Is Three the Magic Number for Wall Street? We'll soon find out. Only a few think that Jerome Powell & Co. wants to cut interest rates next week for a third time in the many gatherings of the Federal Federal Reserve Market Committee.
Market-based probabilities imply a 93.5% chance of a quarter-of-a-percentage-point rate reduction to 1.50% -1.75% range from the current 1.75% -2%, following the two-day Oct. 29-30 meeting, according to CME Group based on federal funds futures.
"It's important to see the Fed rates next week because it is so far expected – e.g. futures at this point, "Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, told MarketWatch in emailed comments on Friday.
However, disappointment from the Fed is not 't outside the realm of possibility, despite the lofty expectations for a third cut on Wednesday, especially as the S & P 500 index
SPX, + 0.41%
Friday's action is roughly 0.1% from its July 26 record at 3.025.86, while the Dow Jones Industrial Average
DJIA, + 0.57%
and the Nasdaq Composite Index
COMP, + 0.70%
wrapped up the session within 2% of their all-time highs.
Moreover, Boston Fed President Eric Rosengren and Kansas City Fed President Esther George preferring to leave rates unchanged, among three members dissenting at last month's policy meeting.
This is a mid-cycle adjustment by Fed Chairman Powell earlier this year.
China-U. The negative effects of a nasty China-U. S. trade conflict.
Experts say that a third-cut matches the definition of a mid-cycle shift and could be considered as further as a recession.
Keith Lerner, chief market strategist at SunTrust Advisory Services, pointed to a trio of rate cuts in 1995 and 1998 as parallels to the current monetary tactic.
"Actually, both 1995 (which Powell has often talked about in a favorable light) and 1998 both saw three 25 basis point rate cuts and then the Fed stopped; These are both mostly looked at as mid-cycle adjustments or for insurance reasons, especially in 1995, "the SunTrust Strategist said.
Lerner added, "To the FOMC, Powell is not going to put the Fed in a box."
"I suspect he wants to discuss that the Fed has cut rates to support the economy and now the Fed wants to focus its attention on the term 'data dependent.'
Still, a failure to deliver a cut will not be met by kindly by investors.
"If the Feds were to break the markets by next week's cutting," 5%, but it all depends on the Fed communicates their decision, "IAA's Zaccarelli said.
To be sure, signs of softness (and outright weakness) swirling around in the US economy abound.
"The economics of economics and the global economy continue to increase," economists Lydia Boussour and Gregory Draco at Oxford Economics in a Friday research report.
Indeed, a decline in orders for long-lasting goods over the past 12 months steeped to 5.4%, representing the largest annual drop-off since the middle of 2016, and reflecting a broadening decline in manufacturing activity.
Given that, the Oxford economists believe that the Fed does not want to worry about the creation of other parts of financial markets.
"Despite some hints from Fed officials that it may be time to contemplate a cut-back break, we believe the FOMC leadership retains its easing bias and remains attuned to the unwanted tightening of financial conditions,"
Jobs , jobs, jobs … and a flood of other data
It's not just about the Fed next week either. Arguably, even more significant update will be the Friday jobs report that will roll out on Nov. 1. Economists are anticipating 93,000 jobs created in October, versus a disappointing 136,000 increase in September, reflecting payroll growth and the impact of strikes at General Motors Co.
GM, + 2.57% ,
according to Econoday data. Consensus estimates place at the rate of 3.6%, up from 3.5% last month.
Here's what the rest of the week looks like on the data front (bolded for significance):
- International trade in goods at 8:30 am Eastern Time Dallas Fed Manufacturing Survey
- Case-Shiller home-price index at 9 am
- Consumer confidence at 10 am with pending home sales at the same time
- ADP private-sector employment at 8:15 am
- GDP report at 8:30 a.m.
- 2 p.m. Fed decision followed by a 2:30 p.m. news conference
- A report on weekly jobless claims, a reading on personal income and employment at 8:30 a.m.
- Chicago PMI at 9:45 am.
- NFP at 8:30 am.
- ISM manufacturing at 10 a.m., coming after the IHS Markit report at 9:45 am
- A report on construction spending at 10 a.m.
Big corporate earnings highlights
- AT & T Inc.
T, + 0.24%
- Walgreens Boots Alliance Inc.
WBA, + 1.78%
- Beyond Meat Inc.
- Google-parent alphabet
GOOG, + 0.33%
GOOGL, + 0.41%
- T-Mobile US Inc.
TMUS, + 0.17%
PFE, + 1.04%
MA, + 0.54%
AAPL, + 1.23%
AAPL, + 1.23%
- Genera Electric
GE, + 0.56%
- Facebook Inc.
FB, + 0.81%
SBUX, + 0.24%
- Bristol-Myers Squibb Co.
BMY, + 1.12%
- Kraft Heinz Co.
- Altria Group Inc.
- Exxon Mobile
XOM, + 0.23%
- Chevron Corp.
CVX, + 0.93%
- Seagate Technology PLC
STX, + 1.20%
- Colgate-Palmolive Co.
CL, + 0.10%
- American International Group Inc.