Fed Holds Rates Steady, Powell's Cautious Stance Soothes Investors, Labor Market Softens: The Week In The Markets

Markets bounced back decisively this week, shrugging off prior volatile months marked by heightened geopolitical tensions. The resurgence of risk sentiment ignited a relief rally in both equities and bonds, with investors embracing the Federal Reserve's decision to hold steady on interest rates.

Simultaneously, investors welcomed a wave of robust earnings reports.

Federal Reserve maintains interest rates at 5.25%-5.5%, leaves future options open: During its November meeting, the Federal Reserve opted to maintain interest rates within the range of 5.25% to 5.5%, in line with market expectations, refraining from making commitments about future actions. The economist consensus now overwhelmingly leans toward the Federal Reserve refraining from further interest rate hikes, and speculators have already priced in the possibility of a first rate cut by June 2024.

Powell suggests meeting-by-meeting approach: During his Wednesday press conference, Fed Chair Jerome Powell acknowledged the Fed’s policy stance is restrictive and could exert downward pressure on inflation. He also recognized that tighter financial conditions, such as rising Treasury yields or increased inflation, influence monetary policy. While Powell displayed a cautious stance, he did not entirely close the door on potential future rate increases.

Labor market shows signs of softening: The pace of job gains slowed to 150,000 in October, marking the lowest figure since June. This represented a decline from the robust 297,000 jobs added in September and fell short of the expected 180,000. Additionally, the unemployment rate edged up to 3.9%.

Apple delivers Q4 beat, but iPhone revenue comes in shy of estimates: Apple Inc AAPL reported fourth-quarter results on Thursday, exceeding estimates, with better-than-expected revenue from Services and iPads. The company achieved record-high Services revenue and increased its active installed base of devices, although iPhone revenue of  $43.805 billion fell slightly short of estimates.

Chipmakers continue to outperform expectations: Shares of Advanced Micro Devices, Inc. AMD surged by 9.7% on Wednesday following better-than-expected earnings and revenue in the last quarter, marking its strongest week of gains since May. Qualcomm Inc QCOM rose by 6% on Thursday, recording its best-performing week of the year.

Weight loss drugmakers beat estimates, highlight supply risks: Novo Nordisk A/S NVO reported a remarkable 764% increase in sales for the obesity drug Wegovy, reaching DKK 9.65 billion ($1.38 billion) and a 56% revenue increase from its diabetes drug Ozempic, reaching DKK 23.9 billion. Eli Lilly And Co LLY reported third-quarter sales of $9.49 billion, a 37% year-over-year increase, surpassing the consensus estimate of $8.95 billion.

What To Watch In The Week Ahead: The upcoming week is expected to be relatively quiet in terms of data releases. The spotlight event will be the release of the University of Michigan Consumer Sentiment Index for November, scheduled for Friday. Additionally, investors may want to monitor the customary weekly jobless claims report on Thursday. 

Upcoming Earnings To Watch: Monday will see Vertex Pharmaceuticals Incorporated VRTX revealing third-quarter results. Tuesday brings earnings reports from Gilead Sciences, Inc. GILD, Uber Technologies Inc UBER and Occidental Petroleum Corp OXY. On Wednesday, all eyes will be on Walt Disney Co DIS, and Thursday will feature Becton Dickinson and Co BDX's earnings announcement.

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