Earlier this morning, the equity market futures were up either side of the half-percentage-point mark, suggesting a constructive start to the day. The U.S. stock market managed to move higher last week, which was regarded as a pleasant surprise given the Federal Reserve’s continuing upward pressure on interest rates. However, it remains to be seen if traders can build on these gains in the days ahead.
In economic news, there will be a number of reports released this week, with one of the most important items coming out on Thursday. Here, we will get a look at the preliminary estimate for third-quarter gross domestic product (GDP). Most analysts expect that the economy managed to expand at an annualized rate of about 2.5% during the quarter, after struggling earlier in the year. News that the broader economy remains in good shape may help lift sentiment. Another report of some importance will follow on Friday when the Personal Consumption Expenditures (PCE) Price Index for September will be published. This issuance is carefully followed by the Federal Reserve, and as a result, will probably be watched by investors. Economists are expecting the numbers to show that inflation continues to run considerably higher than the Federal Reserve's 2% target rate. While this problem should be addressed, many economists are now wondering if it’s possible to bring prices down too quickly, without unleashing dire economic consequences. Notably, aggressive rate hikes could usher in a prolonged recession at home, while causing disruptions to the global financial markets. At this point, the central bank may be growing concerned about its hawkish program, as some officials seem to be tempering their remarks.
In corporate news, the third-quarter earnings season continues to take shape, with numerous large technology names in the spotlight this week. Tomorrow, Alphabet (GOOG) and Microsoft (MSFT) will deliver their reports. Wednesday, we will hear from Meta Platforms (META), followed on Thursday by Amazon.com (AMZN) and Apple (AAPL). All of these companies are industry leaders that clearly have the ability to influence the direction of the market.
From a technical vantage point, the S&P 500 index sank to the 3,500 level several sessions ago, but promptly recovered. That development seems to have removed some negative sentiment, while paving the way for the current rally attempt. However, it remains to be seen if a sustained move higher will develop from here, or if stocks will start to drift lower yet again. – Adam Rosner
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
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