Markets open the week digesting last week’s Democratic midterm sweep and Thursday’s market weakness. Investors are reassessing policy risks now that Democrats control Congress opposite President Trump. Inflation data then takes center stage with October CPI on Tuesday and PPI on Friday. Tuesday’s 10-year note auction and Thursday’s 30-year bond auction will test demand for Treasuries. Cisco (CSCO) reports Thursday, while Occidental Petroleum (OXY) opens the week Monday. Wednesday is Veterans Day, so bond markets are closed while stocks trade normally.
Here are 5 things to watch this week in the Market.
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Democratic Sweep and Post-Election Weakness
Democrats swept last week’s midterms, setting up divided government for the next two years. Stocks weakened Thursday as investors began repricing the policy outlook. Markets may be weighing risks around taxes, regulation, drug pricing, and energy policy. Congressional investigations and oversight hearings could also create headline risk for specific sectors. However, a Democratic Congress cannot pass major legislation without the President’s signature. That makes sweeping policy changes unlikely over the next two years. Historically, divided government has not been a major obstacle for stocks. Post-midterm periods have also tended to be seasonally strong for the S&P 500. The key question is whether Thursday’s weakness was a knee-jerk reaction or the start of a deeper repricing. Healthcare, energy, and defense names will be most sensitive to policy headlines this week.
October CPI and PPI: Inflation Back in Focus
Tuesday’s October CPI report at 8:30am is the week’s most important economic release. Both headline and core readings will show whether inflation is cooling or holding firm. Energy prices remain a key swing factor for the headline number. Shelter and services costs will reveal how sticky underlying inflation has become. A hot reading would strengthen the case for Fed Chair Kevin Warsh to stay hawkish. That would likely push yields higher and add pressure to already shaky stocks. A softer print could ease rate concerns and help markets recover from last week’s weakness. Friday’s October PPI at 8:30am closes the week with a read on wholesale inflation. A firm PPI after a hot CPI would deepen inflation concerns heading into mid-November.
Bond Auctions, Yields, and Housing
Tuesday’s 10-year note auction at 1:00pm comes just hours after the CPI release. Thursday’s 30-year bond auction at 1:00pm follows the Veterans Day bond market closure. Long-end yields have been a persistent headwind for equity valuations this year. Post-election fiscal expectations could influence how buyers approach longer-dated debt. Weak auction demand would push yields higher and weigh most heavily on growth stocks. Strong demand would signal investors are comfortable at current yield levels. Thursday’s existing home sales at 10:00am will show how housing is coping with high mortgage rates. Initial jobless claims at 8:30am Thursday offer a weekly check on the labor market. Rising claims could revive hopes for eventual rate relief.
Cisco Earnings and the Tech Rotation
Cisco (CSCO) reports Thursday, testing enterprise IT and AI networking demand. Investors will focus on orders from cloud providers building out AI data centers. Product order growth and guidance will matter more than the headline numbers. The results arrive as capital keeps rotating from tech and AI names into defensive sectors. Strong numbers could help stabilize sentiment toward AI infrastructure plays. Weak guidance would reinforce doubts about the payoff from heavy AI spending. With few other tech reports this week, Cisco carries outsized weight for the sector.
Oil Prices and Energy Earnings
Occidental Petroleum (OXY) reports Monday, offering an early read on energy sector profits. Investors will watch production volumes, realized prices, and capital spending plans. Energy stocks may also face policy questions following the Democratic sweep. Crude oil inventories arrive Thursday at 12:00pm, pushed back by the holiday. Oil prices remain sensitive to Middle East developments and Strait of Hormuz headlines. Any escalation could lift crude quickly and feed into inflation expectations. That would complicate the Fed’s path and keep yields elevated. Easing tensions would help cool energy costs and support consumer spending.
Best of luck this week and don’t forget to check out my daily options article.
On the date of publication, Gavin McMaster did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.