Investors are preparing for Q3 2017 earnings season which heats up this week with Alcoa reporting earnings on Wednesday in a week that will be light with economic data.
U.S. sock indexes are trading at all time highs, largely amid hopes that President Trump will enact tax reform which remains high on his priority list, although he is expected to face resistance from Democrats and some fiscally conservative Republicans after preliminary analysis from the non-partisan Tax Policy Center revealed that Trump’s proposed tax plan stands to benefit the wealthiest 1 percent and corporations more than any other group while adding to the U.S. federal deficit by $2.4 trillion over ten years and $3.2 trillion over the 2nd decade.
Crude oil is trading high on Monday after Iraqi military forces have been engaged in armed conflict on Monday against Kurdish peshmerga forces over Kurdish held oil fields in northern Iraq.
Yesterday Fed Chair Janet Yellen gave a speech on the U.S. economy and monetary policy during an international banking seminar in Washington D.C. where she said that the hurricanes in September will likely result in some setback for U.S. GDP growth in the third quarter but rebound afterwards.
Yellen admitted that inflation readings over the past several months have been “surprisingly soft” and noted the 12-motnth change in core PCE prices has fallen to 1.3 percent.
Yellen predicted that the soft inflation readings will not persist, and with the ongoing strengthening of labor markets, she expects inflation to move higher next year.
However, she also explained that their understanding of the forces driving inflation is “imperfect”, and said that she and the other Fed participants “recognize that this year’s low inflation could reflect something more persistent than is reflected in our baseline projections.”
“The fact that a number of other advanced economies are also experiencing persistently low inflation understandably adds to the sense among many analysts that something more structural may be going on” Yellen said.
Earnings and U.S. Economic Calendar
The vast majority of S&P 500 companies will report Q3 2017 earnings over the next few weeks but 6 percent of the companies in the index have already reported earnings.
According to FactSet, “Hurricanes have been cited by the highest number companies in the index to date as a factor that either had a negative impact on earnings or revenues in Q3, or is expected to have a negative impact on earnings and revenues in future quarters.”
Fed Chair Yellen will give another speech on Friday but during this coming week the economic data will be light.
On Monday Empire State Manufacturing data is due for October.
On Tuesday import and export prices are reported for September. Industrial production (Sept.) and Housing Market Index will also come into focus.
On Wednesday Housing Starts for September and MBA Mortgage Applications are due along with the Fed’s Beige book and a crude oil- petroleum report. Fed Participants William Dudley and Robert Kaplan will give speeches.
On Thursday weekly jobless claims, Leading Indicators (Sept.), and Natural Gas report.
On Friday Existing Home sales (Sept.) and Fed Chair Janet Yellen speaks during a speech.
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