Top 5 Market Trends to Watch for Next Week

Investors are gearing up for a significant week that includes a Federal Reserve meeting, the latest U.S. jobs report, and earnings from tech giant Apple, all of which could influence stock and bond markets for the remainder of the year. Here’s what to keep an eye on as the week begins.

1. Federal Reserve Meeting
Attention will be focused on the Federal Reserve’s meeting scheduled for Wednesday, where policymakers are anticipated to share their insights on the economy and interest rate forecasts. Many investors believe the Fed is finished tightening, following comments from Chair Jerome Powell indicating that increasing long-term yields lessen the need for additional rate hikes. However, some experts suggest that another increase could be possible during the Fed’s December meeting. If the Fed signals an intention to maintain current rates through the upcoming year, it may strengthen expectations for further increases in Treasury yields, which have recently reached levels not seen in over 15 years, contributing to a significant market sell-off. The index has seen a drop of more than 10% from a year-high recorded in late July, although it remains nearly 8% higher for the year.

2. Nonfarm Payrolls Data
A pivotal economic report is set for release on Friday: the nonfarm payrolls data for October. Following an impressive addition of 336,000 jobs in September, economists predict a more moderate increase this month, which still aligns with a strong labor market. The unemployment rate is likely to remain unchanged, while year-on-year wage growth is expected to decrease, potentially reaching a post-pandemic low. This trend could support the Fed’s view that inflationary pressures are diminishing and that further rate hikes may not be necessary. Ahead of this key report, market participants will also analyze third-quarter employment cost data on Tuesday to gauge wage growth trends.

3. Earnings Reports
Apple is set to dominate the earnings spotlight this week, reporting on Thursday. As the largest company by market capitalization, Apple’s performance has been a significant factor in the rise of equity indexes this year, alongside other major U.S. tech stocks. However, the ongoing earnings season has seen mixed results from various tech giants, with shares of Alphabet and Tesla declining post-report. While the tech sector has fallen 11% from its peak, it still shows nearly a 30% increase year-to-date. Consumer spending trends will also be closely monitored, with various companies reporting results throughout the week, including McDonald’s on Monday, Caterpillar and Pfizer on Tuesday, Mondelez on Wednesday, and Starbucks and Eli Lilly on Thursday.

4. Bank of England Meeting
The Bank of England will hold its second-to-last meeting of the year on Thursday, where officials must decide whether to resume increasing interest rates after pausing in September following 14 consecutive hikes. Investors expect the central bank to maintain rates at a 15-year high of 5.25%, while allowing for future hikes if necessary. Policymakers are likely to emphasize that rates will need to stay around current levels for the foreseeable future, even as signs suggest the economy is stagnating. The Bank will also update its quarterly forecasts, which in August projected economic growth of just 0.5% for both 2023 and 2024, reflecting a cautious outlook from Governor Andrew Bailey.

5. Eurozone Inflation and GDP
In the Eurozone, the European Central Bank recently decided to keep interest rates steady after implementing aggressive hikes. Ahead of its final meeting of the year, Tuesday’s data on inflation and GDP will be critical. Preliminary results on consumer price inflation are expected to show a decline in the headline rate for October, edging closer to the ECB’s 2% target, despite ongoing high energy costs presenting a risk of upward pressure. GDP data is anticipated to reveal a contraction in the Eurozone economy during the third quarter, marking a meager annual growth rate. During a recent address, ECB President Christine Lagarde suggested a continuation of current policy and countered speculation regarding potential rate cuts.

This week is poised to be consequential for investors, with multiple factors influencing market dynamics.