Market Outlook: Central Banks Pause Rate Hikes as Stocks Rally
Stocks on Track for Best Week of the Year
Markets are anticipating a pause in interest rate hikes by central banks, along with a decline in inflation and strong corporate earnings. This positive sentiment has propelled stocks towards what could be the best week of 2023.
Focus on U.S. October Employment Report
The U.S. October employment report, set to be released today, will be a crucial indicator of economic strength in the final quarter of the year. Despite expected distortions related to strikes, the report’s findings will carry significant weight.
Expectations for Slower Job Growth
After a soft reading on private sector jobs earlier this week and a slight increase in weekly jobless claims, it is anticipated that employment growth will have slowed to around 180,000 new payrolls, compared to 336,000 in September.
Market Reaction and Hesitations
Following Thursday’s surge in stocks and bonds, driven by the assumption that major central banks have paused their rate hike campaigns, signs of a cooling labor market may be welcomed. However, some hesitancy remains due to underwhelming third-quarter results from Apple and downgraded fourth-quarter earnings growth estimates on Wall Street.
Interest Rate Relief Boosts Markets
The relief brought by the pause in interest rate hikes by the Federal Reserve, European Central Bank, and Bank of England is evident in the market. U.S. Treasury yields have dropped significantly, and market volatility has subsided.
Positive Economic Indicators
Economic data, such as labor statistics showing increased worker productivity and decreased labor costs, have contributed to renewed market optimism. Similarly, Chinese stocks saw improvement despite challenges in new orders and employment.
Remaining Factors to Watch
Investors will keep an eye on the ongoing conflict in Gaza as U.S. Secretary of State Antony Blinken seeks a pause in the war. Additionally, the cryptocurrency world may experience a moment of reflection following the conviction of FTX founder Sam Bankman-Fried for financial fraud.
Key Developments for the Day
- U.S. October employment report, ISM, and S&P Global October U.S. service sector surveys
- Various U.S. corporate earnings releases
- Speeches by Federal Reserve and Bank of England officials
- Visit by U.S. Secretary of State Antony Blinken to Israel
By Mike Dolan
