“How many more rate hikes?” PCE, jobs report, and Micron earnings | US stock market outlook for this week [9/28-10/2]
[Notice] Starting yesterday, we have split our weekend distribution into two parts. We will deliver the “Weekly Review” on Saturdays and the “Outlook for the Week” on Sundays.
How many more rate hikes will there be? This week is a week where the numbers that will bring us closer to that answer will all be released.
It has been two weeks since the FRB (Federal Reserve Board) took the plunge into its first rate hike in about three years. While the perception of it being a “preventive rate hike” to prolong economic expansion is spreading, market interest is shifting toward how long the rate hikes will continue and how much they will increase in total.
The key lies in the August PCE core deflator on Wednesday the 30th and the September jobs report on Friday, October 2nd. *Prices and employment, the two figures the FRB values most, will be released in the same week.
In corporate earnings, attention is focused on Micron Technology on Wednesday the 30th. Will the momentum of AI and semiconductor stocks, which saw the SOX (Semiconductor Index) rise by over 6% last week, continue? This looks like it will be the litmus test.
Now, let’s get started!
But before that…
What are the two responsibilities (dual mandate) imposed on the US central bank?
The FRB (Federal Reserve Board), the US central bank, has a mission that is distinctive even among major central banks. That is the
“dual mandate”. Many central banks have “price stability” (stable prices) as their highest priority mission. In contrast, the FRB is also charged with another responsibility: “maximum employment”. In other words, the FRB is responsible for both
curbing inflation and aiming for the maximum employment that the economy can sustainably maintain. It conducts monetary policy while balancing these two. Investors and analysts pay attention to the remarks of the FRB Chair and the FOMC (Federal Open Market Committee), which makes direct decisions on monetary policy, because it has a major impact not only on inflation rates and employment conditions, but also on interest rates, the economy, corporate profits, and asset prices such as stocks.
First, let’s cover the key points.
●The biggest focus is the “number of rate hikes.” Searching for the next move through price and employment figures
● August PCE core deflator on Wednesday the 30th, September jobs report on Friday, October 2nd ● Confirming the strength of AI demand with Micron earnings on Wednesday the 30th
● The overvaluation of the S&P 500 has faded, but be careful when comparing it to long-term interest rates in the 5% range
● One month until the midterm elections in November. Congress will finish deliberations on Friday the 2nd
A 30-second review of last week
●🗽NY Dow +0.28%
●📊S&P 500 +1.22%
●💲Nasdaq +2.06%
●💿SOX (Semiconductor) +6.27%
● US 10-year Treasury yield (long-term interest rate) hit 5.23% at one point (highest level in about 19 years)
● Dollar-Yen 157.29 yen
It was a week where AI and semiconductor stocks pushed the market up while long-term interest rates hit their highest levels in about 19 years. On the other hand, there are also headwinds for AI infrastructure-related companies like Oracle, such as the rising cost of raising funds.
For details, please see yesterday’s “Weekly Review”.
Events to watch this week (9/28-10/2)
Economic indicators, etc.
●9/28 (Mon)
G20 Trade Ministers Meeting (until 10/1, Milwaukee, USA)
Basel Committee on Banking Supervision (until the 29th)
●9/29 (Tue)
August JOLTS (Job Openings and Labor Turnover Survey), September Consumer Confidence Index
●9/30 (Wed)
August PCE Core Deflator, August Personal Income and Personal Spending, September ADP Employment Report,
April-June Real GDP (Final Estimate), September Chicago PMI
●10/1 (Thu)
September ISM Manufacturing PMI, Initial Jobless Claims, August Construction Spending,
US Fiscal Year 2027 begins, House of Representatives concludes pre-midterm election sessions (resumes 11/9), China’s National Day holiday (until the 7th)
●10/2 (Fri)
September Employment Report (Non-farm Payrolls and Unemployment Rate), August Factory Orders, August Durable Goods Orders (Final Estimate), Senate concludes pre-midterm election sessions (resumes 11/9)
The two most important indicators to watch this week are as follows.
PCE Core Deflator (Core Personal Consumption Expenditures Price Index)
A price index that shows the movement of prices for goods and services purchased by individuals, excluding volatile food and energy prices. It is the primary gauge the Fed uses to measure its inflation target (2%).Employment Report
Comprehensive employment data released monthly by the US Department of Labor. It focuses on the number of jobs added outside of agriculture (non-farm payrolls) and the unemployment rate. Investors around the world watch it as a thermometer for the economy.
This week, employment figures will be released almost daily, including JOLTS on Tuesday the 29th, ADP on Wednesday the 30th, and initial jobless claims on Thursday, October 1st. It looks like a week where market sentiment will gradually solidify ahead of Friday’s employment report.
Also, this weekend, October 3rd, marks exactly one month until the November midterm election voting. The House of Representatives will conclude its pre-election sessions on Thursday the 1st, and the Senate on Friday the 2nd (resuming 11/9).
