What to Watch for This Week
Major Macroeconomic Numbers
On Thursday we will get the first of two major macroeconomic reports due this week that have caught our attention. First up is the Bureau of Economic Analysis delivering the U.S. Q3 GDP report. Following this, on Friday morning investors will get the latest Personal Consumption Expenditures (PCE) & Core PCE reports. Last week, Federal Reserve Chairman Powell said that he expects a period of below-trend growth will be required to sustainably return inflation back to the 2% goal. After these comments, you can bet that investors will be keyed into this new data.
- Gross Domestic Product (GDP) – On deck Thursday morning is the U.S. third-quarter GDP report. GDP of course is a measure to track the total value of the goods and services produced in the country. So far this year we have seen Q1 & Q2 U.S. GDP reports show that the U.S. economy has grown Q/Q 2.2% & 2.1% respectively.
- Forecasts project on average that U.S. GDP in the third quarter will have increased 4.5%, the largest increase almost two years.
- Personal Consumption Expenditures Price Index (PCE) – To close out the week, on Friday morning the new PCE & Core PCE data for the month of September we will be released for investors to digest. PCE and Core PCE are admittedly the Federal Reserve’s favorite measures to gauge inflation. In particular, the Fed pays extra attention to Core PCE as this measure excludes more volatile categories like Food & Energy. The PCE price index data is gathered to track the costs that U.S. consumers are paying for goods and services and to document the change in these costs over time.
- September’s Core PCE number is expected to increase by 0.3% which would be slightly higher than the previous month’s report of 0.1%.
Federal Reserve Watch
Last week we got a healthy dose of messaging from various members of the Federal Reserve about their current stance regarding the trajectory of monetary policy and inflation. Numerous Fed members shared their opinions that while inflation is still too high in their eyes, with Fed Funds rates elevated where they are, the Fed can proceed more cautiously when considering any future hikes. This more cautious signaling from the Fed is in-line with their recent less-hawkish tone.
- At the previous FOMC meeting in September, the committee decided to maintain their current levels for the Fed Funds rate but communicated that they still expected to hike once more before the end of the year. Despite this messaging from the FOMC, investors are skeptical that we will see any additional hikes before the year’s end. Currently, Fed Funds Futures indicate that investors believe that the Fed’s policy rate will remain paused through the end of the year. Additionally, the CME Group projects a greater than 96% probability that at the next FOMC meeting the committee will opt to maintain the current target range between 5.25%-5.50%.
All About the Earnings
This is the most important week of Q3 earnings season as four of the “Magnificent 7” mega-cap technology companies will report their earnings. Given that these seven stocks have been responsible for a large portion of the major indices gains in 2023, delivering on their reports & guidance is a must. Following Tesla’s disappointing report last week, the stock plunged, ending the week down over 17%.
- On Tuesday, the first two of the mega-caps are due to report their earnings. After the bell, both Microsoft Corp. & Alphabet Inc. will deliver their Q3 results. These two companies account for roughly 11% of the total weighting of the S&P500 Index.
- MSFT earnings are expected to come in at $2.65 EPS.
- GOOGL/GOOG earnings are expected to come in at $1.45 EPS.
- Wednesday, Meta Platforms, Inc. is expected to report their latest quarterly earnings. Expectations have set META’s ’23 Q3 earnings estimates substantially higher than last year’s Q3 earnings of $1.64 EPS. Should META follow through, this could be a boon to push the stock higher.
- META earnings are expected to come in at $3.57 EPS.
- Making their most important delivery of the week on Thursday, Amazon.com, Inc. is due to post their third-quarter earnings. AMZN’s report could provide yet another piece of evidence about how resilient consumer spending has been despite the Fed’s best efforts to slow it down in their fight against inflation.
- AMZN earnings are expected to come in at $0.58 EPS.
Thank you for reading this week’s edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week’s important market events.
Thanks,
Blane Markham
Author, Weekly Market Periscope
Hughes Optioneering Team
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