What you need to know this week

The Federal Reserve’s forthcoming monetary policy meeting will be in focus this week and may form the basis for a long-awaited announcement of a reduction in asset purchases. Meanwhile, traders will also await more data on the U.S. economic recovery with the Labor Department’s monthly job report later this week.

The Federal Open Market Committees (FOMC) meeting in November will take place from Tuesday to Wednesday, with the political statement and press conference from the meeting serving as the central bank’s penultimate opportunity this year to announce formal plans to begin rolling back its crisis-era quantitative easing program . For the past year and a half, the central bank has bought $ 120 billion a month in mortgage-backed securities and government bonds as an important tool to support the economy during the pandemic.

In late September, the FOMC’s latest monetary policy statement and press conference from Federal Reserve Chairman Jerome Powell suggested that the central bank be fit to announce the start of the downsizing before the end of the year and continue the downsizing process until “around the middle of next year.”

“The forthcoming FOMC meeting will be important for three reasons: 1) the announcement of downsizing; 2) guidance on what downsizing means for the upturn; and 3) nuanced changes in views on inflation risks given the latest data,” the Bank of America’s economist Michelle Meyer in a note.

“The statement announcing the new pace of asset purchases will be followed by a note on flexibility stating that asset purchases are not at a predetermined rate and will depend on the outlook for the labor market and inflation, as well as an assessment of the effectiveness of Asset purchases, “she predicted.

She noted that Powell can also use the press conference to reiterate that the end of the downsizing does not necessarily indicate the start of rate hikes and that both policy actions are different. In previous public remarks, Powell has already made a similar point in previous public remarks, saying, “the timing and pace of the upcoming reduction in asset purchases will not be intended to carry a direct signal of the time of interest rate hikes.”

Given that the market has been anticipating the start of the downturn for several months now, speculation about when the Fed will make a change in interest rates has become a point of particular interest to investors. Investors and economists have been considering whether the Fed might need to act faster than previously telegraphed to adjust interest rates to ward off inflation, which has proven to be more protracted than some had suggested.

WASHINGTON, DC - SEPTEMBER 24: Federal Reserve Chairman Jerome Powell testifies at a hearing in the Senate Banking Committee on Capitol Hill on September 24, 2020 in Washington, DC.  Powell and US Treasury Secretary Steve Mnuchin testify about the CARES Act and the economic effects of the coronavirus pandemic.  (Photo by Drew Angerer / Getty Images)

WASHINGTON, DC – SEPTEMBER 24: Federal Reserve Chairman Jerome Powell testifies at a hearing in the Senate Banking Committee on Capitol Hill on September 24, 2020 in Washington, DC. Powell and US Treasury Secretary Steve Mnuchin testify about the CARES Act and the economic effects of the coronavirus pandemic. (Photo by Drew Angerer / Getty Images)

In September, primary personal spending – the Fed’s preferred target for underlying inflation – rose 3.6% year-on-year for the fourth month in a row, hitting the fastest cut since 1991. And earlier this month, Powell acknowledged in public remarks , that supply chain constraints and shortages, which spurred the recent rise in prices, “are likely to last longer than previously expected, likely well into next year.”

While the central bank will not publish an updated summary of economic projections with their political statement on Wednesday, the latest projections from the September meeting suggested that the committee be divided on interest rate hikes for 2022, with nine members seeing no rate hikes by the end of next year , while the other nine members saw at least one increase.

“I think the Fed has pretty well decided to start the downsizing pretty quickly. We expect them to announce it next week and then it will start soon after, so it’s pretty well carved in stone,” Kathy Jones, Charles Schwabs Chief Executive Officer, told Yahoo Finance Live last week. “I think the big debate now is how fast the Fed is moving in the direction of actually raising interest rates. The expectation in the market has really shifted to expecting as many as two interest rate hikes in 2022 and 2023 … that is a rather aggressive pace of tightening. ”

job report in October

One of this week’s most monitored financial data will be the job report from October, which is to be published on Friday by the Ministry of Labor.

Economists appear to be seeing an increase in the pace of employment until October after a disappointing pressure in September, when only 194,000 non-agricultural payslips returned to the expected half-million. Over the last two months, wage increases have averaged only 280,000. The unemployment rate is also expected to take another small step towards pre-pandemic levels in October, where unemployment is expected to fall to 4.7% from 4.8% the month before.

Yet the labor market has still fallen short of pre-pandemic conditions on a number of fronts. The unemployment rate has not yet returned to its lowest level in 50 years at 3.5% from February 2020. And by September, the civilian workforce had still fallen by around 3.1 million people from pre-virus levels.

One factor that weighed on the labor market in August and September was the Delta variant, which may have deterred some workers from seeking personal work due to the risk of infection. And a persistent element that draws on the labor market recovery has been a mismatch between supply and demand, with employers struggling to fill an almost record number of job openings, while voluntary redundancies rose to a historically high level.

“Next week’s wage report for October will shed light on whether supply eased due to declining constraints, or whether the labor market continues to face headwinds for now,” Rubeela Farooqi, chief economist at High Frequency Economics, wrote in a note last week.

