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Stocks slide with Fed, earnings, jobs data on deck

US stocks lagged on Monday morning to start a busy week marked by Fed policy, earnings and jobs data.

The S&P 500 (^GSPC) fell 0.7%, while the Dow Jones Industrial Average (^DJI) shed 200 points, or 0.6%. The tech-heavy Nasdaq Composite (^IXIC) fell by roughly the same margin. Government bonds rose again and held above 4%.

Equity markets are still poised to finish the month higher after a brutal decline in September. The Dow Jones Industrial Average was up 14.4% month-to-date at Friday’s close — making October the 10th best month on record since 1915, according to Bespoke Investment Group data. If the Dow closes just 2 basis points higher on Monday, this October will beat January 1[ads1]976 as the best month since the 1930s.

The Federal Reserve’s next policy announcement on Wednesday and October’s monthly employment report due on Friday will determine whether the tailwinds will continue to push stocks forward through the rest of 2022.

Federal Reserve officials are poised to raise the Fed’s benchmark interest rate by another 0.75%, but some strategists believe it could be the last outsized increase before officials scale back tightening plans.

Pantheon Economics chief economist Ian Shepherdson said with core CPI still high and wage gains averaging 372,000 over the third quarter, investors’ expectations that policymakers will continue to raise interest rates into next year are justified.

“But we see enough straw in the wind now to believe that the economy is at a real inflection point, while investors are putting too much weight on data, which right now seems to indicate that growth is holding up well,” he said.

Stocks slide with Fed, earnings, jobs data on deck

WASHINGTON, DC – OCTOBER 14: US Federal Reserve Chairman Jerome Powell attends a meeting of the International Monetary and Financial Committee (IMFC) at the IMF and World Bank Annual Meetings at IMF Headquarters on October 14, 2022 in Washington, DC. (Photo by Drew Angerer/Getty Images)

“We doubt Chair Powell’s tone will change significantly this week, but he won’t be able to hold back the tide if the numbers turn,” Shepherdson added.

The Labor Department’s jobs report is expected to show that monthly payrolls fell below 200,000, a big drop from an average of 400,000 over much of the pandemic, but still close to the pre-pandemic monthly average. Economists expect 190,000 jobs were added or created last month, according to a Bloomberg consensus estimate.

And on the earnings front, companies are still rolling out results for the third quarter. Of companies in the S&P 500 Index that have reported so far, net profit margin for the index is 12%, which is below last quarter’s net profit margin and below year-ago net profit margin, but higher than the five-year period. average net profit margin of 11.3%.

Bank of America analysts said in a note that overall earnings so far have continued to “defy the downturn,” with many company metrics still above expectations.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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