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Top 5 things to watch in markets in the week ahead

 
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Investing.com — In the coming week U.S. inflation data will be closely watched, along with comments from several Federal Reserve officials, which will help investors shape their views on the future path of interest rates. Retailers are due to report earnings against a background of persistent concerns over inflation and the economic outlook and oil prices look set to remain volatile. Here’s what you need to know to start your week.

  1. U.S. inflation data

Investors are awaiting Tuesday’s U.S. consumer price data for October, for an update on the Fed’s progress in its battle to keep lowering inflation from last year’s multi-decade highs.

Inflation is expected to have risen 0.1% on a monthly basis. September’s CPI rose 0.4% on a surprise surge in rental costs, but also showed a moderation in underlying inflation pressures.

A sharper cooling could fan the peak rate talk, fuelled by October’s employment report, which pointed to easing conditions in the labor market.

The U.S. is also to release producer price data along with retail sales numbers for October, which are expected to dip into negative territory after a string of solid monthly gains.

Other data due for release includes reports on industrial production, housing starts and initial jobless claims.

  1. Fed speakers

Investors will get a chance to hear from several Fed officials during the week, including New York Fed President John Williams, Chicago Fed President Austan Goolsbee, Governor Philip Jefferson and Governor Michael Barr as policymakers weigh any further tightening ahead of their next meeting on Dec. 12-13.

Last Thursday, Fed Chair Jerome Powell said officials “are not confident” that interest rates are yet high enough to finish the battle with inflation. While the Fed does not want to overtighten policy, Powell said “the biggest mistake we could make is really, to fail to get inflation under control.”

His comments were echoed by colleagues, with San Francisco Fed President Mary Daly saying Friday she is not ready to say yet whether the Fed is done raising rates.

Investors have been focused on benchmark Treasury yields, which have eased somewhat from 16-year highs as they assess whether rates have indeed peaked and when the central bank could start cutting rates.

  1. Retail earnings

Third quarter earnings season is winding down, but several major retailers are due to report in the week ahead with investors on the lookout for indications on how consumer spending is holding up.

Home Depot (NYSE: HD) is due to report ahead of the open on Tuesday, followed by Target (NYSE: TGT) ahead of Wednesday’s market open, while results from Walmart (NYSE: WMT) and Macy’s (NYSE: M) are due out on Thursday.

Target has been struggling with higher costs and the big box retailer has made several cuts to its guidance, after warning earlier this year that “shrinkage” – goods that are stolen – is hitting its bottom line.

In contrast, Walmart shares hit record highs earlier this month boosted by growing revenues and profits which saw it handily beat expectations when it reported in August.

Other retailers reporting during the week include TJX Companies (NYSE: TJX), Gap (NYSE: GPS), and China’s Alibaba (NYSE: BABA).

  1. U.S. government shutdown risk

The risk of a federal government shutdown is looming if lawmakers in Washington are unable to pass a measure to at least temporarily fund operations before Friday.

Hardline demands for steep spending cuts and policy riders including abortion restrictions have split Republicans for much of 2023, with Republican centrists pushing for a more bipartisan approach that can win support in the Senate.

U.S. House Speaker Mike Johnson unveiled a Republican stopgap spending measure on Saturday aimed at averting a partial shutdown, but the unorthodox plan quickly came under fire from members of both parties.

Fresh wrangling could renew concerns about governance in the world’s biggest economy.

  1. Oil price volatility

Oil prices gained about 2% on Friday as Iraq voiced support for OPEC+’s oil cuts ahead of a meeting in two weeks and as some speculators covered massive short positions ahead of weekend uncertainty.

Still, prices settled with weekly losses of 4%, their third straight weekly decline.

Concerns about the global demand outlook offset fears over potential production outages related to the Middle East conflict amid weak economic data out of China, the U.S. and the U.K. last week.

Energy traders are looking ahead to a meeting between the Organization of the Petroleum Exporting Countries and allies including Russia on Nov. 26.

Analysts think OPEC+ might cut supply further if prices continue to fall.

–Reuters contributed to this report

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