Poor Elon, the guy can’t catch a break. On Friday, Tesla previewed his robotaxi vision to the world in a carefully produced event titled “We, Robot” that was filmed at the Warner Bros. film studios in Burbank. It was slick, the cars were sleek, and the whole thing felt like a mash-up of an old-school Steve Jobs iPhone hype-launch and a Marvel superhero movie trailer (you can view it yourself here).¹ Even the most hardened Tesla skeptic might find it hard to not to be at least a little bit inspired by Musk’s vision of an enormous fleet of self-driving taxis vying for fares alongside New York’s ubiquitous yellow taxis, London’s black cabs, or the new(ish) army of upstart Uber/Lyft gig workers grinding it out in Everycity, USA.

But it fell flat. Investors are clearly still skeptical of Tesla’s ability to execute on Musk’s imaginative vision and responded by sending the company’s shares lower. Splashy release but not enough substance to quiet the doubters, it seems.

So, too, did it go for this week’s economic releases: lots of potential splash but not enough substance to move the needle. For example, prices at the consumer level rose 0.2% last month, a little hotter than expected.² Not long ago, that might have caused equity markets to freak out because of the signal it sends to the Federal Reserve: “Hey, Fed,” this hypothetical message might read, “what you’re doing to control inflation isn’t working, so you’d better buckle down and at least cool it with the super-cuts.”

Of course that’s not what happened. Stocks didn’t exactly love what Thursday’s Consumer Price Index (CPI) had to say about prices, but there was no broad sell-off, no breathless commentary about how the Fed is falling behind again, no doom-and-gloom scenarios from the peanut gallery telling us that the loosening cycle kicked off two weeks ago was about to start running in reverse.

The reason for this lack of reaction is probably two-fold. First, Chairman Powell told us weeks ago that the Fed had shifted its focus away from the inflation part of its two-part mandate to the jobs side of the equation. That means it was always going to take a big upside surprise to shift the Fed’s “we need to preserve jobs” mentality, and a 0.2% bump (0.3% if you exclude food and energy) doesn’t qualify. (Besides, Friday’s Producer Price Index [PPI] release missed economists on the downside by about the same amount as Thursday’s CPI missed on the upside.³

But more importantly, the previous week’s non-farm payrolls report – which, you might recall, was an upside blowout – had already washed out most market-based expectations for a second super-sized cut to follow the first. Based on that view, the jobs market doesn’t seem to need much help from the Fed, at least not yet. So by the time last week’s slightly-hotter-than-expected inflation data came along, there was already little reason to hope that the Fed might go big again at its November 7 meeting, raising the bar even higher for last week’s inflation data to dent the market’s psyche.

Okay, okay, I hear what you skeptics are saying (there are still a few of you out there, right?): “Yeah, but what about initial unemployment claims data, which broke out of its range last week to hit its highest level in more than a year?” Sure, that’s true on paper: First-time jobless claims hit 258,000 last week, matching a peak hit in early August 2023, back when recession predictions were still all the rage on Wall Street. And all else being equal, that should provide at least some justification for the idea that the Fed’s job-supporting 0.50% rate cut at the end of September was prescient rather than merely prophylactic (and that more might therefore be on the horizon).

But context matters: It seems likely that Hurricane Helene, a tragic and deadly storm that made landfall in Florida’s panhandle on September 24 and dumped a historic amount of rain in portions of North Carolina, Tennessee, and Virginia, distorted those figures as the clean-up progressed. Not surprisingly, those states (as well as Kentucky, which was also clobbered by Helene,) saw an unusually large surge in unemployment claims during the week under review that goes a long way toward explaining the increase at the national level. So anyone tempted to read too much into last week’s jobless claims data should keep in mind that weather can (and sometimes does) distort the numbers.

But back to prices. It’s comforting that both CPI and PPI seem to have mostly lost their power to move the market, but it’s also important to remember that inflation is a rate-of-change phenomenon: Just because prices are no longer accelerating doesn’t mean they still can’t have a big impact. (Think of it this way: If you’re barreling down the interstate at 105 miles per hour in your Maserati, that’s still WAY too fast even if your foot happens to be off the gas; the cop writing you your ticket probably isn’t going to care that you weren’t accelerating your way up to 185 when he zapped you with his radar gun).

