Last week was pretty quiet with S&P 500 ($SPX) (SPY) trading in a range between 4,546 and 4,609.
In total, the index was +0.21% on the week. Mongodb (MDB) suffered a large drop on Wednesday, despite an increase in revenue. In other news last week, shares of Alphabet (GOOGL) shot higher on Thursday as traders appreciated the launch of their Gemini artificial intelligence model.
This week will be all about interest rates with important CPI data and the FOMC rate decision looming.
Here are 5 things to watch in the market this week.
10-Year Note Auction
“The market has more than likely gotten ahead of itself in forecasting rate cuts for early next year,” According to Alex McGrath, chief investment office at NorthEnd Private Wealth.
The 10-year note auction occurs at 1pm on Monday and could have implications for equity markets. The previous yield came in at 4.519% in November, so we will see where this month’s yield lands.
CPI
CPI data will be released before the market opens on Tuesday. The Fed will be paying close attention to inflation ahead of its rate decision on Wednesday.
Labor costs appear to be cooling with a 1.2% decline in the third quarter which could bode well for the CPI data and would strengthen the market expectations that the Fed is done raising rates.
Last month’s CPI came in at 3.2% which is just above the Fed’s target rate of 2-3%. Will we finally drop back down below 3% this month?
FMOC Statement and Rates Decision
The general expectation is that the Feb will keep rates steady when they make their announcement at 2pm on Thursday.
Fed Chair Jerome Powell has so far refuse to commit to rates cuts, but the market is pricing in a 90% expectation that rate cuts will occur no later than May 2024 with a 60% chance of a March cut.
On December 1st, Powell commented that ““The FOMC is strongly committed to bringing inflation down to 2 percent over time, and to keeping policy restrictive until we are confident that inflation is on a path to that objective. It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease. We are prepared to tighten policy further if it becomes appropriate to do so.”
The market will be very interested to see what he has to say this week.
Earnings
We have only a few big-name companies reporting earnings this week with the headliners being Adobe (ADBE) on Wednesday and Costco (COST) on Thursday.
Initial Jobless Claims
On Thursday morning, we have the initial jobless claims before the market open. This be a focus for investors this week amid a series of mixed data releases. Investors will be looking for signs of cooling in the jobs market which could help strengthen the case for rates cuts next year. A stronger than expected jobs market could spook the market into thinking rates may stay higher for longer which could put pressure on equity markets.
Best of luck this week and don’t forget to check out my daily options article.
On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
