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| What we're watching | - Fed focus, finally: The Federal Reserve will reveal announce its latest monetary policy decision at 2:00 p.m. ET. Wall Street expects the Fed to keep rates steady in a range of 5.25%-5.50%, while markets will be looking for any clues Fed Chair Jerome Powell offers on what "higher" and "longer" might mean in the new "higher for longer" interest rate world.
- Treasury debt announcement: Hours before the Federal Reserve's interest rate decision, investors will be hyper-focused on the Treasury Department's new borrowing plan. Known as the quarterly refunding announcement, the plan will outline Treasury's plans for future bill, note, and bond sales amid elevated interest rates.
- Earnings season rolls on: A slew of high-profile companies will report earnings on Wednesday with Airbnb (ABNB), DoorDash (DASH), CVS Health (CVS), Yum Brands (YUM), Qualcomm (QCOM), PayPal (PYPL), and Roku (ROKU) among the most notable names on the docket.
Follow all the action throughout the day on Yahoo Finance and on the Yahoo Finance app. |
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| Note: Data is as of the time of opening this email. To view real-time markets data click here. |
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| | Two things can stop the wealthiest Americans from spending | | Today's Takeaway is by Julie Hyman, Anchor, Yahoo Finance Live Consumer spending has powered the US economy to nearly a full year of defying expectations.
But exactly who is doing that spending is changing. And opening up a new question about the next phase of this economic expansion.
A new report from economists Morgan Stanley published late last month showed the top quintile of earners — or households in the top 20% of income — has accounted for 45% of all consumer spending between 2020 and 2022. Since 2004, this cohort has typically accounted for closer to 39% of all spending.
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| So the question now is what would would make this wealthy cohort slow or stop spending.
On this front, Morgan Stanley's team has some ideas.
Historically, rich people have slowed spending when their financial assets lose value, i.e. stock prices drop like after the tech bubble, or real estate values fall like during the 2008 financial crisis.
As readers are well aware, stock and home prices have risen sharply since 2019, though Morgan Stanley expects the latter to stall out next year.
"Our outlook calls for high-income consumption to slow as the boom years of the post-Covid services recovery moves further into the rear view mirror," wrote the firm's economist Sarah Wolfe.
"And indeed our analysts who cover restaurants and luxury brands both point to an aspirational (middle-income) consumer that has begun pull-back spending on fine dining and luxury shopping. As wealthy households approach satiety as well, aggregate consumer spending will shift into a lower gear. For a sharper step-down, broad-based white-collar layoffs and [a] significant loss of wealth, particularly in housing, are key."
On the one hand, resilient consumer spending is a good thing. Just look at the first estimate of third quarter GDP released on Oct. 26 as an example.
This spending also supports demand for goods and services, contributing to the job market holding up and serving as the main reason the economy hasn't (yet) fallen into recession.
On the other hand, this robust spending is one of the factors contributing to the persistence of inflation, which hurts lower-income households more.
As McDonald's (MCD) CEO Chris Kempczinski pointed out on his company's earnings conference call this week, "One of the things that we saw industry-wide is that that low-income consumer, which we would say is $45,000 and under, was negative from an industry standpoint."
So, wealthy consumers appear to be doing fine. Lower-income consumers are hurting. These are dynamics many investors already have a beat on.
But what has weighed on lower-income consumers won't be what brings down bigger spenders, or the economy at large.
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| Stocks on the move | - Pinterest (PINS): The stock surged 19% on Tuesday after the company reported third quarter results that topped analyst estimates. Pinterest reported revenue of $763.2 million, higher than the estimated $744.1 million, amid a surge in monthly active users, which came in at 482 million versus the 473.46 million that was expected.
- Nvidia (NVDA): Shares fell about 1% after the Wall Street Journal reported the chipmaker could lose out on up to $5 billion in orders to China after the US imposed control restrictions on advanced AI chip exports.
