Stocks are flattish on no real news. Bonds and MBS are up small.
The week ahead will be dominated by the FOMC meeting on Tuesday and Wednesday. Just after the meeting, we will get inflation data with the personal incomes and outlays report. Other than that we will get new home sales and home prices. We will get earnings from Invitation Homes, Meritage, D.R. Horton, Rocket, and PennyMac. Finally, we will have rate decisions from the ECB and the BOJ which will impact rates.
Market bellwethers such as Google, Amazon and Microsoft will also report this week.
As we head into Fed week, the markets are overwhelmingly predicting no change in interest rates. The Fed Funds futures see only a 9% chance of a rate hike this week. Given the proximity to the midterms, the easy choice is to do nothing.
Consumer sentiment was flattish in October, according to the University of Michigan Consumer Sentiment Survey. Expected business conditions improved while buying conditions for durable goods fell. Inflation expectations for the year ahead rose to 4.7% from 4.6% while long-term expectations bumped up from 3.4% to 3.5%.
Overall consumer sentiment is about 10% lower than it was a year ago and 15% below where it was in February before the war in the Persian Gulf began.
Business activity is at a 5 year high, according to the S&P Flash PMI. “October’s flash PMI data indicate that the US economy continues to boom at the start of the fourth quarter. The output readings from the survey are consistent with GDP growing at a 5% annualized rate after a 4% expansion was signalled for the third quarter. Especially healthy corporate earnings and profits are also indicated, and hiring has surged as companies seek to boost capacity to fulfil stronger customer demand.
If the reopening of the economy after COVID is excluded, recent months have seen the best growth spell for US businesses since early 2015. However, cost pressures remain a key concern, notably as the renewed surge in oil prices reverberates through to impact a wide variety of goods and services. Supply chain bottlenecks have meanwhile intensified, and order book backlogs are growing, making it easier for companies to pass higher costs on to customers. The result is the sharpest increase in selling prices for over four years to a pace that indicates consumer price inflation is likely to rise further above the Fed’s target in the coming months.”
