US equity investors will focus on macroeconomic data while watching political developments this holiday-shortened week as a slowing in the Federal Reserve's preferred inflation gauge raised questions about the central bank's relatively hawkish outlook.
* Equity markets will close early at 1 pm ET on Tuesday and remain shut on Wednesday for the Christmas holidays.
* Investors will focus on macroeconomic data even more closely in the week ahead after the Federal Reserve's preferred inflation gauge fell last Friday, just two days after the central bank unveiled a "hawkish" interest-rate cut for December and lowered its outlook for policy easing in the year ahead. The relief rally in equity markets on Friday continued in the premarket on Monday.
* "The PCE inflation print is favorable for our outlook for continued rate cuts in early 2025," Morgan Stanley Chief US Economist Michael Gapen said late last week. "The positive signal came from the slowdown in shelter inflation and that should show through once the temporary storm-related firmness in autos subsided."
* This week, the Conference Board's consumer confidence reading for December is due Monday. Tuesday will be the busiest day, with the Philadelphia Fed's nonmanufacturing index, Redbook same-store sales, durable goods orders, new home sales, and an update to the Atlanta Fed's GDP Nowcast estimate. After Wednesday's holiday pause, the data flow lightens considerably, with weekly jobless claims and an update to the St. Louis Fed's GDP Nowcast estimate to finish the week.
* President Joe Biden signed spending legislation into law late last week, avoiding a potential government shutdown. A bipartisan plan emerged early Saturday to temporarily fund federal operations, ignoring President-elect Donald Trump's demand for a debt-limit increase into the new year. The bill's contentious passage gave investors a window into lawmaking post-Jan. 20 even though Republicans will control all three branches of power under the new administration.
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