- Caterpillar (CAT): Shares fell more than 7% after the machine maker's third quarter report signaled waning demand, despite easily beating earnings expectations. The company said it expects fourth quarter operating margin to be less than the previous quarter.
- JetBlue (JBLU), Spirit Airlines (SAVE): JetBlue shares fell 10% after the airline posted a wider-than-expected loss in the third quarter, in addition to reducing its full-year guidance. The disappointing results come the same day the antitrust trial of JetBlue's contested $3.8 billion acquisition of Spirit Airlines kicked off. Shares of Spirit fell about 13%.
—Alexandra Canal, senior reporter |
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| | Watch on Yahoo Finance Live | - 9:40 a.m. ET — Paul Reilly, Raymond James CEO, will join Yahoo Finance to talk about the company's earnings and the firm's outlook on the markets in 2024.
- 10:00 a.m. ET — Mario Harik, XPO CEO, will discuss the company's latest results and bring us the lowdown on the freight industry.
- 6:00 p.m. ET — Jamie Dimon, JPMorgan CEO, will sit down with Yahoo Finance's Brian Sozzi to discuss his latest thinking on the US economy, the future of the firm, and JPMorgan's small business summit, live from Frisco, Texas.
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| Chart of the day |
|  | | For more graphics like this, follow Yahoo Finance on Instagram. |
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| Earnings and economic calendar | | Wednesday - Economic news: FOMC Decision (5.25%-5.50% target ranged expected, 5.25%-5.50% previously); JOLTS job openings, September (9.2 million expected, 9.61 million previously); ADP private payrolls, October (+135,000 expected, +89,000 previously); Construction spending, September (+0.4% expected, +0.5% previously); Auto sales, October (15.2 million annualized rate expected, +15.67 million previously); ISM manufacturing PMI, October (49.1 expected, 49.0 previously); S&P Global manufacturing PMI, October, final estimate (50.0 expected)
- Earnings: Airbnb (ABNB), DoorDash (DASH), CVS Health (CVS), Yum Brands (YUM), Qualcomm (QCOM), PayPal (PYPL), Roku (ROKU), Estée Lauder (EL), GlaxoSmithKline (GSK), Electronic Arts (EA), Cheesecake Factory (CAKE), Apollo Global (APO), Zillow (ZG), AIG (AIG), Allstate (ALL), Avis Budget (CAR), Brinker (EAT), C.H. Robinson (CHRW), Wayfair (W), Etsy (ETSY), DuPont (DD), Kraft Heinz (KHC), Aflac (AFL), Ingersoll-Rand (IR), Humama (HUM), MetLife (MET), Norwegian Cruise Line (NCLH), Prudential (PRU), Scotts Miracle-Gro (SMG), Wingstep (WING)
Thursday - Economic news: Initial jobless claims, week of Oct. 28 (210,000 expected, 210,000 previously); Nonfarm productivity, third quarter (+4% expected, +3.5% previously); Factory orders, September (+1.7% expected, +1.2% previously)
- Earnings: Apple (AAPL), Moderna (MRNA), Eli Lilly (LLY), Paramount Global (PARA), Peloton (PTON), PENN Entertainment (PENN), Hyatt Hotels (H), Atlassian (TEAM), Ball Corp. (BALL), Cirrus Logic (CRUS), DraftKings (DKNG), Dropbox (DBX), Ferrari (RACE), Expedia (EXPE), GoDaddy (GDDY), Floor & Decor (FND), Kellanova (K), Marriott (MAR), Intercontinental Exchange (ICE), Molson Coors (TAP), Papa John's (PZZA), Palantir (PLTR), S&P Global (SPGI), Shake Shack (SHAK), Pitney Bowes (PBI), Skyworks Solutions (SWKS), Sweetgreen (SG), Universal Display (OLED), Wendy's (WEN), Yelp (YELP), Zoetis (ZTS)
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