Jerome Powell – Page 8

World economy to perform better than expected in 2024, says Goldman Sachs

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Goldman Sachs predicts the global economy will top expectations in 2024, driven by strong income growth and confidence that the worst of rate hikes is already over.

The investment bank forecasts the world economy to expand 2.6% next year on an annual average basis, above the 2.1% consensus forecast of economists polled by Bloomberg. The U.S. is expected to outpace other developed markets again with estimated growth of 2.1%, Goldman said.

Goldman also believes that the bulk of the drag from monetary and fiscal tightening policies is over.

To curtail rising inflation, the U.S. Federal Reserve started its aggressive rate hike campaign in March 2022 as inflation climbed to its highest levels in 40 years. Last Thursday, Fed Chair Jerome Powell said he is “not confident” the Fed has done enough to tackle inflation, and suggested that more rate hikes may be necessary.

Goldman said policymakers in developed markets are unlikely to cut interest rates before the second half of 2024 unless economic growth comes in weaker than estimated.

The bank noted inflation has also continued to cool across G10 and emerging market economies, and is expected to ease further.

“Our economists forecast this year’s decline in inflation to continue in 2024: sequential core inflation is predicted to fall from 3% now to an average 2-2.5% range across the G10 (excluding Japan),” the report stated.

Global factory activity

The investment bank also expects global factory activity to recover from a recent slump as headwinds are set to dissipate this year. Goldman noted global manufacturing activity has been weighed down by a weaker-than-expected rebound in Chinese manufacturing and the European energy crisis, as well as an inventory cycle that had to correct for overbuilding last year.

We continue to see only limited recession risk and reaffirm our 15% U.S. recession probability.

Jan Hatzius

Chief Economist at Goldman Sachs

Global production has been in a slump for most of the year. S&P Global’s gauge of worldwide manufacturing activity came in at 49.1 in September. A reading below 50 indicates a contraction in activity. Additionally, China’s Caixin/S&P Global manufacturing PMI fell to 49.5 in October from 50.6 in September, marking the first contraction since July.

Manufacturing activity should recover somewhat in 2024 from a subdued 2023 pace, Goldman economists led by chief economist Jan Hatzius said, especially as “spending patterns normalize, gas-intensive European production finds a trough, and inventories-to-GDP ratios stabilize.”

Big economies to avoid recession

Rising real income also contributed to Goldman’s positive growth outlook.

“Our economists have a positive outlook for real disposable income growth at a time of much lower headline inflation and still-strong labor markets,” Goldman wrote in a release based on the report. While they hold the view that U.S. real income growth is set to slow from its strong 2023 pace of 4%, it is still purported to support consumption and GDP growth of at least 2%.

“We continue to see only limited recession risk and reaffirm our 15% U.S. recession probability,” Hatzius continued in the outlook report, owed in part to the real disposable income growth.

In September, the bank had cut their forecast for a U.S. recession from 20% to 15% on the basis of cooling inflation and a resilient labor market.

While rate hikes and fiscal policy will still continue to weigh on the growth across G10 economies, Hatzius is confident that the worst of that “drag” is already over.

“Both the Euro area and the UK are expected to have a meaningful acceleration in real income growth — to around 2% by end-2024 — as the gas shock following Russia’s invasion of Ukraine fades,” the economists also noted.

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November 13, 2023

Powell says Fed is ‘not confident’ it has done enough to bring inflation down

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Federal Reserve Chairman Jerome Powell said Thursday that he and his fellow policymakers are encouraged by the slowing pace of inflation but are unsure whether they’ve done enough to keep the momentum going.

Speaking a little more than a week after the central bank voted to hold benchmark policy rates steady, Powell said in remarks for an International Monetary Fund audience in Washington, D.C., that more work could be ahead in the battle against high prices.

“The Federal Open Market Committee is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2 percent over time; we are not confident that we have achieved such a stance,” he said in his prepared speech.

