What you should know this week

Stocks closed another week at record highs as investors began to digest quarterly earnings releases and debate intensified over what the Federal Reserve will do at its November meeting.

This week, the Nasdaq (^IXIC), S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) all rose more than 1%, with both the Dow and S&P 500 closing at all-time highs on Friday.

Next week, a monthly retail sales report will lead the economic calendar as investors gauge whether the economy is picking up speed following a surprisingly strong September jobs report.

In corporate news, results from Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS) will round out results from the major banks, while reports from United Airlines (UAL) and Netflix (NFLX) will also highlight the week.

A construction argument for no-cut November

Speculation grew last week that the Federal Reserve would not cut interest rates further at its November meeting. The September jobs report, which included another drop in the unemployment rate and one of the highest monthly wage gains of the year, helped allay fears that the job market was rapidly deteriorating.

On Thursday, the latest Consumer Price Index (CPI) report showed core prices rose more than expected. On Friday, the latest Producer Price Index (PPI) showed a similar story, with core prices rising 2.8%, while Wall Street expected a 2.6% rise.

Some have argued that given this data – as well as recent minutes from the Fed’s September meeting showing that “some” officials supported a smaller rate cut – the central bank is likely to keep rates steady in November.

“Unless inflation rises so dramatically toward 2% and there is no crisis in the labor market that I don’t foresee, I don’t think there is anything that gives the Fed any reason to cut rates further this year.” “Eric Wallerstein , chief market strategist at Yardeni Research, told Yahoo Finance.

On Friday, markets put the odds that the Fed won’t cut interest rates in November at about 18%, down from a 3% chance a week earlier, according to the CME FedWatch tool.

Retail reading

Stronger-than-expected economic data has helped drive the “no cut” discussion. Investors will get another update in that department this week with the release of the September retail sales report on Thursday.

Economists expect retail sales to rose 0.2% in September from the previous month. Retail sales rose 0.1% in August, defying the decline economists had forecast.

“Retail sales in particular could be a significant market mover as variance in the range has increased and scrutiny over consumer health has intensified,” Jefferies’ economics team led by Thomas Simons wrote in a note to clients on Friday. “We would caution you not to read too much into any deviation from consensus (up or down) as retail sales measure spending with a very heavy weighting of goods rather than services and are measured in nominal terms. The weakness could simply be due to “leading to continued disinflation or deflation in goods.”

Netflix is ​​taking over the big screen

The major banks have largely passed Wall Street’s test at the start of earnings season. Investors’ focus will continue to be on financials early in the week with reports from Morgan Stanley, Goldman Sachs and Bank of America before turning to Netflix results after the market close on Thursday.

The streaming giant’s stock is up about 50% this year and is trading near an all-time high. Wall Street expects Netflix to report earnings per share of $5.16 on revenue of $9.77 billion. This would represent nearly 40% year-over-year earnings growth.

But there’s a heated debate on Wall Street about whether or not the stock can sustain its massive rise. Citi analyst Jason Bazinet believes Netflix’s announcement of further price increases in the US could be a catalyst for the stock in the near term.

“We expect Netflix shares to trade higher following the announcement of a price hike in the US, but we also expect shares to eventually trade lower as investors’ hopes for a $25 per share EPS rise US dollar will be wiped out in 2025,” Bazinet wrote.

Yields are rising

The 10-year Treasury note (^TNX) is hovering near 4.1% for the first time since late July.

The 10-year note has now gained about 30 basis points in the past week as investors have scaled back their expectations for rate cuts amid signs that inflation may be more stubborn than initially thought while economic growth data remains stable.

In recent years, higher yields have largely been a drag on stocks. But Michael Kantrowitz, chief investment strategist at Piper Sandler, told Yahoo Finance on Thursday that yields probably haven’t risen enough yet to cause too much headwind.

“I don’t think this rise in interest rates is too concerning for stocks overall,” Kantrowitz said. “But where it shows is in leadership.”

Kantrowitz noted that areas such as real estate (XLRE) and the small-cap Russell 2000 index (^RUT), which had benefited from investors’ expectations of lower interest rates, lagged given the recent rise in the 10-year yield.

For now, Kantrowitz added, rising interest rates are driving market leadership rather than weighing on the S&P 500 index.

“If interest rates continue to rise, I don’t think it’s a big problem for stocks unless it lasts, I would say, for a couple of months,” he said.

Monday

Economic data: New York Fed 1-year inflation expectations, September (3% previous)

Result: No significant income.

Tuesday:

Economic data: Empire Manufacturing, October (0.5 expected, 11.5 previous)

Result: Bank of America (BAC), Charles Schwab (SCHW), Citi (C), Goldman Sachs (GS), JB Hunt (JBHT), Johnson & Johnson (JNJ), Progressive (PGR), State Street (STT), United Airlines (UAL), UnitedHealth Group (UNH), Walgreens Boots Alliance (WBA)

Wednesday

Economic data: MBA mortgage applications, week ending October 11 (-5.1% previous); Import Price Index month-on-month, September (-0.3% expected, -0.3% previous); Export price index month-on-month, September (-0.3% expected, -0.7% previous)

Result: Abbott (ABT), Alcoa (AA), ASML (ASML), Citizens (CIA), Discover Financial Services (DFS), Morgan Stanley (MS)

Thursday

Economic data: Initial jobless claims, week ending October 12 (previously 258,000); Retail Sales Month-Over-Month, September (0.2% Expected, 0.1% Previous); Retail sales excluding auto and gasoline, September (0.3% expected, 0.2% prior); Philadelphia Fed Business Outlook, October (2.9 expected, 1.7 forecast); Industrial production month-on-month, September (0% expected, 0.8% previous); NAHB Housing Market Index, October (42 expected, 41 expected); Leading index, March (-0.1% expected, +0.1% previously); Existing Home Sales MoM, March (-5.1% expected, 9.5% so far)

Result: Netflix (NFLX), Blackstone (BX), Travelers (TRV), First National Bank (FBAK), Western Alliance (WAL), WD-40 (WDFC)

Friday

Economic data: Month-on-month construction starts, September (-0.9% expected, 9.6% previous); Building permits month-on-month, September (-0.3% expected, 4.9% expected)

Earnings: Ally Financial (ALLY), American Express (AXP), Comerica (CMA), Procter & Gamble (PG)

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

Click here for a detailed analysis of the latest stock market news and events affecting stock prices

Read the latest financial and business news from Yahoo Finance