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Top 5 Things to Watch in Markets in the Week Ahead

Published 10/30/2022, 07:41 AM
Updated 10/30/2022, 08:34 AM
© Reuters

© Reuters

By Noreen Burke

Investing.com -- The Federal Reserve and the Bank of England are all but certain to deliver jumbo 75-basis-point rate hikes on Wednesday and Thursday, respectively, as the battle against sky-high inflation continues. But with investors now on the lookout for signs that aggressive monetary tightening could start to slow, Friday’s U.S. jobs report for October and Monday’s Eurozone inflation report will be in the spotlight. And with earnings season at the halfway mark the week ahead will show whether U.S. equities can continue to take disappointing corporate results in stride. Here’s what you need to know to start your week.

  1. Fed rate hike

The Fed is widely expected to raise interest rates by an outsize 75 basis points for a fourth straight time at the conclusion of its two-day policy meeting on Wednesday.

Investors instead will be looking to Fed Chairman Jerome Powell for any hints that the future pace of hikes could slow after recent softer economic data.

Financial markets are currently pricing in a smaller 50-basis-point rate hike at the Fed’s December meeting and another 50 basis points over the first two meetings of next year.

But betting on a less hawkish Fed has been a risky strategy so far this year. Stocks have repeatedly rebounded from lows amid hopes for a so-called Fed pivot, only to be pressured lower again by persistently high inflation and aggressive monetary tightening.

  1. U.S. jobs data

The tone of Wednesday’s Fed press conference and Friday's October U.S. nonfarm payrolls report will be key in helping investors set expectations ahead of the central bank’s December meeting.

Analysts are expecting the Labor Department to report that the U.S. economy added 200,000 jobs last month, compared with 263,000 in September, while annual growth in average hourly earnings is also expected to moderate.

Data on Friday showed that U.S. labor costs increased solidly in the third quarter, but private sector wage growth slowed considerably, indicating that inflation had either peaked or was close to doing so.

  1. BoE rate hike

The BoE looks set to raise interest rates by 75 basis points on Thursday - its eighth straight rate increase in a row as it battles inflation currently running above 10% - even as the U.K. heads for a recession that could be exacerbated by spending cuts under new Prime Minister Rishi Sunak.

Expectations for a full percentage-point rate hike were trimmed back last week after new Chancellor of the Exchequer Jeremy Hunt reversed almost all former Prime Minister Liz Truss's planned tax cuts and shortened her energy cap program to six months from two years.

But the delay of the first budget plan of the new government until Nov. 17 will make it harder for the BoE to spell out its economic forecasts.

After delays caused by recent financial market turmoil, the BoE is also due to start selling bonds from its stimulus stockpile on Tuesday.

  1. Eurozone data

The Eurozone is to release its flash inflation estimate for October on Monday which is expected to come in at a record high of 10.2%.

Last Thursday the European Central Bank delivered its second 75-basis-point rate hike in a row and subsequent remarks by policymakers indicated that it would continue tightening in the coming months in order to prevent inflation from becoming entrenched, despite fears over a looming recession.

The European energy crisis precipitated by Russia’s war in Ukraine has exacerbated the economic effects of already high inflation resulting in a slowdown in consumer spending.

The euro area is also to release preliminary GDP figures for the third quarter on Monday, which are expected to show a small expansion, but most economists expect the bloc's economy to enter contraction territory in the fourth quarter.

  1. Earnings

With earnings season passing the halfway mark the week ahead will be a test of whether equities can continue to weather disappointing earnings news.

263 of the companies in the S&P 500 have already reported and more than 150 S&P 500 companies are due to report quarterly results in the coming week, including Eli Lilly (NYSE:LLY), ConocoPhillips (NYSE:COP) and Qualcomm (NASDAQ:QCOM).

Earnings season has seen high-profile misses from some big tech names including Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Google parent Alphabet (NASDAQ:GOOGL) and Facebook parent Meta Platforms (NASDAQ:META).

Wall Street closed sharply higher on Friday with the S&P and the Nasdaq posting their second straight weekly gain and the Dow notching up its fourth consecutive weekly gain boosted by hopes for a Fed pivot.