For the second time in recent weeks, a public address from Powell was interrupted by climate protesters. He briefly left the stage before resuming.

The speech comes with inflation still well above the Fed’s long-standing goal but also considerably below its peak levels in the first half of 2022. In a series of 11 rate hikes that constituted the most aggressive policy tightening since the early 1980s, the committee took its benchmark rate from near zero to a target range of 5.25%-5.5%.

Those increases have coincided with the Fed’s preferred inflation gauge, the core personal consumption expenditures price index, to fall to an annual rate of 3.7%, from 5.3% in February 2022. The more widely followed consumer price index peaked above 9% in June of last year.

Powell said that inflation is “well above” where the Fed would like to see it while describing policy as “significantly restrictive.”

“My colleagues and I are gratified by this progress but expect that the process of getting inflation sustainably down to 2 percent has a long way to go,” he said. “We will keep at this until we succeed,” he later added, saying the Fed is focused on whether rates need to go higher and how long they need to stay elevated.

Stocks headed lower after the speech, with the Dow Jones Industrial Average down close to 200 points. Treasury yields lurched higher after declining for most of the past three weeks, propelled up in large part after a poorly received 30-year bond auction.

“Chairman Powell issued a warning to investors too giddy on the prospect of rate cuts next year,” said Jeffrey Roach, chief economist at LPL Financial. “The Fed will be true to its mandate and hike further should inflation reaccelerate.”

As he has in recent speeches, Powell stressed that the Fed nevertheless can be cautious as the risks between doing too much and too little have come into closer balance. He said the Fed is attuned to the rise in Treasury yields.

“If it becomes appropriate to tighten policy further, we will not hesitate to do so,” he said. “We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data, and the risk of overtightening.”

“Monetary policy is generally working the way we think it should work” Powell said during a discussion following his speech.

Markets are largely convinced the Fed is through hiking rates.

Futures pricing, according to the CME Group, indicates less than a 10% probability that the FOMC will approve a final rate hike at its Dec. 12-13 meeting, even though committee members in September penciled in an additional quarter percentage point rise before the end of the year.

Traders anticipate the Fed will start cutting next year, probably around June.

Powell noted the progress the economy has made. Gross domestic product accelerated at a “quite strong” 4.9% annualized pace in the third quarter, though Powell said the expectation is for growth to “moderate in coming quarters.” He described the economy as “just remarkable” in 2023 in the face of a broad consensus that a recession was inevitable.

Unemployment remains low, though the jobless rate has risen half a percentage point this year, a move commonly associated with recessions.

But Powell noted that the Fed is “attentive” that stronger-than-expected growth could undermine the fight against inflation and “warrant a response from monetary policy.”

He also pointed out that improvements in supply chains have helped ease inflation pressures, but “it is not clear how much more will be achieved by additional supply-side improvements. Going forward, it may be that a greater share of the progress in reducing inflation will have to come from tight monetary policy restraining the growth of aggregate demand.”

The remarks are part of a broader presentation he is giving to the Jacques Polak Annual Research Conference. One broad policy topic he addressed was the challenge posed by keeping rates anchored near zero, where they were before the inflation surge. Powell said it is “too soon” to say whether zero-rate challenges are “a thing of the past.”

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November 10, 2023

CNBC Daily Open: Slowing demand means fewer revenue beats

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Signage for the “Disneyland City Hall”, in Disneyland Paris, in Marne-la-Vallee, east of Paris, on October 16, 2023.

Ian Langsdon | Afp | Getty Images

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Streak continues, sans Dow
Major U.S. indexes continued their blistering winning streak Wednesday — except for the Dow Jones Industrial Average, which snapped a seven-day streak. Asia-Pacific markets mostly rose Thursday. Japan’s Nikkei 225 climbed around 1.5% and South Korea’s Kospi added 0.5% after dropping 3.24% in the last two sessions, wiping out more than half of its gains earlier in the week.