However, some data from the past few weeks have reflected positively on labor market conditions in October. Weekly new unemployment applications broke below 300,000 for the first time since the start of the pandemic in the survey week for the October Job Report, or the week that includes the 12th of the month. And in the Conference Board’s October consumer confidence index, only 10.6% of consumers said jobs were “hard to get”, down from 13.0% in September. That brought the Conference Boards’ closely monitored difference in the labor market, or the percentage of consumers who say jobs are “hard to get” deducted from the percentage who say jobs “are plentiful”, to 45 or the highest level since 2000.

Financial calendar

  • Monday: Markit US Manufacturing PMI, final October (59.3 expected, 59.2 in September); Construction costs, month-over-month, September (0.4% expected, 0.0% in August); ISM Manufacturing Index, October (60.5 expected, 61.1 in September)

  • Tuesday: No notable reports scheduled for release

  • Wednesday: MBA loan applications, week ending October 29 (0.3% in previous week); ADP Employment Change, Oct. (400,000 expected, 568,000 in September); ISM Services Index, October (62.0 expected, 61.9 in September); Factory orders, September (-0.1% expected, 1.2% in August); Orders for durable goods, final in September (-0.4% in previous print; Orders on durable goods excluding transport, final in September (0.4% in previous print); Orders for non-defense capital goods excluding aircraft, final in September (0.8% in previous press); Markit US Services PMI, final October (58.2 expected, 58.2 in previous press); Markit US Composite PMI, October final (57.3 in previous press); Federal Open Market Committee’s monetary policy decision

  • Thursday: Challenger job cuts, year-on-year, October (-84.9% in September); Initial applications for unemployment, week ended October 30 (275,000 expected, 281,000 during the previous week); Continued claims, week ended October 23 (2.147 million expected, 2.243 million in the previous week); Non-agricultural productivity, preliminary 3rd quarter (-3.2% expected, 2.1% in 2nd quarter); Unit labor costs, preliminary 3rd quarter (6.9% expected, 1.3% in 2nd quarter); Trade balance, September (USD -80.1 billion expected, USD -73.3 billion in August)

  • Friday: Change in non-agricultural wages, October (450,000 expected, 194,000 in September); Unemployment rate, October (expected 4.7%, 4.8% in September); Average hourly wage, month-over-month, October (expected 4.7%, 4.8% in September); Average hourly wage, year-on-year, October (expected 4.9%, 4.6% in September); Labor force participation, October (61.8% expected, 61.6% in September); Consumer Credit, September ($ 16.2 trillion expected, $ 14.379 billion in August)

Earnings calendar

  • Monday: Clorox (CLX), Avis Budget Group (CAR), ZoomInfo Technologies (ZI), Chegg Inc. (CHGG), Diamondback Energy (FANG), The Simon Property Group (SPG) after market closure

  • Tuesday: Under Armor (UAA), Estee Lauder (EL), Ralph Lauren (RL), Apollo Global Management (APO), Corsair Gaming (CRSR), Bloomin ‘Brands (BLMN), ConocoPhillips (COP), Pfizer (PFE), Groupon ( GPN), Marathon Petroleum (MPC) before the market opens; Mondelez (MDLZ), T-Mobile (TMUS), Akamai (AKAM), Activision Blizzard (ATVI), Lyft (LYFT), Match Group (MTCH), Devon Energy (DVN), Chesapeake Energy (CHK), Coursera (COUR) , Zillow Group (ZG), Amgen (AMGN) after market closure

  • Wednesday: Humana (HUM), Discovery Inc. (DISCA), The New York Times (NYT), Norwegian Cruise Line Holdings (NCLH), Marriott International (MAR), CVS Health Corp. (CVS), Sinclair Broadcast Group (SBGI) before the market opens; Booking Holdings (BKNG), Qorvo (QRVO), The Allstate Corp. (ALL), MGM Resorts International (MGM), Take-Two Interactive Software (TTWO), Electronic Arts (EA), Vimeo (VMEO), Etsy (ETSY), GoDaddy (GDDY), Marathon Oil Corp. (MRO), Roku (ROKU), Qualcomm (QCOM) after market closure

  • Thursday: Cigna (CI), Wayfair (W), ViacomCBS (VIAC), Nikola (NKLA), Duke Energy (DUK), Citrix Systems (CTXS), Regeneron Pharmaceuticals (REGN), Hanesbrands (HBI), Moderna (MRNA), Planet Fitness (PLNT), Vulcan Material (VMC), Kellogg (K), Square (SQ), Cloudflare (NET), Occidental Petroleum (OXY), Uber Technologies (UBER), American International Group (AIG), Shake Shack (SHAK), iHeartMedia (IHRT), Novavax (NVAX), IAC Interactive Corp. (IAC), Peloton (PTON), Dropbox (DBX), DataDog (DDOG), Pinterest (PINS), Skyworks Solutions (SWKS), Expedia (EXPE), Rocket Cos. (RKT), Live Nation Entertainment (LYV), Airbnb (ABNB)

  • Friday: Wynn Resorts (WYNN), Dish Networks (DISH), Dominion Energy (D), DraftKings (DKNG), Goodyear Tire and Rubber (GT), Cinemark Holdings (CNK) before the market opens

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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