Wall Street faces one of the most difficult weeks of the year over the next five days, with investors tackling a host of corporate earnings, three major global central bank rate decisions and a key statement on near-term funding from the U.S. Treasury.
The heavy calendar of headline risk is likely to be highlighted by the Federal Reserve's November policy meeting, which wraps-up on Wednesday with a statement on rates at 2:00 pm eastern time and a question-and-answer session with the media and Chairman Jerome Powell thirty minutes later.
Few are expecting any change to the Fed's benchmark lending rate, which is currently pegged between 5.25% and 5.5%, but with markets now pricing-in more than 1.5% of interest rate cuts over the whole of 2024, focus is expected to fall firmly on Powell's near-term outlook for inflation and the odds of a final move higher into the start of the coming year.
The Bank of Japan is also expected to tweak the levels at which is keeps the government bond market in check, allowing for higher yields, while the Bank of England is likely to hold its key lending rate steady at 5.25% later this week in London.
The Treasury's quarterly refunding statement is also expected Wednesday, with bond markets laser-focused on the amount of marketable securities the government is likely to issue over the coming months as it continues to fund a record budget deficit now pegged at around $2 trillion.
Markets are looking for a headline refunding total of around $114 billion, up from the $103 billion announced in late August, in a move that would take the size of benchmark 10-years auctions to around $41 billion, with long-bond sales rising to $25 billion.
"The Treasury disclosing its financing needs today and the quarterly refunding announcement on Wednesday might get most of the attention as the supply and demand of US Treasuries remains unbalanced," Saxo Bank strategists wrote Monday. "Overall, we expect the Fed and the BOE to deliver a hawkish pause, but the risk is that the BOJ revises upward its inflation forecasts for this fiscal year, while tweaking yield curve control allowing JGB yields higher."
"The move could cause distress in bond markets as Japanese investors would have even less reasons to hold foreign securities," Saxo Bank noted.
A big week for corporate earnings is also on tap, with 164 S&P 500 companies expected to post third quarter updates over the next five days amid a solid, but by no mean spectacular, reporting season.
With around half of the S&P 500 reporting so far, overall earnings are forecast to rise 4.3% from last year to a share-weighted $478.2 billion, according to LSEG data, before rising another 8.5% over the fourth quarter.
Apple (AAPL) -) is set to report its September quarter earnings after the close of trading Thursday, with McDonalds' (MCD) -), Eli Lilly (LLY) -), CVS Health CVS, Starbucks SBUX, Pfizer (PFE) -) and Advanced Micro Devices (AMD) -) among the blue-chip names expected this week.
On the data front, a series of job market updates this week will also keep bond markets, as well as those around the world, on high alert with the September Job Openings and Labor Turnover report on Tuesday, ADP's National Employment report on Wednesday, weekly jobless claims data on Thursday and the crucial October non-farm payroll report slated for 8:30 am eastern time on Friday.
Labor market data continues to hold sway with investors as many see it as the key driver of near-term inflation pressures, with employers facing bigger wage bills to tempt workers from the sidelines and major industrial and commercial groups settling strike disputes with higher salaries and benefits.
Economists expect Friday's employment report to show the economy added 188,000 new jobs last month, down from the blowout tally of 336,000 recorded over the month of September, with average hourly earnings rising 4% from last year.
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