Prices slump in China
Fresh data from China’s National Bureau of Statistics showed the country continuing to struggle with deflationary pressures. China’s consumer price index for October declined 0.2% year on year, more than the 0.1% drop predicted. Producer prices also fell 2.6% — though it’s smaller than the expected 2.7% decline.

Disney pluses subscribers
Disney’s shares jumped around 3% in extended trading after the company reported quarterly earnings. Earnings per share came in at 82 cents, higher than the expected 70 cents. Total Disney+ subscribers, at 150.2 million, also beat forecast by more than 2 million. But the firm’s revenue fell short of estimates — its second consecutive miss — even as quarterly revenue increased 5% to $21.24 billion year on year.

Weakness in Arm
Arm reported earnings for the first time after its initial public offering. The semiconductor licensing company had a net loss of $110 million, but that’s because of a one-time share-based compensation of more than $500 million. Revenue, on the other hand, was up 28% year on year, as licensing sales jumped 106%. Still, shares sank 6.8% after the bell on weak guidance for the current quarter.

[PRO] ‘Fallen angels’
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The bottom line

Earning season’s winding down, and it’s been mostly a good one so far.

Out of the approximately 88% of companies in the S&P 500 have reported results, more than 88% have surpassed earnings estimates. However, only 62% have beaten revenue expectations. This suggests slowing demand is catching up with companies — but they’ve so far managed to expand their margins by cutting costs.

With hard-hitting reports from Disney and Arm coming in after the bell and no major economic data released, major indexes had a tepid day. Trading volume was lower than the 30-day average.

Nonetheless, the S&P 500 managed to inch up 0.1%, its eighth straight day of gains, and the Nasdaq Composite ticked up 0.08% for its ninth positive session. The last time both indexes enjoyed such uninterrupted gains was in November 2021. But the Dow Jones Industrial Average snapped its best winning streak since July with a 0.12% drop yesterday.

This lull in news’ only temporary. Federal Reserve Chair Jerome Powell will speak about monetary policy Thursday and October’s consumer price index reading comes out next Tuesday. Those events will serve as the next major catalysts for stocks, said AXS Investments CEO Greg Bassuk. And though it’s admittedly a very long shot, we’ll see, then, if (the surviving) major indexes manage to extend their winning streak — or precipitate a new fall.

But for investors hoping to time markets and reap quick gains on those events, CNBC’s Bob Pisani has a warning. “The idea that you can predict the future direction of stock prices, and act accordingly — is not a successful investing strategy,” Pisani writes. “The key to investing is not market timing” — it’s giving yourself time in the market.

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November 8, 2023

CNBC Daily Open: Earning’s better than revenue this season

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Visitors wearing emblematic Mickey and Minnie Mouse ears look on, in front of the Sleeping Beauty-inspired castle at Disneyland Paris, in Marne-la-Vallee, east of Paris, on October 16, 2023. characters.

Ian Langsdon | Afp | Getty Images

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Streak continues, sans Dow
Major U.S. indexes continued their blistering winning streak Wednesday — except for the Dow Jones Industrial Average, which snapped a seven-day streak. Europe’s regional Stoxx 600 rose 0.28%, lifted by strong earnings reports. Marks and Spencer shares popped 8.39% on the back of a solid first half of the year, while Dutch wind turbine manufacturer Vestas surged 9.8% after beating profit expectations.

Disney pluses subscribers
Disney’s shares jumped around 3% in extended trading after the company reported quarterly earnings. Earnings per share came in at 82 cents, higher than the expected 70 cents. Total Disney+ subscribers, at 150.2 million, also beat forecast by more than 2 million. But Disney’s revenue fell short of estimates, even as it increased 5% to $21.24 billion compared with the same period a year earlier.

Weakness in Arm
Arm reported earnings for the first time after its initial public offering. The semiconductor licensing company had a net loss of $110 million, but that’s because of a one-time share-based compensation of more than $500 million. Revenue, on the other hand, was up 28% year on year, as licensing sales jumped 106%. Still, shares sank about 8% after the bell on Arm’s weak guidance for the current quarter.

