The Federal Reserve is widely expected to raise interest rates three-quarters more than Wednesday, but that’s what it signals about future rate hikes that should boost markets. The central bank’s two-day meeting Tuesday and Wednesday comes in a week, where investors will also be on high alert for more guidance on corporate earnings ahead of the next reporting season. in October. FedEx roiled markets after withdrawing its full-year earnings guidance on Thursday, warning of global weakness in its delivery business. Stocks fell sharply for the week, with the S&P 500 index ending at 3,873, down 4.8% and its worst week since June. The stock market worsened after the announcement just Consumer price numbers on Tuesday showed inflation will be hotter and more widespread than expected in August. A multi-day rally was brought to an abrupt halt and the Dow lost 1,276 points, or nearly 4%, on its worst stock market day since June 2020. After the CPI, The market turns to prices in an even more aggressive rate hike by the Fed. path. That accelerated a shorter-term higher rate of Treasury yields, which pulled investments into fixed-income investments as investors jumped into unprecedented yields. seen since 2007. “When you can get a 4% yield on the front end of the yield curve, that’s an attractive alternative,” said Jack Ablin, chief investment officer at Cresset Capital. “The bond market used to be competitive for capital with both hands tied behind their backs. Now it’s not.” Fed ahead There will be only a handful of data releases next week, but they will provide an important window into how the housing market is dealing with the Fed’s rate hike cycle. August housing starts on Tuesday and existing home sales are on Wednesday, and the data is expected to show a slowdown as mortgage rates rise. “The problem with that is ‘first wins, heads lose’,” said Art Hogan, chief investment strategist at National Securities. “Good economic data has been bad for the market, but we don’t see bad economic data as good for the market. Maybe we’ll flip that switch if you see housing data drop enough.” He said that means the Fed raising interest rates is slowing the economy, as intended. Strategists say the most important information investors are looking for from the Federal Reserve will be what’s on the dot graph, the so-called Fed rate forecast. Following the release of the CPI, the futures market for funds on offer priced in a jump higher in interest rates, or the end point where the Fed stops raising. It was priced at 4% in April. “It’s really the upper limit of 4.50% now,” said Ben Jeffery, fixed income strategist at BMO. “The potential shock we could see on Wednesday may lie in the dot plot, not in the scale of the rate hike.” The market is also pricing in the possibility of a slight 100-basis-point increase, but instead, most economists are expecting a third 75-basis-point gain. [A basis point equals 0.1%] Hogan said the stock market was “terrified by the ticking two-year higher yields,” which rose above 3.9% on Friday. “The two-year term is really an expression of what we think of the end-of-term interest rate, and that’s why it’s gone up so strongly,” he said. “All that said, it’s really hard in a market where the good news on economic data is bad and the bad data is bad, and the only thing we can rely on is improving the index in terms of economic data. We’re unlikely to find a positive catalyst in the near term.” The next key inflation report is the PCE deflation tool, housed in personal consumption spending data, coming out. 30 September. That measure of inflation is closely watched by the Fed. The next CPI report is scheduled for October 13. Earnings and warnings There is also some earnings in the coming week, including General Mills and homebuilders KB Home and Lennar on Wednesday. , and Costco on Thursday. “If you look at the weekly upgrade versus downgrade earnings, it’s pretty stable,” says Ablin. “Companies with open-ended offers, every reason in the books to lower expectations. I think we’re going to see earnings fall, but the majority of that is actually foreign. The FedEx announcement is actually foreign. is about China and Europe.” General Electric also warned on Thursday that supply chain disruptions could affect its cash flow forecast. Ablin said he hopes to hear more warnings from multinationals, especially from companies with a lot of dollars. Foreign sales are worth less when the dollar appreciates. “We still have an entirely small-cap weighting,” he said. “That would benefit small-cap companies and companies that do most of their business in the country.” The dollar index was trading at a 20-year high and the euro traded flat against the dollar on Friday but slipped below $1. “What I am really watching is a reversal in the dollar,” Ablin said. “Once investors feel the light at the end of the tightening tunnel, we will see the dollar reverse and to me that’s a sign that it’s safe to get into the stock market.” and we should see foreign stocks take the lead higher.” Technically charting strategists have been keeping a close eye on the S&P 500 index, to see if it breaks below the 3,800 level. That level could open the door to testing the June low, at 3,636. The last two weeks of September were just as bad as for stocks. September through early October was the worst period for the S&P 500. “This was the worst part of September. It was the bad part,” Hogan said. “The good news is that we’re in the midterms so the last two months of the year are generally positive.” Last week scheduled Monday Earnings: Autozone 10:00 a.m. NAHB Survey Tuesday Earnings: Stitch Fix, Aurora Cannabis FOMC begins two-day meeting 8:30 a.m. Housing starts 8:30 a.m. Building permits Build Wednesday Earnings: Lennar, KB Homes, General Mills, Steelcase, Trip.com 10:00 a.m. Existing Home Sales 2:00 p.m. FOMC Statement 2:30 p.m. Fed Chairman Jerome Powell Briefing Tuesday Earnings Year: Costco, Darden Restaurants, Accenture, FactSet, Manchester United 8:30 a.m. Initial Statement 8:30 a.m. Second Quarter Current Account 10:00 a.m. Leading Index Friday 9:45 a.m. Product PMI output 9:45 a.m. Services PMI