The financial world is poised for a pivotal week, with three significant events on the horizon that could have far-reaching implications for investors. The FOMC meeting and the release of the October jobs report will take centre stage as we near the end of a turbulent month for the financial markets.
All eyes are on the FOMC meeting, and while it is widely expected that the central bank will maintain its current interest rate policy, the real focus is on the words of Fed Chair Jerome Powell during the subsequent press conference. Powell's commentary will hold the key to investor sentiment, and the market will react strongly to any signs of a hawkish stance. Given the current turmoil in the markets, a hawkish turn from Powell could further erode investor confidence and heighten concerns about an impending recession.
Stocks have been wrestling with a demanding market environment and are on track to end their third consecutive month with losses. The upward march of Treasury yields to multiyear highs has rattled investors, pushing both the S&P 500 and Nasdaq Composite into correction territory, a stark reminder of the fragility of the current market. The disappointing earnings reports from a few major tech giants exacerbated the situation, intensifying the bearish sentiment.
While the market is on edge, it is essential to remember that the Fed's stance is unlikely to offer much solace. The release of third-quarter GDP data last week demonstrated that the U.S. economy continues to expand vigorously, with an annualised growth rate of 4.9%. These surpassed earlier expectations of a 4.7% increase, indicating that the economy remains robust. The strong economic data might suggest that the Fed is less inclined to intervene to support the markets, especially if they opt for a hawkish tone.
Another crucial data release impacting markets this week is the October jobs report. Anticipated to be unveiled on Friday, this report is expected to reveal that the U.S. economy added 175,000 jobs in the previous month, following consensus estimates. However, the preceding month witnessed an extraordinary jobs report, with a staggering 336,000 jobs added. If October data shows slowing job growth, it could ease the Fed's hawkish stance, relieving the markets.
In addition to these critical economic events, the tech giant Apple is scheduled to release its earnings report on Thursday. Investors are understandably anxious about the fate of the largest S&P 500 stock by market capitalisation, especially given its remarkable run this year with gains of around 30%. The fate of such a prominent company could have a cascading effect on the broader market, and it is another factor urging investors to exercise caution.
Fullerton Markets Research Team
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