Fresh AT1s from UBS
UBS started selling U.S. dollar Additional Tier 1 bonds Wednesday, with a five-year bond offering around 10% yield and a 10-year around 10.125%, according to LSEG news service IFR. Why’s this newsworthy? Because $17 billion worth of AT1 bonds were wiped out when UBS took over Credit Suisse in March, causing an uproar among bondholders — and continuing to pose legal challenges.

[PRO] A short-cover rally?
Stock markets are enjoying their longest winning streak in two years. But some analysts are worried that November’s blistering start isn’t a true and sustainable rally. Instead, it’s more to do with hedge funds buying up stocks to cover their short positions. (When investors bet that stock prices will move down, they have to buy shares if prices move up, which pushes up prices even further.)

The bottom line

Earning season’s winding down, and it’s been mostly a good one so far.

Out of the approximately 88% of companies in the S&P 500 have reported results, more than 88% have surpassed earnings estimates. However, only 62% have beaten revenue expectations, suggesting that slowing demand is catching up with companies. The silver lining is that this phenomenon suggests margins have grown.

With hard-hitting reports from Disney and Arm coming in after the bell and no major economic data released, major indexes had a tepid day. Trading volume was lower than the 30-day average.

Nonetheless, the S&P 500 managed to inch up 0.1%, its eighth straight day of gains, and the Nasdaq Composite ticked up 0.08% for its ninth positive session. The last time both indexes enjoyed such uninterrupted gains was in November 2021. But the Dow Jones Industrial Average snapped its best winning streak since July with a 0.12% drop yesterday.

This lull in news’ only temporary. Federal Reserve Chair Jerome Powell will speak about monetary policy Thursday and October’s consumer price index reading comes out next Tuesday. Those events will serve as the next major catalysts for stocks, said AXS Investments CEO Greg Bassuk. And though it’s admittedly a very long shot, we’ll see, then, if (the surviving) major indexes manage to extend their winning streak — or precipitate a new fall.

But for investors hoping to time markets and reap quick gains on those events, CNBC’s Bob Pisani has a warning. “The idea that you can predict the future direction of stock prices, and act accordingly — is not a successful investing strategy,” Pisani writes. “The key to investing is not market timing” — it’s giving yourself time in the market.

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November 8, 2023

Citi upgrades U.S. stocks on stable interest rates, year-end seasonals

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November 2, 2023

Video: Federal Reserve Continues to Hold Interest Rates Steady

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new video loaded: Federal Reserve Continues to Hold Interest Rates Steady

transcript

Federal Reserve Continues to Hold Interest Rates Steady

During a news conference, Jerome H. Powell, the Federal Reserve chair, announced that interest rates will remain unchanged with a hope that it will lead to price stability and bring down inflation in the future.

: My colleagues and I are acutely aware that high inflation imposes significant hardship as it erodes purchasing power. Reducing inflation is likely to require a period of below potential growth and some softening of labor market conditions. The committee decided at today’s meeting to maintain the target range for the federal funds rate at 5.25 to 5.5 percent, and to continue the process of significantly reducing our securities holdings. We are committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation sustainably down to 2 percent over time. Inflation has moderated since the middle of last year, and readings over the summer were quite favorable. But a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal. Price stability is the responsibility of the Federal Reserve. Without price stability, the economy does not work for anyone.

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November 1, 2023

The Federal Reserve leaves rates unchanged. Here’s what that means for your wallet

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The Federal Reserve left its target federal funds rate unchanged for the second consecutive time Wednesday.

Even so, consumers likely will get no relief from current sky-high borrowing costs.

Altogether, Fed officials have raised rates 11 times in a year and a half, pushing the key interest rate to a target range of 5.25% to 5.5%, the highest level in more than 22 years.

