Wall Street is warning customers not to bet on the stock market, with both central banks and corporations acting as catalysts. Markets soared to all-time highs on Friday as the release of consumer inflation data for September overshadowed concerns about tariffs and high valuations. Traders are now watching the Federal Reserve’s two-day meeting and this week’s five earnings reports from Magnificent Seven companies to see if stocks can move higher. “Over the past two weeks, we have taken a more cautious approach to the market,” JPMorgan’s trading desk said in a letter to clients early Monday. “Although we saw some spikes and some fluctuations, the market ultimately turned higher. Things are cleaner now that we have the bulk of Mag7’s revenue coming in with a series of trade deals expected to be formally announced this week.” Federal funds futures are almost certainly pricing in the Federal Reserve cutting interest rates by a quarter of a percentage point to a range of 3.75% to 4.00% at the end of Wednesday’s policymakers meeting, according to the CME FedWatch tool. Investors will be closely watching Fed Chairman Jerome Powell’s press conference after the decision, but they are doubtful that he will be able to provide an outlook on economic policy, given that the nearly four-week federal government shutdown has delayed the release of many economic data. Alphabet, Metaplatform and Microsoft all released their results after the bell on Wednesday, followed by Apple and Amazon on Thursday. “To call this a ‘big week’ feels like an understatement,” Morgan Stanley’s research team said. But Barclays’ sales and trading desk told clients there would be little market stimulus after this week until Nvidia reports its results in mid-November. “Thanks to the government shutdown, the market is now devoid of catalysts… Both systematic and discretionary positioning are at a low risk level relative to S&P 500 levels,” Berkeley’s team wrote. “You don’t need to be as short as dynamic positioning or quiet tape.” Similarly, JPMorgan said it was “tactically bullish” on the belief that Magnificent Seven’s profits this week will exceed expectations. “We are withdrawing our cautious stance, which ultimately turned out to be the wrong decision,” traders at the country’s largest bank said. Stock futures soared Monday morning as hopes for a trade deal with China grew. Barclays said Thursday’s meeting between President Donald Trump and Chinese President Xi Jinping in South Korea was “extremely important” but the outcome of the meeting was “de-risked” following preliminary talks between the two sides over the weekend. “Consolidation does not seem to be in the market vocabulary these days, as buyers continue to be weak and prices continue to rise,” Wolf Research technical analyst Rob Ginsburg wrote in a letter to clients over the weekend. Correction: This article has been corrected to reflect that President Donald Trump is scheduled to meet with Chinese President Xi Jinping. A previous version misspelled the Chinese leader’s name.