From here on out, we can expect more instances where political news will shake the markets.
Key Earnings to Watch This Week
●9/29 (Tue) Carnival (CCL)
How much of the fuel cost increase were they able to absorb amidst high oil prices?
●9/30 (Wed)Micron Technology (MU)
Demand for AI-related memory and the outlook for the next quarter
●10/1 (Thu) Nike (NKE)
Is the turnaround progressing amidst tariffs and slowing consumption? Also, will there be a revival for Nike, which holds an important position in the 2026 Dogs of the Dow series?
/ Accenture (ACN): To what extent is corporate AI adoption reflected in sales?
Carnival
(Carnival Corporation & plc, CCL) The world’s largest cruise ship operator. It provides cruises under multiple brands, with revenue coming from ticket sales and onboard food, beverage, and entertainment sales.Nike (NIKE, Inc., NKE)
The world’s largest sports equipment manufacturer. It sells shoes and apparel through direct-to-consumer stores, online retail, and third-party retailers.Accenture (Accenture plc, ACN)
One of the world’s largest consulting and IT services firms. It supports corporate digitalization and AI adoption, with consulting and business process outsourcing as its core operations.Micron Technology (Micron Technology, Inc., MU)
A major US memory semiconductor manufacturer. It produces DRAM and NAND for data storage, with high-bandwidth memory (HBM) for AI servers being its primary profit driver.
The biggest focus is, of course, Micron.
Micron’s stock price led semiconductor stocks on Tuesday the 22nd, rising +5.00% to $1,096.16.
With expectations running high, the hurdle for earnings has also been raised. More than whether the actual results beat expectations, the question will be whether the outlook (guidance) for the next quarter meets market expectations.
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▶︎ The mechanism by which Micron earns through “all-around AI” is explained in this note based on the previous earnings report. Micron Earnings Note (Mar-May/Q3, 2026)
▶︎Featured Stock!! | Why did Nike’s stock price fall 35% in half a year?
▶︎Why is it being sold off despite good earnings? The mechanism is explained in this note.
Outlook for this week
I believe there are three key points to focus on this week.
1. The focus is on the “number of rate hikes.” Prices and employment will provide the answer
The Fed’s rate hike was almost fully priced in. What the market is looking at now is what comes next.
Last week, a series of comments from Fed officials suggesting additional rate hikes pushed the probability of a rate hike at the next meeting to just under 70%. The 10-year US Treasury yield also hit a roughly 19-year high of 5.23% at one point.
Here, if the PCE core deflator on Wednesday the 30th exceeds expectations, the view that rate hikes will continue will strengthen, making it easier for interest rates to rise further.
Conversely, if price growth settles down and the employment statistics on Friday the 2nd show a slowdown in job growth, expectations that “the rate hikes might end after just one more” may spread.
For us individual investors, I believe what is important is not the quality of the numbers themselves, but reading which way the Fed’s next move is leaning.
2. Expectations for AI will be tested by Micron’s earnings
Last week, the SOX index was up 6.27% for the week. With AMD’s market capitalization exceeding $1 trillion for the first time, expectations for AI and semiconductor stocks were strong enough to push back against rising interest rates.
Micron is a company that makes memory essential for AI servers. If the strength of demand for AI is confirmed in their earnings, it is expected to become a factor that supports the market.
However, the higher the expectations for a stock, the higher the hurdle. Even with good earnings, if the outlook does not meet market expectations, it may be sold off. I want to look at both the earnings figures and the stock price reaction the following day.
3. The sense of overvaluation has faded. However, the benchmark is “interest rates”
Due to the correction in stock prices and the rise in expected EPS (earnings per share), the forward P/E ratio (price-to-earnings ratio) of the S&P 500 was 18.8-19.0x as of last week. It is below the 10-year average (19.2x), and the relative sense of overvaluation has faded.
On the other hand, what we must not forget is the comparison with interest rates. Looking at the “earnings yield” (earnings divided by stock price), which is the inverse of the P/E ratio, the earnings yield for a stock with a forward P/E of 19x is approximately 5.3%. The yield on the 10-year US Treasury is around 5.2%.
If you can get a yield of over 5% on US Treasuries with almost no risk, the reason to allocate money to stocks becomes that much weaker.
“Stocks have become undervalued” and “Are they attractive compared to bonds?” are different questions. This is a phase where we should not be complacent just by looking at P/E figures, but should look at them in conjunction with interest rate levels.
The US stock market is cutthroat. Even after the first rate hike in about three years, the fact that demand for AI infrastructure will likely continue to expand for the foreseeable future remains unchanged.
Prices, employment, and Micron. This week, I want to verify the direction of the tug-of-war between interest rates and AI using the numbers.
How do you see the market this week?
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