Three rate cuts in a row? Investors hope it’s true
Will Federal Reserve Chair Jerome Powell deliver a third consecutive interest rate cut? Investors sure hope so.
The US economy has remained resilient despite weakness in the manufacturing sector, with consumer spending making up for softness elsewhere. Even so, investors expect the Fed to once again issue an “insurance” cut that protects against negative fallout from the trade war and global economic slowdown.
The markets put the probability of a quarter point cut at more than 90%, according to CME Group’s FedWatch tool.
The view: “The deceleration in domestic demand, weaker wage pressures and declining inflation expectations suggests that economic weakness is spreading and that more action may be needed in the coming months,” ING economists said in a note to clients on Friday. They expect the Fed to follow up additional rate cuts in December and January.
That schedule, however, is dependent on the data — and some important indicators will be delivered later in the week.
An advance estimate of third quarter GDP for the United States is expected to come in at 1.7%, according to a Reuters survey of economists. And the jobs report for October, which will post on Friday, is projected to show jobs growth substantially below the 136,000 jobs added in September. (Though the General Motors strike is expected to have a big impact.)
Such releases could make the case for the Fed to keep cutting.
Another busy week for corporate earnings
It’s peak earnings season, and a slew of big names report results this week. Stealing the show will be some of the world’s biggest tech companies — including Google parent Alphabet, Facebook, Apple and Alibaba.
But significant attention will also land on General Motors, which reports third quarter earnings on Tuesday.
From my CNN Business colleague Chris Isidore: “GM’s announcement could give investors a glance at how costly the five-week strike by the United Auto Workers union has been for the automaker. Estimates are that the strike, which started September 16, cost the automaker $1.75 billion, although most of those costs may be in the fourth quarter.”
Rank-and-file union members voted last week to accept a labor deal reached October 16, ending the strike.
The scene: The S&P 500 is expected to suffer a decline in earnings of 3.7% for the third quarter, according to the latest analysis from FactSet analyst John Butters. If this projection is met, it will be the first time the index has reported three consecutive quarters of year-over-year earnings declines since the second quarter of 2016.
The streaming wars kick into high gear
The long-hyped streaming wars have finally arrived.
Apple will launch its highly anticipated Apple TV+ on Friday. The company has said that the service will be available in more than 100 countries at launch.
Apple TV+ will cost just $4.99 per month, undercutting competitors on cost. The question from investors: Will the price tag and a glossy programming slate be enough to compete with better-established rivals such as Netflix and Disney? As iPhone sales stutter, the answer needs to be “yes.”
On the radar: Not to be overshadowed, WarnerMedia boss John Stankey just revealed in an interview with Reuters that HBO Max will be available to AT&T customers in the United States who also subscribe to HBO at no extra charge. (WarnerMedia is CNN’s parent company.)
With Disney+ set to launch in the United States in the middle of November, the race to get customers in the door is underway. Don’t expect it to slow any time soon.
Monday: AT&T, Spotify, Walgreens, Alphabet and Beyond Meat earnings
Tuesday: US consumer confidence; BP, ConocoPhillips, GM, GrubHub, Kellogg, Merck, Pfizer, Xerox and Mattel earnings; Boeing CEO testifies before Congress
Wednesday: US interest rate decision; France and US Q3 GDP; Deutsche Bank, Molson Coors, Yum! Brands, Apple, Facebook, Lyft and Starbucks earnings; Boeing CEO testifies before Congress
Thursday: Europe Q3 GDP; US personal income and spending; Blue Apron, Dunkin, Estee Lauder, Fiat Chrysler, Kraft Heinz, Royal Dutch Shell, Sanofi and Pinterest earnings
Friday: US jobs report and ISM Manufacturing Index; Chinese and German manufacturing data; Alibaba, Chevron, Colgate-Palmolive, ExxonMobil, Newell Brands and US Steel earnings