in a fireside chat on the economic outlook for 2025 and beyond. New York Fed President John Williams will deliver keynote remarks at Binghamton University.
• Earnings: Delta Air Lines (DAL), DOmino’s Pizza (DPZ)

Friday

• September Producer Price Index: The PPI tracks price trends that producers face and is down significantly from its peak earlier in the cycle. 
• October University of Michigan Consumer Sentiment: How consumers feel about economic conditions affect their spending habits. This survey places a particular focus on inflation and its trajectory.
• Fedspeak: Chicago Fed President Austan Goolsbee will give opening remarks at the Community Bankers Symposium. Dallas Fed President Lorie Logan will participate in a panel discussion at the Federal Home Loan Bank of Dallas’ Women in Financial Services Conference. Fed Governor Michelle Bowman will discuss community banking at the Community Bankers Symposium.
• Earnings: Bank of New York Mellon (BK), BlackRock (BLK), Fastenal (FAST), JPMorgan Chase (JPM), Wells Fargo (WFC)

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