U.S. stocks lagged Monday in a downbeat start to a busy week marked by Fed policy, earnings, and jobs data.
Equity markets are still poised to round out the month higher after a brutal September slump. The Dow Jones Industrial Average was up 14.4% month-to-date as of Friday’s close – making October its 10th best month on record since 1915, according to data from Bespoke Investment Group. If the Dow closes just 2 basis points higher on Monday, this October will beat January 1976 as the best month since the 1930s.
The Federal Reserve’s next policy announcement Wednesday and October’s monthly employment report set for release Friday will determine whether the tailwind will continue pushing stocks forward through the rest of 2022.
U.S. central bank officials are poised to raise the Fed’s benchmark policy rate by another 0.75%, but some strategists believe it could be the last outsized hike before officials scale back on tightening plans.
Pantheon Economics Chief Economist Ian Shepherdson said with still-high core CPI and payroll gains averaging 372,000 across the third quarter, investor expectations that policymakers will keep raising rates into next year are justified.
“But we see enough straws in the wind now to think that the economy is at a real inflexion point, while investors are putting too much emphasis on data, which right now appear to suggest that growth is holding up well,” he said.
“We doubt Chair Powell’s tone will change significantly this week, but he won’t be able to hold back the tide if the numbers turn,” Shepherdson added.
Elsewhere on Monday, President Joe Biden is scheduled to deliver a speech at 4:30 p.m. ET addressing “reports over recent days of major oil companies making record-setting profits even as they refuse to help lower prices at the pump for the American people,” the White House said in a statement.
The Labor Department’s jobs report is expected to show monthly payrolls fell below 200,000, a big drop-off from an average of 400,000 across much of the pandemic recovery but still near the pre-pandemic monthly average. Economists expect 190,000 jobs were added or created last month, according to consensus estimates from Bloomberg.
And on the earnings front, companies are still rolling out third-quarter results. Of companies in the S&P 500 index that have reported so far, the net profit margin for the index is 12%, which is below the previous quarter’s net profit margin and below the year-ago net profit margin, but higher than the five-year average net profit margin of 11.3%.
Bank of America analysts said in a note that earnings overall so far have continued to “defy recessionary calls,” with many corporate metrics still above expectations.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
Read More: Stocks slip with Fed, earnings, jobs data on deck