Global Highlights This Week: Fed Officials Speak Out in Force, AI Firms' Earnings Take Center Stage
U.S. stocks were strong overall last week, with the three major indices briefly hitting their own record highs. But compared to the two weeks before, the Dow and S&P showed signs of slowing momentum.
Midweek, the Fed cut the federal funds rate target by 25 basis points, as expected. But Powell warned at the press conference that further rate cuts aren't guaranteed, citing interrupted economic reports due to the government shutdown.
On Friday, Atlanta Fed President Bostic made it clear that a December cut isn't a done deal. That same day, Kansas City Fed President Schmid and Dallas Fed President Logan even said they didn't support the Fed's rate cut decision from last week.
This news pushed overnight index swaps to show the odds of a Fed cut next month dropping to around 50% at one point. U.S. Treasury Secretary Scott Bessent criticized the institution for still living in the past and needing a full overhaul.
This week, several other Fed officials will speak, including Hammack, Daly, Musalem, and others. The biggest one is New York Fed President Williams—he has a lot of say in monetary policy.
Tech giants that reported earnings last week saw big stock swings. Microsoft and Meta plunged after their reports, Amazon and Google soared to new highs, and Apple fell first then rose.
Their earnings show the AI sector is in a heavy investment phase, creating massive cost pressures. More and more analysts are worried about capital piling into AI and whether the spending is sustainable.
Looking at this week's earnings, a bunch of AI-related companies are worth watching: chip stocks like AMD, Qualcomm, Arm, ON Semiconductor; software firms Palantir and AppLovin; quantum players D-Wave and IonQ.
On the data side, with the U.S. federal government in "shutdown" mode, the U.S. trade balance due Tuesday and the nonfarm payrolls report due Friday will likely be delayed. This shutdown is just 3 days away from tying the longest record.
Key overseas economic events this week:
Monday: Eurozone Oct manufacturing PMI final, U.S. Oct S&P Global manufacturing PMI final, U.S. Oct ISM manufacturing PMI
Tuesday: San Francisco Fed President Daly speaks, RBA rate decision, ECB President Lagarde speaks, U.S. Sep JOLTs job openings
Wednesday: Eurozone Oct services PMI final, Riksbank rate decision, Eurozone Sep PPI m/m, U.S. Oct ADP employment, U.S. Oct S&P Global services PMI final, U.S. Oct ISM non-manufacturing PMI
Thursday: Eurozone Sep retail sales m/m, BOE rate decision, Tesla annual shareholder meeting
Friday: New York Fed President Williams speaks, Cleveland Fed President Hammack speaks at New York Economic Club, Philadelphia Fed President Paulson speaks, St. Louis Fed President Musalem holds fireside chat on monetary policy, New York Fed President Williams speaks at ECB money markets conference, U.S. Nov University of Michigan consumer sentiment preliminary,
Saturday: U.S. Oct New York Fed 1-year inflation expectations