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Stocks Fall Monday Ahead of Likely Rate Hike

Monday, October 31, 2022 04:30 PM | Nick Dey

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Stocks Fall Monday Ahead of Likely Rate Hike

Stocks fell Monday ahead of a busy week of earnings, economic reports, and an almost certain interest-rate increase from the Federal Reserve.

Fed Hike

The Federal Reserve’s upcoming rate decision will undoubtedly be the primary talking point this week.

The Fed is expected to maintain course and continue its hawkish path with another 75 basis point hike. However, while this hike is likely to be in line with previous hikes, investors will be paying close attention to Fed Chair Jerome Powell's comments as they could indicate a pivot.

Weaker economic data of late, including higher employment costs, has led investors to start speculating on a pivot to a smaller 50 basis-point hike in December. However, according to Morgan Stanley economists led by Ellen Zentner, Powell will likely aim to keep his options open.

A dovish pivot could spark a relief rally and overly concrete statements could see the relief rally get priced in before the rate hike deceleration occurs. By keeping lips tight, Powell won’t back himself into a corner and risk squashing a rally with a larger hike. So, expect a lot of unspecific talk about how it's a decision made on a lot of variables.

The worse the economy looks in subsequent economic reports, the more investors will speculate that the pivot will come sooner than later. Meanwhile, unexpectedly good reports could ironically dampen spirits and spur losses in the market.

Jobs Report

The other major economic report this week will be the October jobs report.

Nonfarm payrolls are expected to have risen by 220,000 jobs in October, following a 263,000 jump in September. Meanwhile, the private sector is expected to have added 225,000 jobs following September’s 288,000 job jump. The unemployment rate is expected to increase slightly to 3.6% from 3.5%.

The last report left a little to be considered by the Fed but ultimately fell flat as it left room for the Fed to continue on its recent pace. The September report was the third consecutive month of slowing growth and hourly earnings growth dipped on a year-over-year basis to 5% from 5.2%. However, the growth remained strong - despite it being smaller than the prior month - and average hourly earnings rose month over month. It was maybe a half step in the right direction.

Earnings

Lastly, earnings will be in abundance again this week. Oil & Gas companies will be reporting en-masse, while the gig economy’s Uber (UBER), AirBNB (ABNB), and DoorDash (DASH) will be some of the other big names reporting this week.

Uber’s report will be highly watched. The company is expected to post a profit of $0.06 per share on Tuesday. A big question regarding Uber’s earnings is what effect rising inflation is having on ride-sharing. More people may be looking for a few bucks now than they were, so there could be an abundance of people wanting to drive for Uber. However, with less money to spend, consumers may be opting to not Uber as much. Last quarter, Uber said 70% of drivers were influenced by inflation to start driving and it doubled revenues, partly boosted by high fare prices.

Meanwhile, Airbnb is expected to post profits of $1.55 per share. Airliners reported better-than-expected reports and didn’t note expectations for travel demand to wane in the near term. This should bode well for the company’s earnings report. While the signs are there for another great quarter, people are increasingly cutting expenses due to inflation, so any comments on a change in consumer behavior and preferences will be key.

Lastly, DoorDash is expected to narrow its loss per share to $0.07. DoorDash dipped to its lowest-ever price on Monday ahead of its report later in the week as worries mount on a pullback in spending. While Airbnb and Uber both serve as alternatives to something else and can be the cheaper alternative, DoorDash sharply increases the price of your meal to make it simpler on your end.

Economic Events this Week

Tuesday

- 09:00 ET - JOLTS - Job Openings

- 10:00 ET - Construction Spending

- 10:00 ET - ISM Manufacturing Index

Wednesday

- 08:15 ET - ADP Employment Change

- 10:30 ET - EIA Crude Oil Inventories

- 14:00 ET - FOMC Rate Decision

Thursday

- 08:30 ET - Continuing Claims

- 08:30 ET - Initial Claims

- 08:30 ET - Productivity-Prel

- 08:30 ET - Unit Labor Costs-Prel

- 10:00 ET - ISM Non-Manufacturing Index

Friday

- 08:30 ET - Average Workweek

- 08:30 ET - Avg. Hourly Earnings

- 08:30 ET - Nonfarm Payrolls

- 08:30 ET - Nonfarm Private Payrolls

- 08:30 ET - Unemployment Rate

Earnings Reports This Week

Monday:

After the bell:

SYK, AFL, NXPI, WMB, ANET, SBAC, AWK, HOLX, CINF, CIOXY, CAR, RRX, ACHC, LSCC, CHE, CIVI, VAC, TREX, AMKR, RHP

Tuesday:

Before the bell:

BP, CHT, ECL, EPD, ETN, KAOOY, KKR, LLY, MITSY, MPC, NEM, PFE, PSX, SOMMY, SONY, SPG, SYY, TRI, UBER, WJRYY

After the bell:

TRVG, VRAY, TTDKY, AMD, MDLZ, ABNB, MCK, PSA, DVN, AIG, PRU, ET, EA, VRSK, OKE, EXR, EIX, AMCR, PAYC, CLX

Wednesday:

Before the bell:

AMKBY, APO, ASGLY, CVE, CVS, EL, EMR, FUJHY, GSK, HUM, KDDIY, NMR, NVO, RACE, ROK, TEL, TT, VWDRY, YAHOY, YUM

After the bell:

WSTG, QCOM, BKNG, NTR, MET, EQIX, SU, FTNT, O, ALL, WCN, ALB, CTSH, CLR, ES, SLF, EBAY, CF, MRO, IR

Thursday:

Before the bell:

ABC, APD, BCE, CI, CMI, COP, EXC, FIS, GOLD, ICE, JCI, LNG, MAR, MRNA, NVZMY, PH, REGN, SRE, TEVA, ZTS

After the bell:

CTVA, AMGN, SBUX, PYPL, EOG, TEAM, MELI, MSI, ILMN, SQ, MCHP, WBD, ED, MTD, PBA, AVB, AEE, LYV, DASH, NET

Friday:

Before the bell:

BATRA, BATRK, BEP, CAH, CBOE, D, DUK, ENB, EVRG, FWONA, FWONK, HSY, ITOCY, LBRDA, LBRDK, LSXMK, MGA, OWL, PPL, WPC

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