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Jobs report, Fed meeting, earnings — What to know in the week ahead

Heidi Chung

It is gearing up to be a busy week stacked with market-moving events potential including the October jobs report, Q3 GDP estimate, the Federal Open Market Committee (FOMC) meeting and a deluge of earnings announcements.

Earnings bonanza

Looking at the earnings calendar, about 145 S&P 500 companies’ are releasing quarterly results this week. Mega-cap companies announcing include Alphabet, Advanced Micro Devices, General Electric, Facebook, Starbucks, Apple, Lyft, Chevron and Exxon Mobil.

Google-parent Alphabet’s report Monday and Facebook and Apple’s reports on Wednesday will be focal points for investors. With ongoing trade uncertainty and regulatory scrutiny, market participants will be looking to see how the tech giants fared in the challenging environment.

“Following persistent downgrades (-10% over 12 months for the S&P 500), Q3 earnings are beating at a slightly above average historical rate. Muted reactions to misses but strong reactions to beats suggests the slowdown was well priced in,” Deutsche Bank wrote in a note Thursday. “In the US, companies that missed have been punished less severely than is typical (-0.8pp vs -1.6pp), while companies that beat have outperformed robustly (+1.7pps +0.5pp historically).”

FOMC meeting

In addition, the Federal Open Market Committee (FOMC) will be kicking off its two-day policy meeting on Tuesday. The central bank is widely expected to slash short-term interest rates by 25 basis points to a target range between 1.50% to 1.75%. If expectations come to fruition, it would be the FOMC’s third consecutive rate cut this year.

“With the markets still fully pricing in another 25bp rate cut at next week’s FOMC meeting and officials doing nothing to push back against those expectations, there is little point trying to deny that reality,” Capital Economics wrote in a note Friday. “Although we had previously suspected that the Fed would opt to leave rates unchanged next week, we now anticipate two more 25bp rate cuts this year – one next week and one in December.”

The macroeconomic research firm also estimated that incoming economic data will show increased deterioration and the positive noise coming from the U.S. and China on trade negotiations will not change much for the Fed.

“While progress towards an agreement reduces the risks of future tariffs being introduced, it has not yet reversed any of the tariffs already in place, the latest wave of which have yet to fully feed through to economic activity and inflation,” the firm said. “Fed officials are also concerned about the impact of trade uncertainty on business investment, which remains elevated.”

Federal Reserve Chairman Jerome Powell attends a panel at the Federal Reserve Board Building, Friday, Oct. 4, 2019, in Washington. (AP Photo/Jacquelyn Martin)

Fed Chairman Jerome Powell’s language following the decision will be crucial for markets. “While we believe post-October is an appropriate time to take a breather, Chair Powell should avoid signaling a pause lest financial conditions tighten materially,” Morgan Stanley wrote in a note to clients Wednesday. “The statement and the press conference should maintain the ready-to-act-as-necessary message.”

Jobs report

Key economic data on U.S. labor market and the manufacturing sector are set to be released on Friday.

After a 40-day strike, General Motors and the United Auto Workers union struck a deal Friday, but the prolonged fight is expected to have negatively impacted both the October employment report as well as the ISM manufacturing data.

“We assume the BLS perfectly captures the number of striking workers, 49k,” UBS said in a note Thursday. “In addition to this number, we suspect that a small number of GM’s suppliers also had temporary layoffs, adding another 5k to the strike effect. Excluding the effects of strikes, private employment would have risen a bit more than 100k, a pace just ever-so-slightly weaker with the pace of employment growth over the past three months.”

Economists polled by Bloomberg estimate that the U.S. economy added 93,000 nonfarm payrolls during October, down from the 136,000 jobs added in September. The unemployment rate is expected to have ticked higher to 3.6% from 3.5% last month. It is estimated that 55,000 manufacturing jobs were lost during the month.

