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September payrolls expected to rise by just 39,000. (0:17) But will a government shutdown throw data into flux? (2:20) And does a cartoon mean Trump will try to fire Powell this week? (1:39)
There’s a lot of ifs this coming week.
Fed Chairman Jay Powell could get more dovish on cuts this year IF the September jobs numbers show a drop in payrolls.
But that’s only IF President Donal Trump doesn’t try to fire Powell before payrolls Friday, as the president seemed to foreshadow in a post this week.
And we’ll get the numbers on Friday IF Congress can avert a government shutdown that is due to begin on Wednesday.
Let’s start with jobs numbers.
Economists expect that payrolls rose by just 39,000 in September, with the unemployment rate staying steady at 3.9% and average hourly earnings rose by 0.3%.
Wells Fargo economists say: “After flying high at the start of the year, job growth has lost significant altitude in recent months. The monthly pace of payroll growth has averaged only 29K in the three months through August.”
“The slowdown has coincided with the unemployment rate inching up over the past two months, reaching a nearly four-year high of 4.3% in August,” they added. “While the labor market is not in free fall, recent data signal it continues to sputter.”
The weak jobs market was the key reason the Fed cut rates by a quarter point at its last meeting. But recent comments from Powell indicated the Fed chief is reluctant to go all in on easing with inflation creeping higher. On Friday, the August spending and income figures showed the core PCE price index staying at an annual rate of 2.9%, well north of the 2% target.
Odds of a two Fed rate cuts this year fell to 65% from about 80% a week ago as longer-term Treasury yields rose.
But Powell’s reluctance to slash rates has made him persona non grata in the Oval Office and Trump continued to stir the pot this weekend. He reposted a cartoon of himself firing Powell, with no other details.
This comes at a time when Trump is attempting to remove Fed Governor Lisa Cook over allegations that she committed mortgage fraud, which Cook has denied. No president has ever removed a Fed governor before and several market participants and economists sounded the alarm over central bank independence.
This past week, a friends of the court brief was filed with the Supreme Court arguing against Cook’s removal and for Fed independence. Signatories included former Fed Chairs Ben Bernanke, Alan Greenspan and Janet Yellen, as well as former Treasury Secretaries Tim Geithner, Hank Paulson, Bob Rubin and Larry Summers.
But all the economic releases due this week could suddenly be in limbo if Republicans and Democrats in Congress can’t agree on funding the government. As it stands now, a shutdown would begin at 12:01 a.m. ET on Wednesday.
After canceling a meeting with Democrats, Trump has agreed to meet with the top four congressional leaders at the White House on Monday.
The meeting involving House Speaker Mike Johnson and Senate Majority Leader John Thune as well as House Democratic leader Hakeem Jeffries and Senate Minority Leader Chuck Schumer. The Democrats are pushing for healthcare concessions from the GOP.
Odds of a shutdown on prediction market Polymarket shot up to 83% on Saturday but have since dropped to 64% after the news of the meeting.
Looking to earnings, five S&P 500 companies will report this week and Nike (NKE) is the standout name.
Nike (NKE) reports Tuesday and is expected to report EPS of $0.27 on revenue of $10.99 billion. Several analysts expect upside with increasing confidence in the ongoing turnaround of the company and management changes. Key focus areas include China sales, inventory management and the impact of U.S. tariff policy on margins.
Also on the earnings calendar:
Carnival (CCL) and Jefferies Financial (JEF) report Monday.
Joining Nike on Tuesday are Paychex (PAYX) and Lamb Weston (LW).
Acuity Brands (AYI), Conagra Brands (CAG) and Cal-Maine (CALM) weigh in on Wednesday.
In the news this weekend: EA stock – it’s in play.
Electronic Arts (EA) surged nearly 15% on Friday to post its best day since early February 2019. The advance came after The Wall Street Journal reported that a group of investors was looking to take the video game publisher private in what would be the largest leveraged buyout in history.
Investors reportedly include private-equity firm Silver Lake and Saudi Arabia’s sovereign wealth fund. EA could be valued at as much as $50 billion.
The top 5 LBOs are TXU (now Energy Future Holdings) in 2007 for $45 billion. HCA Healthcare in 2006 for $33 billion. The famous RJR Nabisco deal in 1989 for $31 billon. First Data in 2007 for $29 billion. And Heinz in 2013 for $28 billion.
And Versant Media Group has filed a registration statement to register Class A common stock for listing on the Nasdaq Stock Market under the symbol “VSNT.”
The filing with the SEC confirms the company will spin off from Comcast (CMCSA). Once spun off, Versant will hold the assets and liabilities of the “Spin Business,” which includes cable networks such as MSNBC, CNBC, USA Network, Golf Channel, E!, SYFY and Oxygen, along with digital platforms like GolfNow, Fandango, Rotten Tomatoes and SportsEngine. The business has historically not operated as its own unit within Comcast.
After the separation, Versant will maintain a dual-class stock structure. Holders of Class A shares will control two-thirds of overall voting power, while Class B shares (held by Comcast’s leadership) will retain a non-dilutable one-third of voting rights and special approval rights over major transactions.
For income investors, GE Aerospace (GE) goes ex-dividend on Monday, paying out on Oct. 27.
American Tower (AMT) and Nucor (NUE) go ex-dividend on Tuesday. American Tower pays out on Oct. 20 and Nucor pays out on Nov. 10.
And Cisco Systems (CSCO) goes ex-dividend on Friday, with a Oct. 22 payout date.
And in the Wall Street Research Corner, Wedbush is dropping its coverage of GameStop (GME) shares, leaving the retailer without a Wall Street rating as it continues to defy traditional analysis.
Analyst Alicia Reese writes: “We are dropping coverage on GameStop (GME) due to reallocation of analyst resources. Going forward, our rating (Underperform), target price ($13.50) and estimates should not be relied upon.”
Reese’s price target was nearly 50% below current levels. She was the last sell-sider to post a rating on the stock.
Since its rise as meme stock touted by Roaring Kitty, GME has always been a tricky proposition for traditional Wall Street analysis. The stock just does not trade on any fundamentals and that continues as focus shifts from retail investor fervor to the company’s growing cash pile and crypto investments.
But while Wall Street has thrown in a towel on rating the stock, Seeking Alpha analysts have an overall Buy on the stock (3 Buys and 2 Holds). And Quant Rating calls the stock a Hold.
