What to hear this week

New government inflation readings and the US midterm elections are the most anticipated events on Wall Street’s radar this week as investors continue to digest The Fed’s latest interest rate decision.

Thursday morning will bring traders closely-watched Consumer Price Index (CPI) for October. Economists surveyed by Bloomberg saw the headline CPI at 7.9% annually for the month, moderation of September year-on-year increase of 8.2%. Core CPI, which strips out the volatile food and energy components of the measure, is expected to come in at 6.5%, little changed from 6.6% last month.

Stocks, meanwhile, can also take their cue from this year midterm election results on Tuesday. All three main indexes closed higher Friday but lower for the week on the heels of October employment data, a rush of subpar earnings reports, and another supersize rate increase from the Federal Reserve that comes with confirmed of more hikes ahead.

In the five days ended Friday, the Dow Jones Industrial Average fell 1.5%, the S&P 500 3.3%, and the Nasdaq Composite 5.7% – the tech-heavy index’s worst weekly performance since January as mega-caps Apple (AAPL), Amazon.com (AMZN), and characters (Google) each lost more than 10% after the third quarter financials disappointed Wall Street.

The US economy added 261,000 jobs in October, another robust hiring figure is seen as confirmation to policymakers that the labor situation can weather a further ramp up in the Fed’s key interest rate to fight historic inflation. Central bank sent the fourth consecutive interest rate increase from 75 base points while hinting at a slower pace of hiking but the final terminal speed is high.

Investors are hoping for a signal from the central bank about the possibility of easing the monetary plan, which it will serve as a tailwind for major indexes after them closed last month high on expectations of the policy pivot. But Powell pushed back against the notion that a shift in the Fed’s path is imminent, with inflation and wages still rising.

“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” he said in prepared remarks following Wednesday’s policy announcement. “The latest inflation data has come back higher than expected.”

Federal Reserve Board Chairman Jerome Powell holds a press conference after Powell announced the Fed will raise interest rates by three-quarters of a percentage point as part of their continued efforts to combat inflation, following a meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 2 2022. REUTERS/Elizabeth Frantz

Federal Reserve Board Chairman Jerome Powell holds a press conference in Washington, U.S., November 2, 2022. REUTERS/Elizabeth Frantz

A wave of Wall Street strategists have raised their expectations for how high the Federal Reserve will raise its key interest rates after Wednesday’s “slow but high” message from Powell – and this week’s October CPI could confirm the revised forecast, while offering investors clues about the size of December’s increase .

Goldman Sachs was the first among the big banks in the days leading up to the November FOMC meeting to warn that rates could rise above 5% by March 2023.

TD Securities raised its terminal rate forecast from a range of 4.75%-5.00% to 5.25%-5.50% and sees a 50 basis point hike in the next meeting on December 13-14. BNP Paribas expects a 75-basis-point increase next month and a terminal fed funds rate of 5.25% in the first quarter of next year.

After Friday’s jobs report, economists at Bank of America revised upward their forecast to a terminal rate of 5.0-5.25% from 4.75-5.0% and expected an increase of 50 basis points for December.

“We think the risk for our revised FOMC rate path continues to lie to the upside and the upcoming prints on CPI inflation and the November employment report will weigh heavily on the near-term path for Fed policy,” strategists led by Michael Gapen said in Friday Notes.

On Tuesday, Wall Street will tune in to see which party controls the legislative branch of government and several governor’s seats in what could be the first midterm elections since 2006 in which the majority party in the House and Senate — Democrats, in this case — lost them. grip on the controls.

The general election brought volatility to the market in the near term but calmed the three months after, Abhishek Gupta and Román Mendoza of MSCI Research wrote in a new note.

“Focusing on the midterms, historically the broader US equity market has, on average, reacted positively to the ability of political parties to retain their positions in both houses of Congress,” they wrote. “A flip in control has led to uncertainty around the ability of the presidential party to pass bills and effective regulations, leading to increased volatility on a relative basis.”

People attend a campaign rally in support of Democratic U.S. senator John Fetterman and Democratic nominee for Pennsylvania governor Josh Shapiro, in Philadelphia, Pennsylvania, U.S., November 5, 2022. REUTERS/Hannah Beier

People attend a campaign rally in support of Democratic U.S. senator John Fetterman and Democratic nominee for Pennsylvania governor Josh Shapiro, in Philadelphia, Pennsylvania, U.S., November 5, 2022. REUTERS/Hannah Beier

On the corporate side, earnings season continues into its final stretch. Of the 85% of S&P 500 companies that have reported actual results for the third quarter so far, 70% have reported earnings per share above estimates, below the 5-year average of 77% and the 10-year average of 73%, per FactSet Research. And those with figures above expectations, the winning average was only 1.9% higher than the forecast, sharply lower than the 5-year average of 8.7% and the 10-year average of 6.5%.

