The Fed ended months of speculation when it raised interest rates last week. With that round of uncertainty resolved, Wall Street may shift its focus back to more everyday matters, such as fuel and food sales—at least, partly.
Costco Wholesale could provide clues on how consumers are faring when it hands in its quarterly results. Drivers turned to the warehouse club as gas prices shot up, buying a record amount of its discounted fuel last quarter. Oil and gas prices are climbing again, though a surge in gas sales doesn’t always translate into more in-club spending, Costco has said. Major food and dining companies are also slated to report, including General Mills, Cracker Barrel, and Darden Restaurants, which operates Olive Garden and LongHorn Steakhouse. General Mills, known for Cheerios and Cocoa Puffs, warned of “significant consumer stress” earlier this year and cut its outlook. Still, some restaurant chains have had recent success with value-focused options.
Updates from other sectors are also on the docket. Meta Platforms may provide fresh insight on its AI strategy at a developer conference, while AutoZone’s results may shed light on how the trade war with Canada is impacting the vehicle and car part industry. And don’t worry: There will be plenty for Fed watchers to feast on, too. Several events may appeal to those still thinking about the Fed’s first rate hike in three years: Five monetary policymakers are slated to speak at conferences over the course of the week.
What analysts are saying about U.S. equities
UBS: “We believe the equity rally will continue over the next six to 12 months. Of course, rate hikes will not produce more oil or chips, and rising government debt will complicate the outlook. But we have learned over the years that investors should not automatically assume that geopolitical shocks will cause lasting market weakness or that debt challenges will affect every asset negatively. With earnings growth still strong and lower inference costs stimulating AI adoption, we believe the fundamental supports for the rally remain intact.”
JPMorgan: “While in the very short term there could be some legs to market volatility, given that so far stocks are down only a few percentage points from record highs, we argued last week that equities will be able to absorb higher bond yields, and we continue to believe that October will see markets realigning with the fundamental backdrop more closely, and here we see the supportive setup persisting. We believe corporates remain in a strong position, in terms of profitability and in terms of balance sheets, in all the key regions—U.S., Europe, and Japan.”
Morgan Stanley: “In line with our long-standing views, earnings strength has offset valuation compression. This is a hallmark of a mid-cycle transition, as is quality leadership, which we expect to continue. We view the Fed hike as credibility-enhancing, with energy prices still the near-term risk.”
Evercore ISI: “The bull market has further upside. What would make us revise our view is if the pass-through from $100 Oil and a 5% 10-year yield widens credit spreads materially; broadly not evident. Retain long exposure to core AI themes in Info. Tech., Cons. Disc., and Comm Svcs. But with pressure points still existent, fall seasonality, and the history of volatility after the Fed begins hiking and ahead of the Midterms, playing near-term “defense” is inexpensive.”