Manufacturing data will be closely watched after the ISM manufacturing index fell to the lowest level since June 2009 in September. Though recent regional manufacturing surveys since have shown a bit of improvement, economists broadly believe that October’s data will reveal that the manufacturing sector remains in contractionary territory.

“We expect ISM manufacturing to rebound after a sharp decline in September, but the headline index is likely to remain in contractionary territory,” Credit Suisse said in a note Thursday. “Trade uncertainty and weak global growth have been a drag on business sentiment and we expect these headwinds to persist through the end of the year. However, ISM appeared to overshoot to the downside last month, reaching a 10-year low which was out of line with other regional and national manufacturing surveys.”

Earnings calendar

Monday: Spotify (SPOT), AT&T (T), Restaurant Brands (QSR) before market open; Alphabet (GOOGL), Beyond Meat (BYND), NXP Semiconductor (NXPI), T-Mobile (TMUS) after market close

Tuesday: Baidu (BIDU), Merck (MRK), Pfizer (PFE), ConocoPhillips (COP), General Motors (GM), Shopify (SHOP), Incyte (INCY), Grubhub (GRUB), Kellogg (K) before market open; Mattel (MAT), Mondelez (MDLZ), Amgen (AMGN), Electronic Arts (EA), FireEye (FEYE), Advanced Micro Devices (AMD) after market close

Wednesday: Molson Coors (TAP), Yum Brands (YUM), General Electric (GE), Royal Caribbean (RCL) before market open; MGM Resorts (MGM), Facebook (FB), Twilio (TWLO), Western Digital (WDC), Etsy (ETSY), Starbucks (SBUX), Apple (AAPL), Lyft (LYFT), Vertex Pharma (VRTX) after market close

Thursday: Sprint (S), Estee Lauder (EL), Bristol-Myers Squibb (BMY), Wayfair (W), Clorox (CLX), Kraft Heinz (KHC), Allergan (AGN), Altria (MO) before market open; Pinterest (PINS) after market close

Friday: AbbVie (ABBV), Chevron (CVX), Colgate-Palmolive (CL), Exxon Mobil (XOM), Alibaba (BABA) before market open

Economic calendar

Monday: Chicago Fed National Activity Index, September (0.10 in August); Wholesale Inventories month-on-month, September preliminary (0.2% prior); Dallas Fed Manufacturing Activity, October (0.0 expected, 1.5 in September)

Tuesday: Pending Home Sales month-on-month, September (1.0% expected, 1.6% in August); Conference Board Consumer Confidence, October (127.9 expected, 125.1 in September)

Wednesday: MBA Mortgage Applications, week ended October 25 (-11.9% prior); ADP Employment Change, October (132,000 expected, 135,000 in September); Q3 GDP (1.6% expected, 2.0% in Q2); Personal Consumption, Q3 (2.6% expected, 4.6% in Q2); GDP Price Index, Q3 (1.8% expected, 2.4% in Q2); Core PCE, Q3 (1.9% in Q2)

Thursday: Employment Cost Index, Q3 (0.7% expected, 0.6% in Q2); Personal Income, September (0.3% expected, 0.4% in August); Personal Spending, September (0.3% expected, 0.1% in August); Initial Jobless Claims, week ended October 26 (212,000 prior); Continuing Claims, week ended October 19 (1.682 million prior); MNI Chicago PMI, October (49.0 expected, 47.1 in September); Bloomberg Consumer Comfort, week ended October 27 (63.4 prior)

Friday: Change in Nonfarm Payrolls, October (93,000 expected, 136,000 in September); Change in Manufacturing Payrolls, October (-55,000 expected, -2,000 in September); Unemployment Rate, October (3.6% expected, 3.5% in September); Markit US Manufacturing PMI, October final (51.5 prior); ISM Manufacturing, October (49.0 expected, 47.8 in September); ISM Prices Paid, October (49.7 in September); Construction Spending month-on-month, September (0.2% expected, 0.1% in August); Wards Total Vehicle Sales, October (17 million expected, 17.19 million in September)

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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