Some version of that idea was on display last week when the University of Michigan released its first read of consumer sentiment for October. The sentiment figure itself wasn’t terrible, but it did dip lower even though economists thought it would tick higher. More interesting, though, is the reason it dipped: The high cost of living is eroding consumers’ personal finances even as consumers recognize that its acceleration seems to have been successfully arrested by the Fed’s tightening campaign.⁴ Such unease has caused confidence to erode while keeping uncertainty high (something that also featured large in last week’s small business confidence index from the NFIB, which indicated that uncertainty about the future is at an all-time high).⁵

Which brings us to our last point regarding last week: corporate earnings. Delta Airlines’ small miss and downbeat guidance did little to restore confidence in the sector when it released results on Thursday, providing a less-than-positive read-through into the consumer and the willingness to make discretionary purchases. But big banks went three for three on Friday, with JPMorgan, Wells Fargo, and Bank of New York all beating analysts’ estimates by comfortable margins. That was obviously a relief but by itself isn’t terribly surprising or noteworthy. Big companies have a habit of “beating the street,” and banks are no exception. Meanwhile, the post-earnings commentary was a little less upbeat than the results themselves: JPMorgan’s Jamie Dimon was his usual, candid self (chastising analysts for their obsession with net interest income while waxing poetic about the uncertain state of the economy and global affairs, for example) while Bank of New York executives carefully avoided providing too much in the way of forward-looking guidance given the uncertain outlook for rates in the near term.

So on balance, Friday’s results didn’t carry much more substance than the macro data despite the splash, meaning we’ll have to wait for more information before passing judgement. Which is probably a good approach to a certain robotaxi event that took place last week, too.

What to watch this week

It’s a relatively slow week for economic data, with Thursday’s retail sales release probably the headliner on a weak bill that also includes the first two regional Fed manufacturing reports for October (Empire on Tuesday and Philly Fed on Thursday) as well a smattering of housing market data. I’d watch Thursday’s retail sales report for any signs that the U.S. consumer is finally pulling back or that the gap between higher- and lower-income consumers is continuing to widen. Neither of those will be immediately obvious in the numbers, however, and you’ll have to look closely at where consumers are spending (not just how much) to build a cogent view. Look specifically at categories that are unambiguously discretionary for clues.

I’d also give Thursday’s homebuilder sentiment index from the National Association of Homebuilders a quick scan for signs that housing activity is either reaccelerating or retreating. So far, the Fed’s much-anticipated rate cuts aren’t necessarily translating into improving home-buying activity (likely because mortgage rates aren’t necessarily moving in lock step with the Fed). That said, anything that improves affordability at the margin — like more robust inventories or the promise of lower rates in the future — should eventually become fuel for a housing market rebound. Until that develops, it will be hard to get too constructive on the economy in general.

That leaves corporate earnings firmly in control of this week’s narrative. Tuesday will largely be a replay of last Friday’s large-bank earnings with an airline tossed in for good measure. This time, it’s Bank of America, Citigroup, and Goldman Sachs (instead of Wells, JPMorgan, and BoNY) on the banking side while United Airlines stands in for Delta. The same rules apply, though: Watch banks for any commentary about the supply and demand of credit, as well as the ability of borrowers to repay their loans, while listening to United’s post-results call for clues about the consumer. Tuesday will also feature results from trucking company J.B. Hunt, a new favorite of mine given management’s recently candid discussion of trends in ground transportation, which is long recognized as an indicator of more broad economic activity (also see railway CSX on Wednesday for the same reason).

Other big banks and financiers are scheduled to report this week as well, including Morgan Stanley, USBank, American Express, Discover Financial, and others. But this week will also see an increase in the number of mid-size and regional banks reporting results, like Key Corp, Fifth/Third Bank, and M&T (among others). Big banks capture (and deserve) much of the attention each earnings season, but smaller, more regionally focused banks might have an even better read into the macro given the relative size and more narrow scope of their businesses. That can create even more sensitivity to some of the same trends that larger banks are exposed to, which might in turn make them worth paying close attention to given where we are in the cycle.