“Relief for households isn’t likely to come soon, at least not directly in the form of a cut in the fed funds rate,” said Brett House, economics professor at Columbia Business School.

The consensus among economists and central bankers is that interest rates will stay higher for longer, or until inflation moves closer to the central bank’s 2% target rate.

What the federal funds rate means for you

The federal funds rate, which is set by the central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.

To a certain extent, many households have been shielded from the brunt of the Fed’s rate hikes so far, House said. “They locked in fixed-rate mortgages and auto financing before the hiking cycle began, in some cases at record-low rates during the pandemic.”

However, higher rates have a significant impact on anyone tapping a new loan for big-ticket items such as a home or a car, he added, and especially for credit card holders who carry a balance.

Here’s a breakdown of how it works.

Credit card rates are at all-time highs

Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. As the federal funds rate rose, the prime rate did as well, and credit card rates followed suit.

Credit card annual percentage rates are now more than 20%, on average — an all-time high. Further, with most people feeling strained by higher prices, more cardholders carry debt from month to month.

“Rising debt is a problem,” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University and chief economist at SS Economics.

“Consumers are using a lot of credit card debt and paying very high interest rates,” Sohn added. “That doesn’t bode well for the long-term economic outlook.”

For those borrowers, “interest rates staying higher for a longer period underscores the urgency to pay down and pay off costly credit card debt,” said Greg McBride, chief financial analyst at Bankrate.com.

Home loans: Deals slow to ‘standstill’

Although 15-year and 30-year mortgage rates are fixed and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.

The average rate for a 30-year, fixed-rate mortgage is up to 8%, the highest in 23 years, according to Bankrate.

“Purchase activity has slowed to a virtual standstill, affordability remains a significant hurdle for many and the only way to address it is lower rates and greater inventory,” said Sam Khater, Freddie Mac’s chief economist.

Prospective buyers attend an open house at a home for sale in Larchmont, New York, on Jan. 22, 2023.

Tiffany Hagler-Geard | Bloomberg | Getty Images

Other home loans are more closely tied to the Fed’s actions. Adjustable-rate mortgages and home equity lines of credit, or HELOCs, are pegged to the prime rate. Most ARMs adjust once a year after an initial fixed-rate period. But a HELOC rate adjusts right away. Now, the average rate for a HELOC is near 9%, the highest in over 20 years, according to Bankrate.

Still, Americans are sitting on more than $31.6 trillion worth of home equity, according to Jacob Channel, senior economist at LendingTree. “Owing to that, many homeowners could benefit from tapping into the equity they’ve built with a home equity loan or line of credit.”

Auto loan payments get bigger

Student loans: New borrowers take a hit

Federal student loan rates are also fixed, so most borrowers aren’t immediately affected by the Fed’s moves. But undergraduate students who take out new direct federal student loans are now paying 5.50% — up from 4.99% in the 2022-23 academic year and 3.73% in 2021-22.

The government sets the annual rates on those loans once a year, based on the 10-year Treasury.

If the 10-year yield stays near 5%, federal student loan interest rates could increase again when they reset in the spring, costing student borrowers even more in interest.

Savings account holders are earning more

“Borrowers are being squeezed, but the flipside is that savers are benefiting,” McBride said.

While the Fed has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate. The savings account rates at some of the largest retail banks, which were near rock bottom during most of the Covid pandemic, are currently up to 0.46%, on average, according to the Federal Deposit Insurance Corp.

“Average rates have risen significantly in the last year, but they are still very low compared to online rates,” added Ken Tumin, founder and editor of DepositAccounts.com.

Some top-yielding online savings account rates are now paying more than 5%, according to Bankrate, which is the most savers have been able to earn in nearly two decades.

“Savings are now earning more than inflation, and we haven’t been able to say that in a long time,” McBride said.

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November 1, 2023

Zombie firms are filing for bankruptcy as the Fed commits to higher rates

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In the U.S., 516 publicly listed firms have filed for bankruptcy from January through September 2023. Many of these firms have survived for several years with surging debt and lagging sales.