--Reuters contributed to this report

Latest comments

I'm going to make my money this week on DIA and QQQ calls. This market will keep rallying into the FED rate hike. What actually happens Wednesday, I'm not sure. Cash out late session tomorrow. Buy back in on whatever happens.
Indexes are green. That is good.
The most important things to watch is the strength of the dollar and the global 10 year yields.
What 'softer economic data' are they talking about??? Solid economic data with GDP up, unemployment rates down big, job creation up big, inflation higher than expected. This is prime for Feds to continue aggressive rate hikes, and even a 100 bps hike to shock inflation into subduing.
even with many losses im still getting profit. thanks to profrsional platform called "common sense in my brain".
100 basis points on Wednesday is necessary to tame persistent high inflation
Wish the FED would think outside the box and not be so text book! This environment is like no other. We dont have a demand problem so there is no need to slow demand. The problem is supply and energy. 2% inflation? How about we acheive 4% first and not *****the economy.
the Biden Administration has done what any competent administration can do whether Democratic or Republicancan against an inflationary cycle. options are limited. under the Biden Administration, the American unemployment rate is at one of the lowest levels in American economic history. it passed an important infrastructure bill. managed to get reforms in medicare and Obamacare. helped unite the west against the Russian attempt to invade and conquer Eastern Europe, and brought respect and leadership back from the dismal diplomatic failures and incompetent thuggery of the Trump Administration.
The Biden administration created inflation with flawed policies. It didn't have to be this way.
it wasn't just the Biden administration that caused it things take time to manifest in the economy. one of the main drivers was the increase of money supply by the fed needed to fund covid policy of both the Trump and Biden administrations of which a fair amount was spent in the wrong place especially the stimulus checks hand out to everyone when there was well known supply chain issues. also the effects on the supply chain of key commodities caused by russian invasion and sactions.
Oil production and oil rig count have doubled since Biden took office. The US is energy independent and oil exports are at record highs. You don't know what you are talking about.
Investors lolz. Who are these people?
generally think the fed need the stay ultra hawkish they need to teach the market they can't be a fall back plan for the markets they also need to show they won't fold to political pressure from the dems, as the main reason for all the qe and easy policy of the last decade has been due to the government's inability to be financially responsible. also although inflation does look to be slowing there very high chance of the markets easing financial conditions too quickly putting future inflation pressures on companies and the consumer at a time many consumers just can't anymore.
because a few politicians have sent letters in the last couple of weeks telling them to think about stopping hikes, a central bank should be independent from the government and not be influenced by them . if governments were more financially responsible over the last 10 years we wouldn't be in position in reality the government spending is the main reason for the qe and low rates we've seen for years. it seems the current idea of government around the world is to keep spending and accruing debt and let future generations deal with the problem years down the line.
your argument doesn't have merit. Elements in both parties in the past, have been guilty of trying to pressure the fed in a particular policy direction.
holds no merit? its just the truth currently its the dems pressing them but neither party should be putting political pressure on the fed as an independent central bank it needs to be left to be independent from both sides. the fed has two mandates maximum employment and stable prices that's what they are trying to achieve its not their job to fund out of control fiscal deflicts by either side. just look at turkey if you want to see what a government controlled central bank looks like.
international money flows into US markets has been exceptional. the dollar has been on a tear to the upside. foreign capital is fleeing china, Russia, and other major international market looking for safer investments in the US. the dollar now is looking to correct in the short term, and a possible consolidation, before heading high. this rally in the dow and the s&p could see a continuation of their rallies into the Thanksgiving day holiday before we see another breakdown in those markets; I still have a 4100 s&p target before that happens. I'm also looking for a vestious contra rally in bonds. oh and Mike ..the good old USA is becoming more relevant not less since the Trump debacle. Mike is a lover of the Putin crowd, so you'll have to forgive him of his fascist. anti- American tendencies.
"Trump debacle"???? You mean, when gas prices were LOW, inflation was NONEXISTENT and everything cost LESS, anf crime was LOW, the United States was not involved in any new WARS and the Southern Border was SECURE? That "debacle"? The DEBACLE is now with fraudulent JoeZo Biden posing as the president.
the international embarrassment the pay to play the kiss ass support of Putin the resistance to sanctions against Russia. the support of far right anti government rascist militias. the attempt by trump and his maga supporters to overthrow the constitution. the giveaway of trillions of dollars in tax cuts to the wealthy, mega corporations, and finding ways to screw the ordinary American taxpayer and lower his taxes to almost 0. all during a major economic expansion. as far as lower gas prices, international crude markets, oil companies and opec determined the price of crude not Trump. the Trump Administration was in constant chaos and corrupt. they had trouble walking and chewing gum at the same time.
I need a big pullback this week! down big on SPY puts and want to cash out and buy shares on the low🤞
Perhaps, you will have to wait a bit longer, until the election date.
everybody expect to stocks go up? Why. I would sell. Already 4 weeks green in these macro conditions!
 I did not say that stocks go up. My reply projects that they drop after the elections.
Love how the author puts a negative spin on everything. Earnings mean a test of the market weathering more bad news lol.
514603
“Fed pivot” dream serves the same purpose as “transitory inflation” tale did half year ago.
The purpose was/is to brainwash populus into believing that “everything goes by plan”.
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