Stocks are set to exit October with a tail wind but will immediately face a Federal Reserve meeting in the first days of November that could help decide the course of trading for the rest of the year. The Fed is widely expected to raise its target fed funds rate by three-quarters of a point Wednesday, but it’s what central bankers signal about December and later that will matter most. Some economists expect that by the mid-December meeting, the central bank will be ready to scale back the size of its rate hiking to a half percentage point, or 50 basis points. There also is plenty of economic data in the week ahead, the most important being Friday’s September employment report. In addition, the coming week also is the busiest of the corporate earnings season, with about a third of the S & P 500 companies releasing results. “The key is Nov. 2 and what the Fed has to say,” said Quincy Krosby, chief global strategist at LPL Financial. She said policymakers like San Francisco Fed President Mary Daly have suggested the central bank could slow the pace of rate hikes at some point, and many market participants are now expecting that to happen in December. “The market is looking for either an outright comment or clues, either in the statement or in the press conference. … That’s going to be important,” Krosby said. “Historically, the market waits for the last Fed rate hike to be introduced and then the market climbs higher. The question is, with the backdrop we have … does the market wait for that last rate hike or does the market use the transition to a less hawkish policy to start investment?” As investors have become more convinced the Fed could slow down, stocks have rallied and bond yields have fallen. Yields fall when bond prices rise, and the closely watched 10-year yield was at 4.01% Friday afternoon from its recent high of 4.32% the previous Friday. Patrick Palfrey, senior U.S. equities strategist at Credit Suisse, said the Fed may not signal on Wednesday that it will step back from its aggressive policy, no matter what investors currently expect. “The question for the Fed is how do they balance the incremental slowdown we’ve seen in inflation against a still roaring economy,” he said. “At the end of the day, in order to tame inflation, the Fed is going to have to remain engaged.” Keith Lerner, chief market strategist at Truist, said the rate hike decision could have a big impact on how the market trades during a typically positive time for stocks….
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