The week of October 31 is going to be packed jammed with a ton of economic data, earnings, and a Federal Open Market Committee (FOMC) meeting. Tuesday is all about JOLTS and the ISM data. The ADP job data and the highly anticipated FOMC meeting are scheduled for Wednesday. On Thursday the ISM services index will be released and then on Friday, the widely watched October U.S. Nonfarm Payrolls report.

According to the CME FedWatch Tool the Federal Reserve is likely to deliver its fourth 75-basis-point rate hike at the conclusion of its two-day policy meeting as the fight against sky-high inflation continues. So far this year the Federal Reserve raised their benchmark rates by 25-basis-point in March, 50-basis-point in May, and 75-basis-point in June, July, and September. Meanwhile the core PCE which was at 4.9% in May, rose to 5% in June and is now at 5.1% in September.

Investors would be closely looking for signals when the aggressive monetary tightening may start to slow, given the recent soft economic data. Investors are hopeful that the Fed would soon give hints for a moderation in the pace of interest rate hikes, which have been boosting equity markets over the past two weeks. At present the market is widely expecting at a minimum a 50-basis-point rate hike in December followed by a 50-basis-point hike in January 2023, and a smaller 25-basis-point hike at the March meeting. Together, these hikes would bring the official policy rate to a range of 5%-5.25%, where the Fed could choose to pause.

The Fed press conference and the Nonfarm Payrolls report are the key releases this week, which would be closely monitored by traders as they could help them establish expectations of the timing of potential pivot by the Fed.

Fed Chair J. Powell will likely utilize the press conference following the FOMC meeting to note that at some point it will make sense to slow the pace of rate hikes as the central bank ascertains the lagged impact of past rate hikes on the real economy.

Any mention of a potential slowing of the pace of rate hikes by the Fed in the press conference will almost certainly boost risk appetite in its aftermath.

On another hand, earnings season has passed halfway, and this week will be a test of whether equities can continue to weather poor earnings results. So far 263 of the companies in the S&P 500 index have already reported their quarterly results and more than 150 of the S&P 500 companies are due to report this week.

Despite relatively high U.S. dollar and disappointing earnings season, all major U.S. indices have had a killer month making a big comeback over the past two weeks, boosted by hopes for a Fed pivot. The S&P 500 already retraced almost 50% of its August decline. The rally coincided with the unwinding of strongly oversold and diverging momentum conditions, with the RSI steadily climbing toward overbought levels.