Despite the drop on Friday, the S&P finished October with an 8.3 percent gain, the best monthly return since 2011. While hampered by losses from Twitter (TWTR) and GoPro (GPRO), the market rode higher on the strength of earnings reports from LinkedIn (LNKD) and merger talks between pharmaceutical heavyweights Pfizer (PFE) and Allergan (AGN). Crude oil closed above $48 per barrel and the yield on the 10-Year Treasury declined slightly.
The post-meeting statement released by the Federal Reserve last week downplayed international concerns and renewed the focus on domestic data as the main driving factors as to whether they will raise rates at the December meeting. The odds of a December rate hike now stand at 50 percent. Key data this week includes manufacturing PMIs. Productivity and labor costs will be out later this week, along with October’s employment report due out on Friday, the next to last before the December Fed meeting. China released their figure on Sunday night and it shows the sector still in contraction.
Other major economic reports due out reflect the state of manufacturing and the consumer, including light vehicle sales on Tuesday and hourly earnings on Friday. The U.S. trade deficit is expected to show a reduction on Wednesday due to the drop in oil prices. The mid-week release of the ISM non-manufacturing index will provide a gauge for the strength of the service sector economy. The consensus is for a slight decline from September. Consumer credit is anticipated to show an increase when the report is released on Friday. There will also be closely watched European and German PMI reports on Monday and respective service sector reports on Wednesday. These reports will be important with the market still digesting European Central Bank President Draghi’s comments about possible additional monetary easing in the future.
Earnings season continues with several well-known names scheduled to report this week. On Monday, the market will receive an earnings report from Visa (V) before the bell and AIG (AIG) after the close of trading. In addition to Sprint (S), Tuesday will see the release of Tesla’s (TLSA) third quarter results, which may reflect the impact of the company’s recent bad press. Facebook (FB), 3D Systems (DDD), Qualcomm (QCOM) and Whole Foods (WFMI) release results on Wednesday. The next day, the market will hear from Duke Energy (DUK), Disney (DIS) and Kraft Heinz (KHC).