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The Commerce Department is scheduled to release third-quarter gross domestic product (GDP) figures on Thursday. It is the broadest measure of economic output and shows that the U.S. economy expanded at an incredible pace from July to September despite rising interest rates, depleted savings due to the pandemic and high inflation. It will be.
Although the economy will slow, it is expected to continue growing until the end of the year. Some investors say the company may be looking at a year-end stock price rise.
Expectations that the economy will not gain further momentum could put the Fed on track to cut rates in 2024, as intense demand exceeding supply may keep upward pressure on prices. But how early in the year the Fed starts cutting rates will ultimately depend on the trajectory of inflation.
Fed Chair Jerome Powell said the central bank needs to see “below-trend growth” to be confident that inflation is on track to slow to the Fed's 2% inflation target.
Gregory Daco, chief economist at EY Parthenon, said: “The U.S. economy continued to show remarkable resilience over the summer, with surprisingly strong job growth and an unexpected uptick in consumer spending, leading to a “GDP growth is likely to exceed 5% annually.” he wrote in an analyst note.
“These signs of economic strength will fuel speculation that the economy is reaccelerating, but we do not expect such strong momentum to persist.”
The Fed lowers interest rates whenever unemployment rises sharply or inflation remains consistently below 2%. Also, if inflation is already under control, central banks have no incentive to restrict the economy through higher interest rates.
Darko expects interest rate cuts to begin by the middle of next year.
The Fed's main strategy to combat inflation is to suppress demand by raising interest rates. This is because when interest rates rise, it becomes more expensive to borrow money to buy cars and homes, encouraging consumers to curb their spending. The US central bank has raised interest rates 11 times since March 2022, the highest level in 22 years.
Still, the economy appears to have performed well in the third quarter.
Personal consumption, which accounts for approximately 70% of economic output, continued to grow steadily by 0.4% in August, following a 0.7% increase in July. Retail sales, part of broader spending statistics, rose for the sixth consecutive month in September. Meanwhile, industrial production in September rose to the highest level in about five years.
And employers have added an average of about 260,000 jobs per month this year, for a total of more than 2 million jobs added since January. A strong job market produces similarly strong spending.
But to be sure, Americans still face some economic obstacles. A sharp rise in Treasury yields is expected to cool the economy, along with stricter lending standards, a resumption of student loan repayments and the depletion of excess savings that many Americans accumulated during the pandemic.
The U.S. economy is also grappling with two foreign wars, trillions of dollars in federal debt, a frozen housing market, and record-low oil inventories, while geopolitical tensions in the Middle East threaten to send oil prices soaring. ing.
But despite all the uncertainty, some economists remain bullish on the economy's resilience.
Diane Swonk, chief economist at KPMG, said: “Rising bond yields and delays in credit tightening will continue into 2024, including the impact on corporate bonds issued early in the pandemic and scheduled to be repriced at much higher rates. It will be a headwind.” Post to X (formerly Twitter).
“It's possible for the economy to slow down without completely derailing it,” she says.
From ESG investing (BlackRock) and gay rights (Disney) to Donald Trump following the Capitol riot (mainstream corporate America), companies routinely take positions on cultural issues.
Sometimes their stance helps the bottom line, as in the case of Nike, when the company supported Colin Kaepernick's right to kneel during the national anthem to protest the poor treatment of Black Americans by police. be. Sometimes it's the other way around — think of Bud Light as supporting transgender rights, my colleague Elliott Gotkine reports.
Most companies have avoided intervening in the long-running Israeli-Palestinian conflict, but the brutal scale of Hamas's attack on Israel on October 7 became clear, according to some management experts and business community insiders. , silence is no longer an option.
“Saying nothing speaks of cowardice,” said Jeffrey Sonnenfeld, a professor at the Yale School of Management, who focuses specifically on corporate leadership. “If they sit idly by, it will be difficult for them to praise their company's character and their ideals.”
With that in mind, many companies have rallied to support Israel. Microsoft (MSFT) CEO Satya Nadella said he was “heartbroken by the horrific terrorist attack on Israel.” Alphabet (GOOG)'s Sundar Pichai is “deeply saddened.” Disney (DIS) donated $2 million in humanitarian aid to Israel, and banks also donated millions.
According to a list compiled by Sonnenfeld, about 80 prominent American companies have condemned Hamas' attack.
However, many organizations, especially those outside the United States, are choosing a more cautious approach. In the UK, Tottenham Hotspur, a London-based soccer club known for its large Jewish supporter base, faced criticism for simply stating that it was “shocked and saddened by the escalation of the crisis in Israel and Gaza.'' Ta.
Monday: Revenue from Whirlpool.
Tuesday: Revenues from Coca-Cola, Verizon, General Electric, Barclays, 3M, Sherwin-Williams, Kimberly-Clark, General Motors, Halliburton, Spotify, Quest Diagnostics, Microsoft, Alphabet, Visa, and Snap.
Wednesday: Revenues from T-Mobile, Boeing, General Dynamics, Moody's, Hess, Old Dominion, Hilton, Meta, and IBM. Fed Chairman Jerome Powell spoke. The U.S. Department of Commerce has announced new home sales for September.
Thursday: Revenues from Mastercard, Merck, Comcast, UPS, Bristol-Myers Squibb, Northrop Grumman, Valero, The Hershey Company, Amazon, Intel, Chipotle, Ford, and Capital One. The European Central Bank releases its latest monetary policy decisions. The U.S. Department of Commerce has released third-quarter gross domestic product (GDP) figures, along with new durable goods orders for September. The U.S. Department of Labor reports the number of new unemployment insurance claims for the week ending October 21st. The National Association of Realtors reports September home sales numbers based on contracts.
Friday: Revenues from Exxon Mobil, Chevron, AbbVie, Colgate-Palmolive, Phillips 66, and T. Rowe Price. The U.S. Department of Commerce released September statistics on household income, spending, and the Fed's recommended inflation measure. The University of Michigan will release final consumer sentiment results in October.