There was hope that, once the Federal Reserve started to cut interest rates on Sept. 18, some sort of huge rally might emerge.
It didn’t exactly happen. Interest rates have been up a little. Stocks have climbed a bit higher, especially the Nasdaq Composite and Nasdaq-100 indexes.
Microsoft (MSFT) , Amazon.com (AMZN) and even Apple (AAPL) moved lower in the last week.
Related: PCE Inflation report resets bets on another big Fed rate cut
But chip giant Nvidia (NVDA) surged 4%. Tesla (TSLA) jumped 9.3%. It’s even up nearly 22% for the month and up 4.8% for the year. Finally. Bitcoin has risen 9.4% since the Fed decision and is up 54.5% for the year.
Still, it feels like a lull is in place. Partly, the lull is due to the anticipation of some important reports coming this week. Then, there is the increasingly bitter, exhausing election to contend with and whether it may or may not be settled 38 days from now.
But all that will fight against the short-term and long-term history.
The math of the Fed cuts alone says lower rates should lead to higher asset prices. It does not matter if it’s a house, a car, shares of stocks or bonds.
Plus: The last quarter of any year is usually strong, especially November and December.
At the same time, China has decided to start stimulating its struggling economy with lower interest rates and other measures. The Shanghai Composite Index was up 12.8% this past week alone.
That’s the big picture. Here how the week shapes up, going backwards.
Related: Fed delivers on big rate cut, signals focus on cooling job market
The big events
The jobs report. The week’s key event of the week is the jobs report, due Friday from the Labor Department. The consensus estimate is for the unemployment rate to hold at 4.2%, with non-farm payrolls rising by 144,000. As always, watch the revisions. Each report comes with a revised estimate of the prior report, and these increasingly have trimmed the job gains.
Powell and friends speak. Fed Chairman Jerome Powell will be one of many Fed officials speaking about the economy and its risks. Powell will speak at the annual National Association of Business Economics on Monday. Every day through Thursday, Fed governors or members of the Fed’s rate-making body, the Federal Open Market Committee, will speak. Fed officials can spook markets. In late May, stocks tanked when Minneapolis Fed President Neel Kashkari suggested interest rates might have to be raised to get inflation under control.
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A potential port strike. Ports from Houston to Maine are facing a possible dock strike starting at midnight on Oct. 1 that could cripple imports arriving, including cars and car parts, perishable vegetables and fruits — even the inflation-resistant banana. A week-long strike might not affect the economy. A prolonged strike would be trouble, creating shortages of goods and unleashing new inflation pressures. It could force the Biden Administration to invoke the Taft-Hartley Act and order workers back to work. If there is a strike, the dock workers will join 33,000 workers already striking at at aerospace giant Boeing (BA) .
Related: Ford CEO says he’s sick and tired of making ‘boring’ cars
Also coming this week: An important report on how purchasing managers see the economy on Monday; a report on construction spending on Tuesday and the weekly jobless claims report on Thursday.
Nike, Carnival Cruise Line, Conagra lead the earnings reports
Monday is the last day of September. The first of the reports on the third quarter results won’t come out for two more weeks.
But important earnings reports are coming from:
Carnival Cruise Line (CCL) , due Monday. The company is expected to report $1.16 a share in earnings with a big jump in revenue. The cruise line business is having a huge year. Carnival shares are up nearly 20% since the end of February. Norwegian Cruise Holdings (NCLH) stock is up 13%. Royal Caribbean (RCL) , shares have jumped 41%.
Nike (NKE) . Due after Tuesday’s close. Expect the company to try to get rid of all the bad news before Elliott Hill becomes CEO, returning to the company he left in 2000. Nike made a bad bet it could build its brands digitally while ignoring its important network of wholesalers and networkers. The shares had slumped 50% since their November 2021 peak. They were off as much as 33% this year by mid-July before the company and outgoing CEO John Donahoe decided to part ways. The shares are up 23% since that July bottom.
Also reporting this week: ConAgra Brands (CAG) and Levi Strauss (LEVI) .
A Carnival Cruise Line ship docked in port.
Image source: Shutterstock
What happens from now until the new year
The presidential and congressional elections are expected to be close, and there are fears an outcome won’t be known for weeks if Donald Trump looks like he loses again, this time to Kamala Harris That’s boosted uncertainty among investors. About the only vehicle rising strongly in recent weeks is Bitcoin.
It’s not clear much will move markets until the outcome is clear. But markets usually rally post-election. The S&P 500 was up 5.3% in the last two months of 2016 after Trump beat Hillary Clinton. The rally was 14.8% after Joe Biden defeated Trump in 2020. In 2004, when George W. Bush beat John Kerry, rally was 7.2%.
This year, however, has one really big wildcard. Israel has been waging a brutal fight against Hamas in Gaza and now Hezbollah in Lebanon. (Israeli forces killed Hezbollah leader Hasan Nasrallah on Friday.) There’s a great possibility that conflict could draw Iran and others into the fighting.
A smaller wildcard is what will happen in the war between Ukraine and Russia.
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