Forecast for the Week: Corporate Earnings and Guidance are front and center

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The upcoming week will bring some key economic data that includes the closely watched Retail Sales Report for September. The markets will be watching this report to gauge the health of consumer spending as we head into the all-important holiday shopping season. Consumer spending makes up 70% of Gross Domestic Product (GDP) – so it is important to follow.

Corporate earnings season officially kicks off this week as the markets will be informed if the recent tariffs have impacted earnings. The forecast for earnings growth for S&P 500 companies will increase 21% in the third quarter of 2018, following 24% and 26% growth in the first and second quarters.

We had an early taste on Friday when J.P. Morgan Chase Bank and Wells Fargo both posted good earnings.

In addition to the earnings, the statements from corporations regarding the outlook for the future will be closely watched. If earnings and forward guidance are solid, it could push Bond prices lower, rates higher, while giving a boost to Stocks. Again, the opposite is also true.

One thing is for sure – volatility is back and something to consider in the weeks ahead.

Key Economic Reports This Week

• The Retail Sales report will be delivered on Monday.
• The NAHB Housing Market Index will be reported on Tuesday, with Housing Starts and Building Permits on Wednesday and Existing Home Sales on Thursday.
• Manufacturing data will be seen from Monday’s Empire Manufacturing Index followed by the Philadelphia Fed Index on Thursday.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Oct 12, 2018)