What you need to know in markets on Friday

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Stocks pulled back on Thursday after a strong session on Wednesday following the midterm elections.

The S&P 500 (^GSPC) fell 0.25%, or 7.08 points, at the end of trading Thursday. The Dow (^DJI) rose slightly by 0.04%, or 11.12 points. The Nasdaq (^IXIC) fell 0.53%, or 39.87 points.

With the midterm elections in the rearview mirror, investors have shifted their focus back to earnings and interest rates. The Federal Reserve left interest rates unchanged on Thursday after a two-day meeting that was pushed back due to the election.

“[The] labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has declined. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year,” the Federal Reserve said in a statement on Thursday.

According to the Fed’s interest rate forecast that was put out in September, there is still one potential rate hike on the table for 2018.

Looking ahead, Goldman Sachs released their market forecast for the next two years. “We forecast S&P 500 adjusted EPS will grow by 6% in 2019 (to $173) and by 4% in 2020 (to $181). We lift our 2018 estimate to $163 (from $159), representing 23% annual growth, aided by continued economic expansion and the reduced effective corporate tax rate. Our S&P 500 EPS forecasts are well below consensus estimates of $177 (+8%) in 2019 and $195 (+10%) in 2020,” David Kostin, chief U.S. equity strategist at Goldman Sachs, said in a note on Thursday.

However, Kostin explained that he expects economic growth to decelerate. “Economic growth is the most important macro driver of S&P 500 EPS and points to positive but decelerating growth through 2020. Although U.S. economic activity has been strong in 2018, the boost from fiscal policy and financial conditions is fading. GS economics expects real average annual U.S. GDP growth will gradually decelerate from 2.9% in 2018 to 1.6% in 2020.”

Looking ahead

On Friday at 8:30am ET, we’ll get the October producer price index (PPI), which is expected to have increased by 0.2% month-over-month or 2.5% year-over-year. Excluding food and energy, core PPI is expected to have climbed by 0.2% and 2.3%, respectively. Meanwhile, the University of Michigan’s consumer sentiment index is expected to have slipped to 98 in November from 98.6 a month ago.

Media behemoth Disney (DIS) reported earnings after the bell on Thursday and posted a big beat on both the top and bottom lines.