What is known this week

What is known this week

The markets will face another big rise in the coming week as policy makers continue their fight against stubborn inflation.

Investors will be heavily focused on the Federal Reserve’s two-day meeting on September 20-21, with officials expected to raise their benchmark policy rate by a third straight 75 basis points after a discussion on Wednesday at 2:00 pm ET.

Wall Street will also take its cue from Fed Chairman Jerome Powell’s post-event speech, as well as the economic projections of US central bank members and the latest dot plot showing each official’s forecast for the central bank’s key short-term interest rate.

US Federal Reserve Chairman Jerome Powell takes questions during a news conference in Washington, DC, on May 4, 2022. (Photo by JIM WATSON/AFP via Getty Images)

US Federal Reserve Chairman Jerome Powell takes questions during a news conference in Washington, DC, on May 4, 2022. (Photo by JIM WATSON/AFP via Getty Images)

“In the updated projections, we look for revisions towards less growth, higher unemployment, and a higher final rate – yet, we expect the path of inflation to remain largely unchanged,” wrote analysts at Bank of America directed by Michael Gapen i. Friday note. “To our eyes, this would suggest that the risks of a hard landing are rising, although we expect the median member to predict a soft landing.”

A readout of Federal Reserve expectations could determine whether markets get relief from a recent selloff or a steep decline is in store. On Friday, all three majors logged their worst week since June. The benchmark S&P 500 lost 4.7% in the week ending September 16, the Dow Jones Industrial average fell 4.1%, and the technology-heavy Nasdaq Composite fell 5.5%.

Warmer-than-expected inflation data earlier this month fueled a new wave of pessimism about the US central bank’s rate hike campaign and its potential to significantly halt economic growth.

The Consumer Price Index (CPI) in August showed an 8.3% increase over last year and a 0.1% increase over the previous month, the Bureau of Labor Statistics reported on Tuesday. Economists had expected prices to rise 8.1% on last year and fall 0.1% on last month, according to Bloomberg estimates.

Wall Street heavyweights including Bank of America, Goldman Sachs, and Nomura all raised their interest rate forecasts immediately after the reading raising expectations for a hard landing – a sharp downturn after a period rapid growth.

Goldman Sachs warned on Thursday that the stock market could plunge another 26% if the Fed’s campaign hiking rates triggered a recession.

“If only a severe recession – and a tougher response to deliver it – will tame inflation, then the downside to both equities and government bonds could still be significant, even after the damage we’ve seen already,” Goldman said.

Elsewhere in the week ahead, a list of housing data is on the docket, with gauges on building permits, housing starts, and existing home sales to watch closely. The releases come as mortgage rates rose 6% last week, the highest level since November 2008, adding to already growing concerns about affordability.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 9, 2022. REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 9, 2022. REUTERS/Brendan McDermid

On the earnings calendar, results are due from headliners including FedEx (FDX), Lennar (LEN), General Mills (GIS), Costco (COST), and Darden Restaurants (DRI).

FedEx shares fell 21% on Friday – wiping $11 billion in market value for the shipping giant in its worst one-day drop ever after the company warned of a global recession in a dismal earnings announcement. FedEx also withdrew its guidance for the full year, citing macroeconomic trends that have “deteriorated significantly.”

The logistics giant’s messages could be a sign of things to come as investors edge closer to the next earnings season, with many strategists sounding the alarm on earnings expectations for the rest of this year.

According to data from FactSet Research, earnings growth expectations for the S&P 500 stand at 3.7% for the third quarter, down sharply from 9.8% growth expectations at the end of June. Analysts have cut Q3 earnings expectations over the past 2-3 months for every sector in the S&P 500 except energy, and seven of the 11 sectors in the index are now expected to show overall year-over-year declines in earnings, compared to sectors alone. three in the second quarter.

In a note on Friday, Bank of America’s Michael Hartnett said an earnings per share shock could be the catalyst for new market lows, citing the FedEx message.

Economic Calendar

Monday: NAHB Housing Market IndexSeptember (47 expected, 49 during previous month)

Tuesday: Building permitsAugust (1.605 million expected, 1.674 million during the previous month, revised to 1.685 million); Building permitsmonth-on-month, August (-4.8% expected, -1.3% during the previous month, revised to -0.6%); Getting Started with HousingAugust (1.450 million expected, 1.446 during the previous month); Getting Started with Housingmonth on month, August (0.3% expected, -9.6% during the previous month)

Wednesday: MBA Mortgage Applicationsthe week ending August 12 (0.2% during the previous week); Current Home SalesAugust (4.70 million expected, 4.81 million during the previous month); Current Home Salesmonth-on-month, August (-2.3% expected, -5.9% during the previous month); FOMC Rate Decision (Lower Tongue), 21 September (3.00% expected, 2.25% during the previous month); FOMC Rate Decision (Upper Limit), 21 September (3.25% expected, 2.50% during the previous month); Interest on Reserve Balances due22 September (3.15% expected, 2.40% during the previous month)

Thursday: Current Account BalanceQ2 (- $260.8 billion expected, -$291.4 billion in previous quarter); Initial claims without a jobthe week ending September 17 (217,000 expected, 213,000 during the previous week); Ongoing claimsthe week ending September 10 (1.398 expected, 1.403 during the previous week); Leadership IndexAugust (-0.1% expected, -0.14% during the previous month); Kansas City Nutrition. Manufacturing ActivitySeptember (5 expected, 3 during previous month)

Friday: S&P Global US Manufacturing PMIPre September (51.3 expected, 51.5 during previous month); S&P Global Services US PMIPre-September (45.5 expected, 43.7 during previous month); S&P Global US Manufacturing PMISeptember Forecast (46.0 expected, 44.6 during previous month)

Earnings Calendar

Monday: AutoZone (AZO)

Tuesday: Repair Stitch (SFIX)

Wednesday: FedEx (FDX), Lennar (LEN), General Mills (GIS), KB Town (KBH), Trip.com (TCOM)

Thursday: Costco (COST), Darden Restaurants (DRI), Set of Facts (FDS)

Friday: Carnival (CCL)

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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