S&P 500 Stalls at Resistance on Cautious Mood. Is the Stock Market Rally in
Traders will have a busy week ahead, with a number of Federal Reserve speakers set to speak. These speeches will provide insight into the December FOMC meeting. They will also offer clues about how the Fed’s rate-hiking cycle will play out, and whether the Fed is ready to take more action to reduce inflation.
The market is currently pricing in an 80 percent chance of a rate increase at the Fed’s March meeting, and an 80 percent probability of a rate hike at the December meeting. The market also believes that the Fed will need to slow its rate-hiking pace. This could mean that US interest rates will remain elevated for a longer period of time. However, the US economy is still performing well. Several economic indicators are improving, including the housing recovery. However, prices of commodities and the geopolitical tensions surrounding Ukraine and Russia are continuing to dampen sentiment.
Investors will also want to pay close attention to retail sales data and Black Friday shopping data this week. These data will give a better indication of how well US consumers are doing, and whether the Fed’s recent moves to increase the unemployment rate have been a success. The first jobless claims of the week will also be released, providing a high-frequency indicator of employment growth.
Traders will also receive data on producer prices and retail gross sales. The US economy is expected to grow at a solid pace this spring, but the service sector is still in contraction territory. The October report from the Labor Department will be released this week, and should reveal that underlying price pressures remain weak. The Fed’s October CPI print will also be released, and if it shows signs of rolling over, the tone for Fed speakers may shift.
The UK will also release its employment and consumer prices data this week, with the former set to show that the economy is heading for its largest squeeze on living standards in six decades. The IMF also forecast a more challenging outlook, blaming the darker outlook on the weak growth momentum in China, as well as the continued broad-based inflation.
In other important developments, Carvana (NYSE:CVNA) announced that it would be cutting approximately 8% of its workforce, a move that came after news of the job cuts broke. In an internal memo, Carvana said the move is part of the company’s plan to cut expenses and stay profitable. However, the announcement of the cuts sparked a slump in Carvana stock, which dropped by about 3%.
The IMF said that a number of factors could have contributed to the worsening economic outlook, including the continued weakness in China, as well as the impact of the Russian invasion of Ukraine. In addition, the Fed’s hawkish action has increased expectations for a faster pace of inflation. However, the Fed’s latest statement also said that it is “premature to say that we have won the battle over inflation.”
Fed officials have also said that it is not enough to point to the “enormous” 7.7% annual charge that the Fed is charging. The October CPI print was “just one data point,” according to Fed Governor Christopher Waller. Waller said that “extra information is needed to identify a fabric slowdown in inflation.”
While US interest rates remain elevated, traders are looking to the Fed’s speakers this week to provide insight into how the Fed’s rate-hiking cycles will play out. These speakers will also provide clues as to how the Fed plans to slow down its rate-hiking pace, and whether it believes that taking more action to reduce inflation is more expensive than taking less action.