Wall Street will try to maintain momentum next week after a strong start to November
Stocks will try to maintain their upward momentum next week after a strong start to November , with Treasury yields falling from their highs and investors betting the Federal Reserve may well be done raising interest rates. Investors kicked off the month with sizable gains. All three major averages are higher in November, and the Dow Jones Industrial Average on Friday capped its best week since October 2022. The S & P 500 and Nasdaq Composite registered their best week since November 2022. Those gains came after the Fed kept rates unchanged for a second straight meeting, and as bond yields tumbled. The 10-year Treasury yield dropped to about 4.57% after topping the 5% level at various times last month. Yields and prices move in opposite directions. One basis point equals 0.01%. Wall Street will try to keep the rally going in a week that’s set to be relatively light on economic data and earnings results, as the company reporting season winds down and seasonal tailwinds pick up entering the holiday season. “We have a paved road ahead of us without any potential speed bumps from economic reports that could interrupt our advance,” said Sam Stovall, chief investment strategist at CFRA. Historically speaking, November is the best-performing month for the S & P 500, according to the Stock Traders’ Almanac, and many are hoping for a broader-based advance in equities following three straight months of declines. “I just feel as if this very minor correction has run its course,” Stovall said. “And hopefully, we will now get back to break even, and then some, from this overall decline.” Earnings and economic data Of course, investors will absorb some notable data next week. September consumer credit numbers are set for release Tuesday, and are expected to show an uptick in individual debt as shoppers get ready for the holiday season. Economists surveyed by FactSet are expecting consumer installment credit in September to have jumped by $7.5 billion, reversing a $15.6 billion decline in August. Investors will also review the November preliminary reading for the Michigan Sentiment survey for any signs of weakness in consumer confidence. The report, set for release next Friday, is expected to rise a hair, to 64.0, from 63.8 the prior month, according to FactSet. Earnings season will wind down with the bulk of corporate updates behind investors. Of the roughly 400 S & P 500 companies that have reported, more than 80% have beaten expectations, according to FactSet. Indeed, earnings in the broader index are set to have grown by 3.7% in the third quarter, according to a FactSet estimate that accounts for both reports that have come in and expectations for those that haven’t. “I think we are emerging from this earnings recession,” Stovall said. “Even though we are not anticipating an economic recession, this in a sense adds to the likelihood that we will end up with simply a soft landing.” Investors will take note of Disney’s earnings to see if the media and entertainment company is working through its problems, after the stock price dropped more than half from its 2021 highs. Homebuilder D.R. Horton may give insight into how much slowing may have come in the housing market thanks to higher mortgage rates. Treasury auctions, Fed speakers on docket One notable event is the Treasury Department’s plans to auction $112 billion in debt next week, as it secures financing for government obligations, including ballooning costs to service the debt. The Treasury is seeking to refund $102.2 billion of notes set to mature Nov. 15 and raise more than $9 billion in additional funds. “Bond yields are the primary concern for investors and what drives bond yields are supply and demand,” Stovall said. “The hope is that there will be enough demand to satisfy the supply without driving the yield higher once again. So I think the Treasury auctions will be very important in order to maintain investor optimism.” Investors will also pay attention to Fed Chair Jerome Powell after this week’s policy meeting. The Fed leader is set to speak twice next week and is likely to reiterate statements made in a press conference after the November policy meeting that he will remain vigilant on inflation, and the central bank will continue to rely on immediate price data. On Thursday, he’s set to speak before the International Monetary Fund. “The thing that I would really be looking for and listening to any Fed officials just really for confirmation that they are beginning to shift their language to one that’s going to be much more of a balanced approach to monetary policy, as opposed to the laser-like focus that they’ve had on fighting inflation for the past year,” said Dave Sekera, chief U.S. market strategist for Morningstar Research Services. Other Fed speakers on the docket include Fed Governor Cook on Monday from Duke University, and New York Federal Reserve President and CEO John Williams in Washington, D.C. on Wednesday. Sekera said he’s seeking more confirmation that a slowing economy will give the central bank room to start cutting rates in the first half of next year. Until then, the strategist said investors should take the time next week to position their portfolios for what’s up ahead, and said now is an especially good time to lock in higher rates in the bond market before any policy easing. “After the deluge of earnings you’ve had the past couple of weeks, I think next week will be a good time for investors to take a breath of air and kind of catch up with anything else that they’ve missed over the past couple of weeks,” Sekera said. Week ahead calendar All times ET. Monday, Nov. 6, 2023 11 a.m. Fed Governor Cook speaks about Financial Stability at Duke University, Durham, N.C. Tuesday, Nov. 7, 2023 8:30 a.m. Trade Balance (September) 12 p.m. New York Federal Reserve President and CEO John Williams moderates a discussion in an event “A Conversation with Erika H. James” organized by Economic Club of New York, Harvard Club 3 p.m. Consumer Credit (September) Earnings: Occidental Petroleum , eBay , D.R. Horton , Air Products & Chemicals Wednesday, Nov. 8, 2023 10 a.m. Wholesale Inventories final (September) 1:40 p.m. New York Federal Reserve President and CEO John Williams delivers keynote remarks in an event “Research and Statistics at 100: A Look at the Past, Present, and Future”, Washington, DC Earnings: Walt Disney Company , MGM Resorts International, Ralph Lauren , Warner Bros. Discovery Thursday, Nov. 9, 2023 8:30 a.m. Continuing Jobless Claims (10/28) 8:30 a.m. Initial Claims (11/04) Earnings: Wynn Resorts Friday, Nov. 10, 2023 10 a.m. Michigan Sentiment preliminary (November) 2 p.m. Treasury Budget (October)
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