Markets await new clues on the policy path! The Fed's September meeting minutes are a key test this week, with PepsiCo and Delta Air Lines earnings leading the way.

Last week, the Dow Jones Industrial Average and the S&P 500 both posted declines, falling 1.3% and 0.3% respectively; the Nasdaq Composite rose 0.5% and touched an intraday record high on Friday. Although the artificial intelligence (AI) trade is supporting market performance at the index level, key inflation data below expectations and somewhat dovish remarks from some officials have sharply cooled market expectations for another Fed rate hike this month. At the same time, however, U.S. Treasury yields continued to climb last week, the 30-year Treasury yield reached 5.69% at one point, while the 10-year Treasury yield broke above 5.3%, both reaching that level for the first time since 2002 and the lack of any significant easing in the Middle East GEO Group Inc situation, which has kept oil prices elevated, remain major challenges for investors. In the week ahead, the Fed's policy path will remain the core focus of market trading. The minutes of the Federal Open Market Committee's (FOMC) September meeting, to be released on Wednesday, will provide investors with more clues to judge whether the Fed will continue raising rates in October. At the September 16 meeting, the FOMC voted unanimously to raise rates by 25 basis points, lifting the target range for the federal funds rate to 3.75%-4.00%. The latest economic projections showed that the median FOMC member forecast for the federal funds rate at the end of 2026 was 4.1%, slightly above the midpoint of the current policy range, implying that under the updated projection framework there is still room for further rate hikes this year. On the macroeconomic data front, this week's releases the U.S. September ISM services index, August trade balance, consumer credit, initial jobless claims, and the preliminary October University of Michigan consumer sentiment index will all provide the latest basis for assessing the state of the U.S. economy. On the corporate side, the third-quarter earnings season is approaching. Although the latest earnings season will not fully get under way this week, several representative companies in the consumer and airline sectors will be first to report. Constellation Brands (STZ.US), Levi Strauss & Co. Class A (LEVI.US), PepsiCo, Inc. (PEP.US), and Delta Air Lines, Inc. (DAL.US) will release results in succession, offering fresh windows into U.S. alcohol consumption, apparel, food and beverages, and air travel demand, respectively. The earnings season in the true sense will begin next week, when major banks such as JPMorgan (JPM.US) and Bank of America Corp (BAC.US) report results, which is typically seen as the official start of a new earnings season. According to a FactSet analysis in late September, as the third quarter progressed, analysts grew increasingly optimistic about results and raised their earnings per share estimates for S&P 500 constituent companies by 1.3%. Analysts typically cut profit expectations as a quarter progresses. FactSet data show that analysts expect S&P 500 constituent companies to post 12.1% year-over-year revenue growth and 29.1% earnings growth in the third quarter. FactSet said that if these expectations are ultimately met, the earnings growth rate for S&P 500 constituent companies would exceed 25% for a third consecutive quarter. Wolfe Research said the upward revisions suggest corporate earnings may "continue to gain momentum." Its analysts wrote last week: "Although a quarter of strong upward earnings revisions means companies reporting over the coming weeks face a higher bar, we still believe AI infrastructure buildout remains robust, and against the backdrop of a volatile macroeconomic environment, this earnings season is likely to become a positive catalyst for the stock market." Fed September meeting minutes coming soon The Fed will release the minutes of the September 15-16 FOMC meeting on Wednesday U.S. Eastern Time. This will be the most important macroeconomic event of the coming week. At the September meeting, the Fed decided to raise rates by 25 basis points and noted in its policy statement that U.S. economic activity continued to expand at a solid pace, domestic spending remained resilient, capital investment was strong, and employment growth was broadly in line with labor supply, but inflation remained elevated. Compared with the policy statement, the minutes will provide more details on the internal discussion. The market will focus on three key questions: how officials assess the persistent impact of rising energy prices and other cost increases on inflation; whether more committee members believe the current level of interest rates is still insufficient to curb price pressures; and what economic data would need to appear to trigger another rate hike. The September economic projections showed that the median FOMC member forecast for PCE inflation at the end of 2026 was 3.7%, core PCE was 3.4%, and the median federal funds rate forecast was 4.1%. Therefore, if the minutes show that most officials still view inflation as the primary risk, the market may continue to bet on another Fed rate hike in October or December; conversely, if officials' concerns about employment and economic growth intensify markedly, market expectations for further rate hikes could be constrained. U.S. September ISM services index coming: price and employment subindexes worth watching On Monday, the Institute for Supply Management (ISM) will release the September ISM services PMI. Data showed that the August ISM services PMI was 55.4, above July's 54.1 and in expansion territory above 50 for a 26th consecutive month. The business activity index rose to 61.7, and the new orders index rose to 60.9, indicating that services demand remains strong. However, two subindexes in the report deserve particular attention. The August services employment index was only 47.8, in contraction territory for a second consecutive month; at the same time, the prices paid index rose to 72.6, the highest level since August 2022. This indicates that the U.S. services sector currently presents a combination of "strong demand, weak employment, and high price pressures." Therefore, if September data continue to show the prices index above 70 while the employment subindex improves again, it could reinforce the view that the economy remains resilient and inflationary pressures persist, thereby supporting market expectations for further Fed rate hikes. PepsiCo earnings to test U.S. food and beverage consumption, with North America performance key Before the U.S. market opens on Thursday, PepsiCo will report third-quarter fiscal 2026 results. In the second quarter, the company reported net revenue of $24.181 billion, up 6.4% year over year; organic revenue rose 2.4%, and core earnings per share rose 4% year over year. The company also maintained its full-year fiscal 2026 guidance. In the third quarter, the market will closely watch volume trends, pricing power, and margins in PepsiCo's North America food and beverage businesses. Although the company's international business has been relatively strong, North American consumers are more sensitive to food and beverage prices, so whether U.S. volumes can improve will be the focus of this earnings report. In addition, investors will also watch whether previous related measures such as portfolio adjustments, zero-sugar drinks, functional foods, and cost-cutting measures can drive growth in the North America business. If volumes and organic revenue grow further, it would indicate that U.S. consumers are adapting to food and beverage price adjustments. Delta Air Lines earnings in focus: airline demand and high oil prices draw attention On Friday, Delta Air Lines will report third-quarter fiscal 2026 results. The company's second-quarter results exceeded previous guidance, and it expects third-quarter revenue to grow by mid-teens percentage points year over year, while reiterating full-year targets of $6.50 to $7.50 in adjusted earnings per share and $3 billion to $4 billion in free cash flow. In this earnings report, the market will closely watch domestic and international route demand, corporate and premium passenger revenue, ticket prices, and unit costs. At the same time, with global oil prices recently remaining high, jet fuel costs have once again become a key variable. Investors will watch whether higher oil prices significantly erode third-quarter margins, and whether the company can mitigate the impact of fuel price volatility through ticket pricing, capacity adjustments, and its refining business. If travel demand remains strong and the company maintains its full-year earnings guidance, it would indicate that U.S. consumer spending on services remains resilient. However, if fuel costs rise rapidly or booking demand begins to weaken, earnings expectations for the airline industry could face readjustment.