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Wall Street readies for earnings, more volatility

Wall Street will also have plenty of economic data and comments from Federal Reserve policymakers to digest as the timing of a rate hike remains uncertain.

“I think there’s still more volatility ahead until the Fed confirms the U.S. economy is on good footing,” said Kevin Mahn, chief investment officer of Hennion & Walsh Asset Management.

The Fed’s September meeting minutes released this past Thursday indicated policymakers were further from raising rates last month than many thought, as FOMC members were concerned about reaching their inflation target and the impact of a global economic slowdown. Fed speakers have generally maintained the central bank could still raise rates this year.

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Chicago Fed President Charles Evans is scheduled to speak again Monday, as is Fed board member Lael Brainard. On Tuesday, St. Louis Fed President James Bullard is due to present remarks, while the New York Fed’s William Dudley speaks Thursday.

The Federal Reserve’s Beige Book, a report of regional economic activity in the United States, is due for release Wednesday.

Other key data out next week include retail sales and the producer price index Wednesday, and the consumer price index Thursday. Industrial production, the Job Openings and Labor Turnover Survey and consumer sentiment are due Friday.

Joseph Lavorgna, chief U.S. economist at Deutsche Bank Securities, said the economic reports are last key data out before the Fed’s meeting at the end of October.

“The economy is still doing OK and interest rates are going to stay low. Equities should do reasonably well,” Lavorgna said. “The economy is plodding along. There’s not much risk of recession.” He expects sub-2 percent GDP growth in the third quarter.

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In the last few weeks, soft reads on the U.S. manufacturing sector and a widening of the trade deficit have lowered some expectations for real GDP growth.

“I think what to keep in mind next week is the retail sales,” said Ben Garber, economist at Moody’s Analytics Capital Markets. “You want to see how strongly the domestic economy is holding up.”

“We could see positive support to stocks in the consumer cyclical sectors that are contrast to energy and mining,” he said.

The beaten-down energy and materials sectors were the top performers in the last week and will remain a focus in coming days. Crude oil rallied more than 8 percent last week, helping the energy sector gain nearly 7.8 percent for its best week of the year so far.

This was a “particularly good week for emerging markets, commodities and other risk assets,” said Eric Stein, co-director of global fixed income at Eaton Vance Management. “Starting a new quarter, there certainly seemed to be a risk-on sentiment. People are still up in the air on what the Fed is going to do. (There’s a) bit more stabilization in China.”

Mainland Chinese markets closed the shortened trading week higher and will get back into full swing after a weeklong holiday.

In the United States, banks are closed Monday for the Columbus Day holiday. Markets remain open.

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Concerns about Congress’ ability to smoothly resolve key fiscal negotiations adds to uncertainty for markets. While the deadline for Congress on the budget and debt ceiling talks is still several weeks away, no clear leader for the House of Representatives has emerged since House Majority Leader Kevin McCarthy pulled out of the race for speaker Thursday.

Market Insider with Patti Domm

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