Stocks closed another week at record highs as investors began to digest quarterly earnings releases and debate intensified over what the Federal Reserve will do at its November meeting.
For the week, the Nasdaq (^IXIC), the S&P 500 (^GSPC), and the Dow Jones Industrial Average (^DJI) all rose more than 1%, with both the Dow and S&P 500 closing at all-time highs Friday.
In the week ahead, a monthly report on retail sales will lead the economic calendar as investors assess whether or not the economy is reaccelerating following a surprisingly strong September jobs report.
In corporate news, the results from Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS) will round out earnings from big banks, while reports from United Airlines (UAL) and Netflix (NFLX) will also highlight the week.
A building case for no-cut November
In the past week, speculation that the Federal Reserve will not cut interest rates further at its November meeting has been growing. The September jobs report, which included another decline in the unemployment rate and one of the highest monthly payroll addition numbers of the year, helped ease fears that the labor market was rapidly deteriorating.
On Thursday, the latest Consumer Price Index (CPI) report showed core prices increased more than expected. On Friday, the latest Producer Price Index (PPI) told a similar story, with core prices increasing 2.8%, compared to Wall Street’s expectations for a 2.6% increase.
Some have argued that given this data — as well as recent minutes from the Fed’s September meeting revealing “some” officials would’ve supported a smaller interest rate cut — the central bank is likely to hold rates steady in November.
“As long as inflation isn’t getting towards 2% so dramatically and there’s no crisis that unfolds in the labor market, which I don’t foresee, I don’t think there’s anything that gives the Fed reason to cut further this year,” Yardeni Research chief markets strategist Eric Wallerstein told Yahoo Finance.
As of Friday, markets were pricing a roughly 18% chance the Fed doesn’t cut in November, up from a 3% chance seen a week prior, per the CME FedWatch Tool.
Retail reading
Stronger-than-expected economic data has helped drive the “no cut” discussion. Investors will have another update in that department this week with the release of the September retail sales report on Thursday.
Economists expect that retail sales increased 0.2% in September from the prior month. In August, retail sales rose 0.1%, defying the decline economists had projected.
“Retail sales, in particular, could be a significant market mover as variance in the series has increased, and scrutiny over the health of the consumer has intensified,” Jefferies’ economics team led by Thomas Simons wrote in a note to clients on Friday. “We would warn that one should not read too deeply into a miss against consensus (upside or downside) because retail sales measures spending with a very heavy weighting towards goods rather than services, and it is measured in nominal terms. Weakness may just be due to continued disinflation or deflation in goods.”
Netflix takes the big screen
Big banks largely passed Wall Street’s test to open earnings season. Investor focus will remain on financials early in the week with reports from Morgan Stanley, Goldman Sachs, and Bank of America before shifting to Netflix results on Thursday after the bell.
The streaming giant’s stock is up about 50% this year and trading near an all-time high. Wall Street expects Netflix to report earnings per share of $5.16 on revenue of $9.77 billion. This would represent nearly 40% earnings growth compared to the year prior.
But Wall Street is heavily debating whether or not the stock can sustain its massive run. In the near term, Citi analyst Jason Bazinet believes Netflix announcing further price hikes in the US could be a catalyst for the stock.
“We expect Netflix’s stock to trade higher on a US price hike announcement, but we would expect shares to eventually trade lower as investor’s hopes for $25 in 2025 earnings per share are dashed,” Bazinet wrote.
Yields on the rise
The 10-year Treasury (^TNX) is hovering near 4.1% for the first time since late July.
The 10-year has now added roughly 30 basis points over the past week as investors have scaled back their expectations for interest rate cuts amid signs that inflation may be stickier than initially thought while economic growth data holds steady.
For much of the past few years, higher yields have been a headwind for stocks. But Piper Sandler chief investment strategist Michael Kantrowitz told Yahoo Finance on Thursday yields likely have not risen enough to be too much of a headwind just yet.
“I don’t think this backup in interest rates is all that worrisome for equities in aggregate,” Kantrowitz said. “But where it does show up is in leadership.”
Kantrowitz pointed out that areas like Real Estate (XLRE) and the small-cap Russell 2000 Index (^RUT), which had benefited from investors anticipating lower rates, have lagged amid the 10-year yield’s recent rise.
For now, Kantrowitz added, rising rates are determining market leadership more than they are weighing on the S&P 500 index.
“If rates keep going higher, I don’t think it’s a massive issue for equities unless it persists for, I’d say, a few months,” he said.
Monday
Economic data: NY Fed 1-year inflation expectations, September (3% prior)
Earnings: No notable earnings.
Tuesday:
Economic data: Empire Manufacturing, October (0.5 expected, 11.5 prior)
Earnings: Bank of America (BAC), Charles Schwab (SCHW), Citi (C), Goldman Sachs (GS), J.B. Hunt (JBHT), Johnson & Johnson (JNJ), Progressive (PGR), State Street (STT), United Airlines (UAL), UnitedHealth Group (UNH), Walgreens Boots Alliance (WBA)
Wednesday
Economic data: MBA Mortgage Applications, week ending Oct. 11 (-5.1% previously); Import price index month-over-month, September (-0.3% expected, -0.3% prior); Export price index month-over-month, September (-0.3% expected, -0.7% prior)
Earnings: Abbott (ABT), Alcoa (AA), ASML (ASML), Citizens (CIA), Discover Financial Services (DFS), Morgan Stanley (MS)
Thursday
Economic data: Initial jobless claims, week ending Oct. 12 (258,000 previously); Retail sales month-over-month, September (0.2% expected, 0.1% prior); Retail sales excluding auto and gas, September (0.3% expected, 0.2% prior); Philadelphia Fed Business Outlook, October (2.9 expected, 1.7 previously); Industrial production, month-over-month, September (0% expected, 0.8% prior); NAHB housing market index, October (42 expected, 41 prior); Leading Index, March (-0.1% expected, +0.1% previously); Existing home sales, month-over-month, March (-5.1% expected, 9.5% previously)
Earnings: Netflix (NFLX), Blackstone (BX), Travelers (TRV), First National Bank (FBAK), Western Alliance (WAL), WD-40 (WDFC)
Friday
Economic data: Housing starts month-over-month, September (-0.9% expected, 9.6% prior); Building permits month-over-month, September (-0.3% expected, 4.9% prior)
Earnings: Ally Financial (ALLY), American Express (AXP), Comerica (CMA), Procter & Gamble (PG)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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