If 1.9% is the final percentage for the quarter, it would be the second-lowest surprise average for companies in the index over the past nine years.

This week’s earnings headliners include Activision Blizzard (ATVI), BioNTech (BNTX), Lyft (LYFT), Walt Disney (sadistic), and Rivian Automotive (Bohuslav).

Economic calendar

Monday: Consumer CreditSeptember ($30,000 billion, $32,241 billion)

Tuesday: NFIB Small Business OptimismOctober (91.3 expected, 92.1 during the previous month)

Wednesday: MBA mortgage applicationweek ended Nov 4 (-0.8% during the previous week); Wholesale Trade Salesmonth-over-month, September (0.4% expected, 0.1% during the previous month); Wholesale Inventoriesmonth-over-month, September Final (0.8% expected, 0.8% during the previous month)

Thursday: Consumer Price Indexmonth-over-month, October (0.6% expected, 0.4% during the previous month); CPI excludes Food and Energy, month-over-month, October (0.5% expected, 0.6% during the previous month); Consumer Price Indexyear-over-year, October (7.9% expected, 8.2% during the previous month); CPI does not include Food and Energyyear-over-year, October (6.5% expected, 6.6% during the previous month); NSA CPI indexOctober (298,572 expected, 296,808 during the previous month); CPI SA Core IndexOctober (300,094 estimated, 298,660 during the previous month); Average Hourly Earningss, year-over-year, October (-3.0% over the previous month); Real Average Weekly Earningsyear-over-year, October (-3.8% over the previous month); Initial Unemployment Claimweek ended Nov. 5 (220,000 estimated, 217,000 during the previous week); Proceed with the Claimweek ended October 29 (1,500 million expected, 1,485 during the previous week); Monthly Budget StatementOctober (-$95.0 billion expected, -$429.7 billion during the previous month)

Friday: University of Michigan Consumer SentimentNovember Preliminary (59.5 expected, 59.9 during the previous month); U. of Mich. Current StatusNovember Preliminary (63.4 expected, 65.6 during the previous month); U. of expected MichNovember Preliminary (54.5 expected, 56.2 during the previous month); U. of Mich. 1 Year InflationNovember Preliminary (5.1% expected, 5.0% during the previous month); U. of Mich. 5-10 years of InflationNovember Preliminary (2.9% expected, 2.9% during the previous month)

Income calendar

Monday: Activision Blizzard (ATVI), BioNTech (BNTX), hotel options (CHH), Groupon (GRPN), Lyft (LYFT), Mosaic (Amos), Plantir Technologies (lTR), Take-Two Interactive Software (two), TripAdvisor (TRAVEL)

Tuesday: confirm (AFRM), Allbirds (GOODBYE), AMC Entertainment (AMC), Constellation Energy (CEG), Coty (COTY), DuPont (DD), GoodRX (GDRX), Lemon (LMD), Lordstown Motors (FIND OUT), Lucid Group (LCD), News Corp. (NWSA), Norwegian Cruise Line (NCLH), Novavax (Vax), West Petroleum (OXY), Planet Fitness (PLNT), Beginning (the UPS), Walt Disney (sadistic), Wynn Resorts (WYNN)

Wednesday: AppLovin (APPLICATIONS), Beyond the Flesh (synd), broken (MBL), Canopy Growth (CGC), Hilton Grand Vacations (HGV), iRobot (RBT), Rivian Automotive (Bohuslav), Roblox (RBLX), SeaWorld Entertainment (sea), Starwood Property Trust (TWD), Signify Health (SGFY), Unity Software (U), Wendy’s (WEN), ZipRecruiter (ZIP)

Thursday: AstraZeneca (AZN), Brookfield Asset Management (BAM), Compass (comp), Dillard’s (DDS), Honest Company (HNST), LegalZoom.com (LZ), Nio (NIO), Poshmark (Posh), Ralph Lauren (RL), Six Flags (Six), Tapestry (TPL), toast (Post), Utz Brands (Butz), Warby Parker (WRBY), UrangWork (OUR)

Friday: spectrum brand (SPB)

Alexandra Semenova is a reporter for Yahoo Finance. Follow him on Twitter @alexandraandnyc

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