Week In Review
All eyes and ears were on the Fed this week as their most recent meeting culminated in yet another 0.75% interest rate increase. That increase was widely expected by analysts and the markets, but it was the subsequent statements that made headlines this week. Initially, the statement that went along with the rate increase had some dovish language, hinting at a rate hike slowdown. Then about half an hour later, Jerome Powell grabbed the mic.
Powell yet again threw cold water on the stock market's intra-day rally. With statements like "we still have some ground to cover" and "it is very premature to be thinking about pausing" you could conclude that the Fed could be more aggressive that Wall Street anticipated toward the end of this rate hike cycle. The CME FedWatch Tool currently has the odds of another 0.75% rate increase next month at about 50%.
We ended the week with the October jobs report on Friday. Unemployment ticked up to 3.7%, slightly higher than the last reading of 3.5%. The economy still added 261,000 jobs in October, which was more than expected, but that number marks the slowest monthly increase in jobs in almost two years. It's just one data point but it would suggest that the labor market, which has been in the Fed's crosshairs, may be slowing.
On deck next week is the inflation report for October due out Thursday at 7:30 AM Central.
The S&P 500 fell 3.4% this week. The chart below is the performance of the S&P on Wednesday, November 2, the day we got the latest rate hike and Fed press conference. The market initially ripped higher at 2 PM Eastern when the Fed statement was released. See if you can identify the time Powell started talking...
Roughly two-thirds of S&P 500 companies have reported earnings for the third quarter now. Of those 325 companies, roughly two-thirds have beaten earnings expectations. Granted, expectations have been lowered to reflect the widely expected slowdown in economic activity. The S&P 500 is up more than 5% since Pepsi kicked off earnings season on October 12.