“The share of zombie firms has been increasing over time,” said Bruno Albuquerque, an economist at the International Monetary Fund. “This has detrimental effects on healthy firms who compete in the same sector.”

Zombie firms are unprofitable businesses that stay afloat by taking on new debt. Banks lend to these weak firms in hopes that they can turn their trend of sinking sales around.

“A really healthy, well-capitalized banking system and financial sector is one of the most important factors in ensuring that unhealthy firms are wound down in a timely way rather than being propped up,” said Kathryn Judge, a professor of law at Columbia University.

Economists say that zombie firms may become more prevalent when banks or governments bail out unviable firms. But the Federal Reserve says the share of firms that are zombies fell after the Covid-19 emergency stimulus measures were implemented. The Fed says banks are refusing to keep weak firms in business with favorable extensions of credit.

The Fed economists point to healthy balance sheets at U.S. firms, despite the increasing weight of interest rate hikes. The effective federal funds rate was 5.33% in October 2023, up from 0.08% in October 2021.

“The biggest implication of the rapid rise in interest rates that we’ve seen the last five or six quarters, actually, is that it reestablished cash,” said Lotfi Karoui, chief credit strategist at Goldman Sachs. “That actually puts some constraints on risk assets.”

The Fed says it thinks interest rates will remain higher for longer. “Given the fast pace of tightening, there may still be meaningful tightening in the pipeline,” Fed Chair Jerome Powell said at an Economic Club of New York speech Oct. 19.

Watch the video above to learn more about the Fed’s battle with unviable zombie firms in the U.S.

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October 31, 2023

How the Fed fights zombie firms

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Share

Some firms sustain their businesses by taking on more debt that they can repay. Economists call them zombie companies. When compared to their peers, zombies are smaller in size and deliver lower returns to investors. These companies distort markets, keeping resources from their fundamentally sound competitors. Banks and governments keep zombie firms alive with bailout loans. As the Federal Reserve resets the economy with higher interest rates, many zombie firms are filing for bankruptcy.

10:01

Tue, Oct 31 20236:00 AM EDT

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October 31, 2023

CNBC Daily Open: Are things about to get more difficult?

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Up from No. 13 in 2022, Minneapolis, Minnesota ranked as the No. 2 most neighborly city in America.

S. Greg Panosian | E+ | Getty Images

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

S&P 500 in correction
The S&P 500 index slipped into correction territory on Friday amid fears of a recession, closing 10.3% lower from this year’s peak on July 31. The Dow Jones Industrial Average closed 1.12% lower, and the Nasdaq Composite held 0.38% higher. Asia-Pacific markets kicked off the week on a mixed note ahead of key economic readings from the region. Japan’s Nikkei 225 fell 1.03% while the Kospi in South Korea was up 0.35%.

Hey, Big Spender
Inflation in September rose but consumer spending came in even stronger than economists expected, numbers from the Commerce Department showed on Friday. The core personal consumption expenditures price index, the Fed’s key inflation measure, was 0.3% higher for the month, which was in line with the Dow Jones estimate. Even though prices picked up, personal spending continued, rising 0.7%, which was better than the 0.5% forecast.

A potential pause?
The Federal Reserve is widely seen leaving interest rates unchanged at the end of its two-day policy meeting this week, even as its preferred inflation indicator remains well above its 2% target. Earlier this month, Fed Chair Jerome Powell said “inflation is still too high,” raising expectations that another rate hike may not be entirely out of the picture.

HSBC’s bumper profit
HSBC reported quarterly profit after tax of $6.26 billion, up a whopping 235% compared to the $2.66 billion from a year ago quarter. Profit before tax, for the three months ended September, rose by $4.5 billion to $7.7 billion, due to a higher interest rate environment.

[PRO] This under-the-radar stock is set for an AI boost
Investors have piled into the likes of Nvidia, Baidu and Alibaba as such tech companies have leveraged the use of artificial intelligence. But one portfolio manager says there’s one lesser-known stock that stands out.

