2 things that will drive the stock market after last week’s Trump-Fed meeting

Talk about an important week.

Usually, when the Fed cuts interest rates, it’s a big story.

However, Friday’s Federal Reserve meeting pales in comparison to Tuesday’s presidential election, which produced a winner before the sun came up this morning.

The stock market’s reaction Wednesday to Republican Donald Trump’s victory over Democrat Kamala Harris was swift and intense Dowat S&P 500 and on Nasdaq to an all-time high. The Fed’s interest rate cut the next day was the icing on the cake for the bull market, with gains for the S&P 500 and the Nasdaq. The Dow was flat on Thursday. On Friday, the Dow rose above 44,000 for the first time, and the S&P 500 topped 6,000 for the first time. They closed below that level. All three stock benchmarks ended the week at record highs.

For the week, the Dow and S&P 500 gained more than 4.6%. He had his best week of the year and his first positive week in three weeks. The Nasdaq rose 5.7% for the week. The tech-heavy index’s weekly gain, while the strongest of the three, was only its best since September. For the week, consumer discretionary, energy, industrials, financials, and information technology were the top five sectors.

• Last week, we sold stocks of industry laggards Honeywell be the strength of the third, bring the position down to the level that Jim Cramer said will not hurt us. On Wednesday, when it was running Wells Fargo and Morgan Stanley both surged double digits on a percentage basis after Trump won, our discipline called for us to take some profits, which we did. BlackRock, one of our new positions, did not participate in the general meeting on Wednesday in financials, so it took some of the proceeds of the bank deposit and bought some more shares of the largest asset manager in the world.

We said last weekend that the risk to the market is not so much who wins, but who wins decisively. That’s exactly what we got.

Wall Street, however, has traditionally liked gridlock in Washington over a long time, a situation created by the split of Congress or the White House controlled by one party and the Capitol Hill by another. The exact combination remains up in the air. While the presidential race was decided quickly and Republicans lost the Senate, there are still very close House races, according to NBC News. By Sunday evening, Republicans needed to win six to hold the majority.

Only time will tell how the balance of power will play out and whether it is good or bad for the stock market. But one thing we do know is that Trump likes to judge the market’s performance. In Trump’s first term, from Inauguration Day 2017 to his last day in office, the S&P 500 gained 67%. Barring a disaster, President Joe Biden and Vice President Harris will hand over to Trump a healthy economy with moderate inflation and a strong stock market.

Next week, two government inflation reports will be released that Wall Street and the Fed will be watching closely. The earnings season began to decline and only two club names, Home Depot and Disneyquarterly results report.

The big economic report for the week, the October consumer price index, is out before the opening bell on Wednesday. According to estimates compiled by FactSet, economists are looking for a 2.6% annual increase in the headline CPI, slightly warmer than in September. The core rate, which excludes volatile food and energy prices, was seen rising 3.3% year-on-year, in line with the previous month. The shelter component of the CPI, which accounts for about a third of the entire index, will also be a major focus because of how housing costs inflation.

• Although not as closely watched as the CPI, the October producer price index, which comes out Thursday, could affect the market. The monthly PPI reading is still important to monitor because it shows the wholesale price companies are paying, often called input costs, and whether they need to raise consumer prices to protect their margins. According to FactSet, economists expect a 2.3% annual increase in the headline PPI and a 2.9% annual increase in the core rate.

• Among other data points this week, October retail sales and October industrial production are both out. Retail sales provide a snapshot of where consumers are and where they are focusing their purchasing power during the holiday shopping season. About two-thirds of the country’s economy is driven by consumer spending. The monthly industrial production and capacity utilization report provides insight into the manufacturing industry, which has long been under pressure, as well as the mining, and electricity and gas industries.

For Home Depot, which reports third-quarter earnings before the opening bell Tuesday, we want to hear what management sees in the housing market.

We know that long-term bond yields have risen and are driving up mortgage rates again – so benefiting from stronger housing that leads to more building sales and renovations. We are encouraged to see bond yields decline on Thursday and Friday after spiking on Wednesday. Hopefully it will continue with the Fed in easing mode and the market is likely to favor another rate cut in December.

• Additionally, it is likely that Home Depot’s sales increase, in part in the reported quarter and beyond, will come from the recovery process after hurricanes Helene and Milton as insurance claims come in and homeowners rebuild. That said, we’ll bide our time and predict that once the housing market starts to turn around, Home Depot will be the main beneficiary. On Friday, consensus estimates called for Home Depot sales of $39.24 billion in the third quarter and earnings of $3.64 per share.

Disney reported before the bell Thursday, and its experience business will be in focus as it has been battered by recent hurricane activity that has forced closures at Florida theme park locations and inflation-weary consumers. Disneyland Paris will likely see some negative impact from the Summer Olympics, which will be held in the city during the quarter.

• However, Disney’s direct-to-consumer business should be a better story as profits continue to rise. Big content releases like the new season of the critically acclaimed television series “The Bear” and the movie “Inside Out 2,” which grossed nearly $1.7 billion in theaters worldwide, should help subscriber numbers. On Friday, consensus estimates were for Disney sales of $22.44 billion in fiscal Q4 and earnings of $1.10 per share.

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