Stocks Down Last Week, Earnings, The Fed, And Jobs All On Tap This Week  Image: Bigstock Stocks closed mostly lower on Friday, and lower for the week. The Dow is now down -9.01% from their recent high close just a few short months ago. The S&P is down -10.2%. And the Nasdaq is down -11.9%. For context, the S&P and Nasdaq are still up for the year with gains of 7.24% and 20.8% respectively. Nonetheless, they have fallen into correction territory.
For reference, a 'pullback' is defined as a decline between -5% and -9.99%. A 'correction' is a decline between -10% and -19.99%. But it's important to know that pullbacks and corrections are common. Every bull market has them. In fact, stocks usually pull back roughly 3-4 times per year, while corrections take place on average of about once a year. Granted, pullbacks and corrections are never fun when they're happening. But if you know these are commonplace moves, you can instead look at them as opportunities to buy rather than places to sell. Friday's main event was the Personal Consumption Expenditures (PCE) index. That's the Fed's preferred inflation gauge. And it showed headline inflation up 0.4% m/m vs. last month's 0.4% and views for 0.3%. On a y/y basis, however, it came in at 3.4%, which was in line with estimates but below last month's 3.5%. The core rate (ex-food and energy) was up 0.3% m/m vs. the consensus for 0.3% and last month's 0.1%. On a y/y basis it came in at 3.7%, in line with the consensus and down from last month's 3.9%. All in all it was a good report. And shows inflation continuing to decline. As such, the Fed is widely expected to keep rates steady when they meet on Wednesday, November 1. Although, they do have another meeting in December. So once we get past Wednesday, the focus will shift to what happens next. While inflation is on the decline, it's still too high. But Fed Chair, Jerome Powell, and several of his colleagues have acknowledged that rising yields, especially on the long bond, have tightened financial conditions significantly in recent months. And that may preclude the Fed from having to tighten further. Whether they raise one more time this year or not, it's clear they are near the end of their rate hike cycle. And they have already estimated that they will likely cut rates by -50 basis points next year, and another -100 bps in 2025. In other news, Friday's Consumer Sentiment report rose to 63.8 vs. last month's 63.0 and views for the same, even though the year-ahead inflation expectations notched up to 4.2% vs. last month's 3.8% as well as the consensus. Earnings season continues to impress, even if nobody seems to care. But eventually they should. And as long as the beats keep coming, that bodes well for the market. Today we'll get 157 companies set to report, with names like Western Digital, McDonald's, and ON Semiconductor before the open, and Arista Networks, Public Storage, and Check Point Software after the close. We've got a full docket of economic reports on tap as well, culminating with Friday's always important Employment Situation report.
So really, we've got 2 'main events' this week. First the FOMC Announcement on Wednesday, and then the Employment Report on Friday. Should be a busy week. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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