Investing.com - A jump in government bond yields remains in focus as markets prepare for the start of the trading week. Minutes from the Federal Reserve’s September meeting could offer some insight into the path ahead for interest rates, while new data may shed light on activity in the key U.S. services sector. On the earnings calendar, returns from Levi Strauss and PepsiCo may provide a glimpse into the state of the U.S. consumer.

1. First full trading week of fourth quarter

Monday will be the start of the first full trading week of the fourth quarter, with the stock market on track for a strong year.

The benchmark S&P 500 has gained more than 12% so far this year and is not far from an all-time record high notched in August. The key fourth-quarter earnings season is set to begin in earnest later this month, while an all-important Federal Reserve interest rate decision and November 3 mid-term elections loom large in the coming weeks.

On Monday, a recent spike in bond yields to the highest levels in decades cast a pall over sentiment, underlining concerns around energy-driven inflationary pressures and soaring costs of rapid artificial intelligence infrastructure development. At the same time, broadly resilient economic growth has bolstered expectations that the Fed may opt to keep rates higher for longer in a bid to quell price gains.

The rise in yields, which tend to move inversely to bond prices, has shown signs of spreading globally. French debt is under the spotlight early this week, especially after the spread between French 10-year bond yields and their German counterpart -- a de facto Eurozone benchmark -- recently notched its biggest weekly widening since the data was first tracked in 1990. Fears have swirled around whether this could be a harbinger of an emerging euro sovereign debt crisis.

"Given the high stress and high alert in bond markets, the main focus in the week ahead will be on central banks, with the minutes from the September FOMC meeting on Wednesday and the ECB’s account of its latest meeting on Thursday," analysts at Deutsche Bank said in a note.

2. FOMC meeting minutes

Minutes from the rate-setting Federal Open Market Committee are anticipated to shed more light on why policymakers opted to lift interest rates for the first time since 2023 in September.

The jump in the Fed’s overnight target rate by a quarter percentage point to a range of 3.75% to 4% was widely viewed as a push by the central bank to corral inflation, which has now overshot its 2% target rate for more than half a decade.

Fed rate projections last month also indicated that some officials felt another increase in borrowing costs may be warranted before the end of the year, meaning that a fresh hike could be coming either this month or in December.

Wagers on an October hike have downshifted, however. New York Fed leader John Williams dampened these bets when he suggested last week that there was no urgency for another immediate hike, while soft employment data for September further bolstered expectations that the Fed may choose to stand pat this month. In theory, raising rates can help quell inflation, albeit at the risk of weighing on growth and the labor market.

3. ISM non-manufacturing PMIs

On a relatively light economic calendar, traders will likely be keeping tabs on the release on Monday of a gauge of activity in the critical U.S. services industry.

The monthly non-manufacturing purchasing managers’ index from the Institute for Supply Management is expected to stand at 55.1, down slightly from 55.4 in August.

A reading above 50 denotes expansion in the services sector, which accounts for some two-thirds of overall U.S. economic output.

In August, services activity picked up, underpinned by a 3-1/2-year peak in new orders, although input prices climbed -- a possible sign of lingering inflationary pressures.

4. Levi Strauss to report

The earnings calendar is also subdued before the quarterly results parade kicks off later in October. But a clutch of big-name companies are set to deliver returns that could shed some light on the state of the U.S. consumer.

Levi Strauss is due to report after the closing bell on Wednesday, with the jeans maker banking on the appeal of its premium denim products among wealthier customers despite wider economic uncertainty.

Shares of Levi’s have fallen by more than 4% so far this year, even after the company lifted its full-year profit outlook in July.

Speaking to investors at the time, CEO Michelle Gass said that Levi’s, which has rolled out baggier styles to entice Gen Z shoppers and has focused on building its higher-margin direct-to-consumer business, was attempting to capture a "sizable premium segment" it has not already accessed.

5. PepsiCo earnings ahead

PepsiCo is also slated to report this week, days after the firm said it would raise prices for some of its chips to keep up with inflation.

According to a spokesperson cited by Reuters, the price jump will be in the low- to mid-single-digit percentage range of a selection of chip brands. PepsiCo is attempting to tamp down prices where it can, the spokesperson told Reuters.

Along with a shift in consumer preferences for healthier snacking options, the Lay’s owner has also been grappling with elevated input costs and consumers wary of protecting their wallets during a time of increasing expenses.

In February, PepsiCo slashed prices on products like Lay’s and its Doritos chip brand, responding to shoppers’ backlash against prior price bumps.

(Reuters contributed reporting)

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