Stocks Up Again, All Eyes On This Afternoon's Fed Announcement  Image: Bigstock Stocks closed higher again yesterday with all of the major indexes in the green. The week is off to a great start so far. There were plenty of beats before the opening bell yesterday with Pfizer posting a 46.9% positive EPS surprise, Marathon Petroleum posting a 4.49% positive EPS surprise, and Cameco posting a 118% positive EPS surprise. After the bell the beats kept coming with Advanced Micro Devices reporting a 2.94% positive EPS surprise, and a 1.65% positive sales surprise. That translated to a 4.47% quarterly EPS growth rate vs. this time last year, and a 4.12% positive sales growth. They were up 2.41% in the regular session before announcing earnings, and flat to slightly lower in after-hours trade. Today we'll get as many as 412 companies set to report including Humana (before the open), Qualcomm (after the close), and Airbnb (after the close) to name a few. In other news yesterday, the Case-Shiller Home Price Index (unadjusted) increased by 0.4% m/m, and 2.2% y/y vs. estimates for 1.6%. The Chicago PMI came in at 44.0 vs. last month's 44.1 and views for 45.0. And Consumer Confidence slipped to 102.6 vs. last month's upwardly revised 104.3, but beat the consensus for 100.0. Today we'll get MBA Mortgage Applications, the ADP Employment report, the ISM Manufacturing Index, the PMI Manufacturing report, Construction Spending, and the Job Openings and Labor Turnover Survey report (or JOTLS for short). But what everybody is really waiting for is this afternoon's FOMC announcement, and Fed Chair Jerome Powell's press conference. The Fed is widely expected to keep rates steady today. But they do have another meeting in December, so the speculation will immediately shift to the next meeting and what happens then.
Over the last several weeks, Mr. Powell and several of his Fed colleagues have acknowledged that rising yields, especially on the long bond, have tightened financial conditions significantly in recent months, and that may preclude the Fed from having to tighten further. You can be sure Mr. Powell will be asked about that at his press conference following the announcement. Along with his outlook on rate cuts next year. The Fed previously forecast cutting rates by -50 basis points in 2024, and another -100 bps in 2025. He will likely be asked if that's still the Fed's expectations.
Regardless of whether the Fed hikes one more time or not, it's clear they are near the end of their rate hike cycle. The real question now seems to be how 'long' does 'higher for longer' mean? After a spectacular first 7 months of this year, it's been a rough last 3 months. But as you know, pullbacks and corrections are common. Every bull market has them. In fact, stocks usually pull back roughly 3-4 times per year, while corrections take place on average of about once a year. Based on this week's auspicious start, we might very well have turned the corner and stocks could be headed back up for their long awaited Q4 rally. Remember, history shows if the market is up more than 10% thru July (which it was), and August is down (which it was), the remainder of the year is up 100% of the time with an average gain of 9.9% (median of 8.7%). With September and October being down as well, the market is going to have to rally even more if it hopes to match the average/median mentioned above. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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