The Fed is to publish the minutes of its Oct. 31-Nov. 1 meeting on Tuesday, a day earlier than usual, due to this week’s Thanksgiving holiday.
Recent indications that inflation is cooling have fueled hopes that the U.S. central bank is done with hiking rates and investors will be combing through the minutes for clues on where policymakers are leaning.
On Friday Vice Chair for Supervision Michael Barr said he believes the Fed is at or near the peak of interest rate hikes, but San Francisco Fed chief Mary Daly and Boston Fed President Susan Collins highlighted the need for more evidence of cooling inflation.
On the economic data front, figures on existing home sales are due out on Tuesday, followed a day later by the weekly government figures on initial jobless claims and October data on durable goods orders.
U.S. retailers are gearing up for Black Friday, marking the start of the crucial holiday shopping season that follows Thanksgiving at a time when investors are questioning whether the consumer-driven U.S. economy can remain resilient.
This year’s Black Friday comes against a backdrop of elevated interest rates and inflation that, while easing, remains above the Fed’s 2% target.
Data last week showed that U.S. retail sales fell for the first time in seven months in October, pointing to slowing demand, although the decline was smaller than expected.
Retailers have already warned that this year’s holiday season will be less robust than in previous years. Walmart (NYSE:WMT) said Thursday that consumers are being more cautious with spending as the holiday season gets underway, even as the largest U.S. retailer raised its forecast for sales and profit for the year.
Investor optimism on equities has grown over the last few weeks, with markets rebounding from a months-long drop that ran from August through much of October. Treasury yields, whose steady rise over the last few months had weighed on stocks, have rapidly retreated amid hopes the Fed is finished raising interest rates.
Last week saw the S&P 500, the Nasdaq and the Dow rack up their third straight week of gains. For the S&P and the Dow it was the longest weekly winning streak since July. For the Nasdaq it was the longest weekly advance since June.
This week investors will be turning their attention on chip company Nvidia (NASDAQ:NVDA), which releases its latest earnings report on Tuesday. It is the last of the results in the earnings season from the Magnificent Seven megacap companies, whose massive share gains this year have led equity indexes higher.
Oil prices jumped more than 4% on Friday, rebounding from a four-month low hit in the previous session, as investors who had taken short positions took profits and while U.S. sanctions on some Russian oil shippers lent support.
Still, both the Brent and crude oil benchmarks ended the week more than 1% lower, their fourth straight weekly decline, mostly weighed down by a rise in U.S. crude inventories and sustained record high production.
China’s deepening property crisis and slowing industrial growth also weighed.
With Brent below $80, many analysts expect the Organization of the Petroleum Exporting Countries and its allies to extend output cuts into 2024 when the group meets later this month.
The Eurozone is to publish purchasing manager indexes data for November on Thursday, with economists not expecting any meaningful pickup in activity. The bloc is also to release data on consumer confidence on Wednesday and the closely watched German Ifo business climate index is due out on Friday.
The European Central Bank is to publish its latest financial stability review on Wednesday, followed a day later by the minutes of its October policy meeting.
ECB President Christine Lagarde is to make an appearance in Berlin on Tuesday and will speak again at an event in Frankfurt on Friday, while several other ECB officials are also due to make appearances during the week.
Potential market trajectory
In the upcoming week appears to hinge on a blend of cautious optimism and vigilant scrutiny. The Federal Reserve’s meeting minutes are likely to play a pivotal role in shaping investor sentiment, especially regarding interest rate trends. If the minutes suggest a pause or slowdown in rate hikes, this could fuel a positive market response, bolstering investor confidence.
The retail sector, particularly with Black Friday sales, will be a critical barometer of consumer confidence and spending power. Success in this domain, against the backdrop of inflation and interest rate concerns, could signal robust consumer resilience, potentially lifting retail stocks and broader market sentiment.
In the equity markets, the performance of major players like Nvidia will offer insights into the tech sector’s health and influence market direction. Simultaneously, developments in oil prices, influenced by geopolitical factors and OPEC’s decisions, will have broader implications for energy stocks and inflationary trends.
The Eurozone’s economic data and the European Central Bank’s insights will contribute to understanding the global economic climate, impacting market perceptions on international trade and investment.
Overall, the week ahead seems poised at a crucial juncture, where positive indicators could strengthen market optimism, while any signs of economic strain or policy tightening could prompt a more cautious or bearish market reaction. Investors and market participants would do well to stay attuned to these varied signals to navigate the evolving economic landscape.
by Steve Macalbry
Disclaimer: This article is intended for informational purposes only. It should not be considered financial or investment advice. We do not hold any form of equity in the securities mentioned in this article. Always consult with a certified financial professional before making any financial decisions.