What to Watch for This Week

U.S. Housing Market Data on Deck

On Tuesday, investors tracking the housing market will begin to digest a group of insightful reports about the sector. The housing market reports that are due will shed light on current sentiment for U.S. home builders, new housing starts and building permits, as well as the volume of sales for existing homes.

  • Home Builder Confidence Index (HMI) – On Tuesday morning, we will get the HMI report for the month of October. The HMI report serves as a confidence gauge for the U.S. home builder industry. The HMI index has been trending down since the year’s high in July when it peaked at 56.
  • The consensus prediction for October is that the HMI index will come in at 45. This report follows the September report of 45.
  • Housing Starts & Building Permits – Following Tuesday’s HMI report, on Wednesday morning investors in the housing sector will see the latest reads from the Census Bureau on new housing starts as well as new building permits issued. This data is significant as it reflects how much work U.S. home builders currently have scheduled. Additionally, it can provide helpful information about the current state of the economy and the consumer’s appetite for spending on large purchases such as housing.
  • New Housing Starts & Building Permits are expected to come in at 1.37 million & 1.45 million respectively.
  • Existing Home Sales – To close out the housing sector data for the week, Thursday will give us the existing home sales report for September. The volume of U.S. existing home sales has been steadily trending down since the year’s high in February.
  • Existing Home Sales from September are expected to come in at 3.9 million.
  • The U.S. home builder’s sector remained quite resilient throughout the first half of this year and was one of the strongest sectors across the market, despite the rapid rise in interest rates. However, in August the sector finally seemed to breakdown as Treasury yields broke out to new highs and homebuilder sentiment faded. Should the various reports due next week bring weaker than expected data, investors should assume further downward pressure on the U.S. home building sector.
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Federal Reserve Watch

All eyes are fixed on the FOMC’s upcoming meeting, scheduled to begin on October 31st. This week we are expected to hear from eleven different Fed Governors & Fed Presidents at various speaking engagements, including Fed Chairman, Jerome Powell. With the breadth of exposure these Fed members will have over the coming week it is likely we will get a strong sense of where the FOMC stands regarding their next policy decision.

  • Last week, we heard from numerous Fed members that expressed caution regarding any future Fed Funds Rate hikes. This careful and less-hawkish tone from Fed members has the CME Group projecting greater than a 91% probability that at the next FOMC meeting the Fed is likely to maintain the target range between 5.25%-5.50%.  Should the Fed decide to either raise or lower their Fed Funds Rate, this divergent move would likely spook investors, adding to the recent volatility seen in the markets.

All About the Earnings

Q3 Earnings Season is underway and continues into this week as the remainder of the major U.S. Banks & Financials report. On Wednesday, Tesla, Inc. of the mega-cap tech “Magnificent 7”, will be the first of the group to report their Q3 results. Additionally, one more large tech company, Netflix, Inc. is scheduled to post their Q3 earnings.

  • The major Financials wrap up their reporting as Bank of America Corporation, Goldman Sachs Group, Inc., & Morgan Stanley are due. Last week the four major banks that reported all beat expectations, posting higher than expected earnings. We will see if these companies can post strong results this week, continuing the momentum for the sector.
  • BAC earnings are expected to come in at $0.80 EPS.
    • GS earnings are expected to come in at $5.32 EPS.
    • MS earnings are expected to come in at $1.27 EPS.
  • Tesla, Inc. is set to report their Q3 earnings after market close on Wednesday. For the better part of the last three months, TSLA stock has been rangebound in a consolidation pattern. If they are able to report an upside surprise, possibly this could boost the stock higher.
  • TSLA earnings are expected to come in at $0.64 EPS.
  • America’s favorite streaming service, Netflix, Inc. is scheduled to share their Q3 earnings with investors after the bell on Wednesday. NFLX has been stuck in a downtrend recently as investors have feared that the company’s new ad-supported tier & subscription sharing crackdown strategy may be off to a slower start than they hoped for. Possibly, when they report, NFLX could provide some clarity and updates about this.
  • NFLX earnings are expected to come in at $3.47 EPS.

Thank you for reading this week’s edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week’s important market events.

Thanks,

Blane Markham

Author, Weekly Market Periscope

Hughes Optioneering Team

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