There are two big headwinds for markets in the week ahead – another potentially hot consumer inflation report and the congressional midterm elections. Stocks were higher on Friday but ended a tough week with losses after Federal Reserve Chairman Jerome Powell’s dovish talk on interest rates on Wednesday. Powell suggested the central bank may need to raise interest rates further than expected to curb inflation, making Thursday’s report on the October consumer price index even more critical. At stake in Tuesday’s election is control of Congress, which can decide how money is spent and how much is spent on various programs. “The most important thing the market needs to know is that the election is over,” said Ed Mills, a political analyst at Raymond James. “100% of the time, the S&P 500 is up 12 months after midterm elections.” Democrats currently control the House of Representatives, and Democrats hold a majority in the Senate considering Vice President Kamala Harris’ tie-breaking vote. “We expect the most likely outcome to be a Republican House,” Mills said. “The Senate is close. I think the Republicans have the upper hand right now, but I don’t think we really know.” Midterm rallies Stocks tend to gain in the final months of midterm election years, and strategists expected the market to rise further. A jump in interest rates has stifled growth and tech stocks. The 2-year Treasury yield continued its higher pace, briefly touching a 15-year high of 4.8% on Friday, stronger than the expected October jobs report. The S&P 500 rose 1.4% on Friday, but ended the week down 3.4% at 3,770. The Nasdaq fell 5.7% for the week, but gained 1.3% on Friday. “If the results are clear, there will definitely be a rally,” said Julian Emanuel, head of equity, derivatives and quantitative strategy at Evercore ISI. Emanuel said rumors that China might lift Covid restrictions helped stocks on Friday and sent commodities higher, and that could be a catalyst for the week ahead if there are actual news to confirm the speculation. “If the results [of the election] unclear but not too controversial, potentially positive news from China will be enough to help this post interim rally,” he said. Republicans are winning.” CFRA Chief Market Strategist Sam Stovall said that even when interest rates were rising, the midterm elections were a catalyst for stocks. He examined market performance in other midterm election years when interest rates rose. “The market was up. 12.8% on average after 12 months,” Stovall said. The years when that happened were 1946, 1958, 1994 and 2018. “Even a rising interest rate environment couldn’t dampen the effect of post-midterm optimism,” he said. , November of a midterm election year. The best-performing sectors from 1 to the following November 1 include semiconductor equipment, which is up an average of 48.2% over the period since 1990. Shoes are also doing well, along with electronic equipment, up about 42%. . In those years, the S&P has added an average of 16% over the period, while the Nasdaq has gained 32.6%. Along with the election, corporate earnings season is underway. Reports are expected from dozens of companies, including Walt Disney, AstraZeneca, Dupont, Wendy’s and Occidental Petroleum. Hot inflation? The CPI is the most important economic report due next week, and economists expect consumer inflation to rise to an annual pace of 7.9% in October. Core CPI excluding food and energy came in at 6.5%, according to Dow Jones. is expected to increase. Headline CPI rose 8.2% in September. “If it’s below 8%, that would be a psychological positive,” Stovall said. Friday’s October employment report came in stronger than expected with 261,000 jobs added in October, while economists had expected 205,000. A strong labor market is seen by the Fed as a source of inflation, and so far its rate hikes have not slowed job growth much. If the inflation data were to surprise to the downside, it would go against recent trends and be a potentially positive catalyst for the market. Next Week Calendar Monday Earnings: Palantir Technologies, Viatris, Activision Blizzard, Lyft, Take-Two Interactive, TripAdvisor, Brighthouse Financial, Brookdale Senior Living, Mosaic, Cabot, International Flavors & Fragrances, Choice Hotels, BioNTech, NRG p3 Energy Consumption Credit 15:40 Cleveland Fed President Loretta Mester, Boston Fed President Susan Collins 18:00 Richmond Fed President Tom Barkin Tuesday Election Day Earnings: Walt Disney, Dupont, Bayer, PerkinElmer, Elanco Animal Health, Coty, Planet Fitness, Reynolds Consumer Products, Norwegian Cruise Line, Hain Celestia l, Party City, , Akamai, Lucid Group, Affirm Holdings, Axon, Sprouts Farmers Market, 3D Systems, Angi, Occidental Petroleum, AMC Entertainment, NortonLifeLock, Ambac Financial, Allbirds: 0 am 0 NFIB small business earnings survey Wednesday: DR Horton, Wendy’s, Hilton Grand Vacations, Honda Motor, Beyond Meat, Adidas, Performance Food Group, Capri Holdings, SeaWorld, Hanesbrand, Canopy Growth, F ossil, Rackspace, Redfin, Bumble, Coupang, Unity Software, Kinross Gold, Rivian Automotive, Trading Desk, Jamf Holding, Rocket Lab 3:00 New York Fed President John Williams in Zurich 10:00 Wholesale Trading 11:00 Richmond Fed President Tom Barkin Thursday Earnings: AstraZeneca, Becton Dickinson, Edgewell Personal Care, Tapestry, Warby Parker, Ralph Lauren, ArcelorMittal, WeWork, Sally Beauty, Yeti, Toast, Beazer Homes, Aurora Cannabis, Poshmark Government, Toast Christopher Waller 8am in Australia: 30 Initial Jobless Claims 8:30am CPI 9:00am Philadelphia Fed President Patrick Harker 9:35am Dallas Fed President Lori Logan 12:30pm Cleveland Fed President Loretta Mester Kansas City 1:30pm Fed President Esther George 2:00pm Federal Budget 6:35pm New -York Fed President John Williams Friday Veterans Day Earnings: SoftBank, Embraer Bond Market Closes at 10:00 a.m. Consumer Sentiment