October Fed Policy Meeting, Apple Earnings In Focus; The Week Ahead

dreamstimeU.S. stocks rallied on Friday and the dollar strengthened following news of an interest rate cut from the People’s Bank of China, marking the sixth rate cut in less than 12 months along with a decision to lower the reserve requirement that banks must hold.

The accommodative move from China’s Central Bank is a sign that policymakers acknowledge that China’s economy is cooling and is intended to spur economic growth to help the Asian giant to meet it’s 7 percent annual GDP goal for 2015 which comes on the heels of Beijing reporting last Monday that China’s 3rd quarter GDP slipped below 7 percent and reached 6.9 percent.

Last Thursday another central bank made headlines when European Central Bank President Mario Draghi announced that the ECB is “ready to act” if needed to help revive economic growth in the 19 member currency zone.

Investors took those two accommodative monetary policy signals from China and Europe positively on Friday alongside stronger than expected corporate earnings reports from companies such as Amazon and Microsoft which were supported by their cloud computing businesses and Alphabet (Google) which announced a 5 billion share buyback and saw solid growth in their mobile search revenue and You Tube advertising.

This week investors will watching closely to see what the U.S. Federal Reserve will decide at their October 2 day policy meeting. An interest rate decision is due on Wednesday October 28th when the meeting ends and no press conference is scheduled after the rate decision is reached.

Although it’s possible that the Federal Reserve could decide to raise interest rates, most economists are expecting a later interest rate hike, more likely in December or else in 2016 due to a combination of  weak inflation, soft non-farm payroll job reports over the past 2 months, slower global growth, and a strong U.S. dollar.

This Friday Fed officials and investors will pay close attention to an important inflation report, core personal consumer expenditures (PCE)-core, the Fed’s preferred inflation gauge, for signs about whether inflation in September moved closer to the Fed’s 2 percent inflation target.

Economists from briefing.com forecast a gain of 0.1 percent in September with core PCE, which could match the 0.1 percent increase in August.

Low oil prices and a strong dollar are putting a lid on inflation.

This week will see a deluge of economic data released in the middle of corporate earnings season.

New home sales for September will be reported on Monday followed by durable orders (September) on Tuesday alongside Consumer confidence (October) and Case-Shiller 20 city index (August).

On Tuesday Apple will report corporate earnings for the fiscal period ending in September.

Wall Street analysts are expecting Apple to report EPS of $1.88 on revenues of $51.1 billion.

Last year during the same quarter, Apple reported EPS of $1.42.

Investors are expected to pay close attention to iPhone sales because they account for the largest segment of Apple’s revenues.

Wall Street analysts are expecting 46-49 million units sold this past quarter with the consensus estimate at 48 million units.

On Wednesday the Fed will make their rate decision at the end of the day.

On Wednesday morning before the meeting revised third quarter GDP results will be posted along with chain deflator (adv.).

The last 3rd quarter GDP reading came in at 3.9 percent.

Economists from briefing.com expect a drop to 3.2 percent in the latest reading due on Wednesday.

Other economic data on Wednesday include pending home sales (September), MBA Mortgage Index, initial and continuing jobless claims, and Crude Inventories.

On Thursday the Bureau of Labor Statistics will report PCE- core for September along with personal income and personal spending for September.

The employment cost index for the third quarter will also be released.

On Friday Chicago PMI (October) and Michigan Sentiment- final for October will be reported.

On Friday the Bank of Japan will make a monetary policy decision.

-Johnathan Schweitzer             schweitz31@gmail.com

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