3 Things to Watch in Investing

Stocks experienced a decline on Tuesday as investors grappled with the implications of prolonged high interest rates and the potential economic fallout from a federal government shutdown.

Congress has a deadline of Saturday evening to reach an agreement on at least a temporary funding extension to avert a shutdown, which could occur as early as Sunday. Lawmakers from both parties have expressed a desire to avoid a shutdown; however, some conservative House members are opposing efforts to pass a stopgap measure and are demanding deeper spending cuts than those agreed upon in a previous deal with the White House.

As political negotiations unfold, investors are also contemplating the Federal Reserve’s indications that interest rates are likely to remain elevated for an extended period to combat inflation. The Fed has suggested an additional rate hike may be on the horizon, while also forecasting just two rate cuts for the following year, which is half of what was predicted in June. The central bank aims to bring annual inflation back to its 2% target.

A government shutdown could complicate the Fed’s efforts, with Moody’s Investors Service warning that such an event would negatively impact U.S. credit, although it anticipates that any shutdown would be brief. Additional concerns such as increasing energy prices, an ongoing labor strike by the United Auto Workers, and the resumption of federal student loan repayments next month could further squeeze household discretionary spending.

Despite the Fed’s outlook on interest rates, futures traders currently estimate an 83% chance of a pause on rate increases during the Fed’s upcoming meeting in November.

Here are three key factors that could influence the markets tomorrow:

1. Jefferies Earnings
   Jefferies Financial Group is expected to report earnings per share of 32 cents on revenue of $1.24 billion. The firm reports ahead of many Wall Street counterparts and is often viewed as a precursor to the earnings of larger banks.

2. Micron Reports
   Micron Technology is anticipated to report a loss per share of $1.15, with projected revenue of $3.9 billion.

3. Paychex Earnings
   Paychex is expected to report earnings per share of $1.12, with revenue estimated at $1.28 billion.