The bottom line

Markets survived another brutal week and are looking to wrap up an even more tumultuous month, which saw the S&P 500 and Nasdaq indexes slip into correction territory.

A correction is when an index falls more than 10% (but less than 20%) from its most recent closing high. It’s called a correction because historically the drop often “corrects” and returns prices to their longer-term trend.

Investors have had to tackle everything from multi-year high Treasury yields, a busy earnings season to multiple inflation readings. A reading on personal consumption expenditures on Friday served as the latest evidence that American consumer spending remained healthy.

Core PCE rose 0.3% in September and 3.7% year over year, matching estimates from economists polled by Dow Jones. Personal spending increased 0.7%, however, surpassing estimates of 0.5%. PCE is the Federal Reserve’s most preferred inflation metric.

The reading came ahead of the Fed’s two-day policy meeting this week, at the end of which the U.S. central bank is widely expected to pause on hiking rates.

Morningstar’s chief U.S. market strategist Dave Sekera says the Fed is done hiking, and forecasts the central bank will start to cut the federal funds rate in the first half of 2024.

“As we forecast the rate of economic growth to slow and inflation to moderate, this allows the Fed to move to increasingly more accommodative language in early 2024 to prepare the market in advance for when they decide to begin cutting rates,” Sekera wrote.

A Fed meeting was by no means the only market-moving event investors were looking at. About 30% of the S&P 500 is scheduled to report earnings this week, among which Apple, McDonald’s and Pfizer will deliver quarterly results.

And if that wasn’t packed enough, market players will also be chasing the October jobs report due on Friday. It’s expected to show the U.S. economy added 175,000 jobs last month, according to consensus estimates from FactSet. That will follow a blowout 336,000 job additions from the prior month.

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October 29, 2023

CNBC Daily Open: The perfect storm

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NEW YORK, NEW YORK – JUNE 03: People walk by the New York Stock Exchange (NYSE) at the start of the trading day on June 03, 2022 in New York City. A new jobs report released by the Labor Department this morning shows employers added 390,000 jobs in May. Stocks pointed lower ahead of the opening bell on Friday, putting indexes back into the red for the week. (Photo by Spencer Platt/Getty Images)

Spencer Platt | Getty Images News | Getty Images

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

S&P 500 in correction
The benchmark S&P 500 index slipped into correction territory on Friday on fears of a recession, closing 10.3% lower from this year’s peak on July 31. The Dow Jones Industrial Average closed 1.12% lower, while the Nasdaq Composite held 0.38% higher. European stocks also ended lower, with the benchmark Stoxx 600 closing down 0.8%.

Hey, Big Spender
Inflation in September rose but consumer spending came in even stronger than economists expected, numbers from the Commerce Department showed on Friday. The core personal consumption expenditures price index, the Fed’s key inflation measure, was 0.3% higher for the month, which was in line with the Dow Jones estimate. Even though prices picked up, personal spending continued, rising 0.7%, which was better than the 0.5% forecast.

A potential pause?
The Federal Reserve is widely seen leaving interest rates unchanged at the end of its two-day policy meeting this week, even as its preferred inflation indicator remains well above its 2% target. Earlier this month, Fed Chair Jerome Powell said “inflation is still too high,” raising expectations that another rate hike may not be entirely out of the picture.

One million share sale
JPMorgan Chase CEO Jamie Dimon is set to sell one million shares of the bank in 2024. The plan raised concerns that Dimon could be contemplating retirement. Still, a spokesperson for the country’s biggest lender said the move wasn’t related to a succession plan, and that Dimon has “no current plans” for another sale.

[PRO] The S&P 500 correction is good news
The stock market tumbled into correction territory this week, sparking fears of more turmoil is ahead. But for disciples of Warren Buffett, a 10% drawdown for the the S&P 500 shouldn’t matter.