Weekly:The final Fed meeting and inflation data of 2023 in the week ahead

The Week Ahead

Macro Factors - The final Fed meeting and inflation data is on desk

• The last Federal Reserve meeting and the latest inflation data of 2023 is on deck in the week, and investors will be keen to look for signals on when the central bank may start to cut interest rates, as stocks try to finish the year off on a high note.

• The market is overwhelmingly expecting no change to rates. Fed officials' latest projections for the economy and interest rates will offer clues into the future path of monetary policy.

• On Wednesday, Powell is likely to signal his continued commitment to bringing down inflation in his press conference. Traders will also get clarity into the path of potential future easing from the dot plot, or the Fed’s projections for 2024. In fact, the CME Group’s FedWatch tool shows markets are already pricing in a 45% likelihood in March that the central bank will lower rates by 0.25 percentage points.

• The November consumer price index, set to come out Tuesday. The data is expected to show monthly inflation unchanged from the prior month, according to FactSet consensus estimates. On a yearly basis, the consumer price index is anticipated to show a 3.1% rise, down slightly from a 3.2% rise in the October year-over-year reading.

• Meanwhile, core CPI, which excludes volatile food and energy prices, is expected to have risen by 0.3%, representing a slight rise from the 0.20% gain in the previous month.

• The November PPI that’s set to come out on Wednesday is expected to have stayed flat from the prior month, according to economists polled by FactSet.

Last Week's Recap

The US Market - All the major indexes wrapped six winning weeks

• All the major averages finished the week with gains, with the major indexes rising slightly, just below 52-week highs. All three major indexes wrapped six winning weeks, their longest run since 2019.

• The S&P 500 posted its highest close of the year last week, the benchmark is now up about 20% on the year and trading at its highest level back to March 2022.

• The November jobs report showed stronger-than-expected hiring, but the underlying trend in jobs and wage growth continues to cool. Treasury yields rebounded from three-month lows on Friday's jobs report.

• U.S. crude and the global benchmark lost about 4% for the week despite Friday’s rebound. The last time WTI booked a seven-week losing streak was five years ago.

• Some notable signals in the recent rally have investors deliberating how to position for 2024. The Magnificent Seven have recently taken a backseat to some of 2023′s laggards such as health care and small caps as market participation broadens out.Goldman Sachs on Wednesday noted the seven tech stocks have been collectively sold by hedge funds over 15 of the previous 17 sessions. Meanwhile, the small-cap Russell 2000 index has outperformed this month, up by nearly 3%.

The US Sectors & Stocks - Bitcoin rallied back to $44,000

• 5 of the S&P 500 sectors ended the week in the green. the communication services sector led S&P 500 higher, as both of GOOG and META rose more than 2.4%.

• Energy sector logged the worst performance, as oil prices headed for a seventh straight weekly loss.

• Bitcoin rallied back to its $44,000 price level to its highest level since April 2022. Cryptocurrency prices continue to gain steam in anticipation that the SEC will eventually approve a slew of spot bitcoin ETFs. Coinbase (COIN) leapt nearly 7% last week as Needham hiked its price target on COIN stock by $40 to $160 on Tuesday.

• Google stock jumped as its parent Alphabet (GOOGL) launched its "Gemini" artificial intelligence foundation model. Gemini will be available in three different sizes — Ultra, Pro and Nano. Google showed benchmark results that suggest better performance vs. OpenAI's GPT4-V. Google's Bard chatbot will be first to use Gemini.

• AMD (AMD) on Wednesday launched an AI-focused chip to challenge the dominance of Nvidia (NVDA) in the red-hot market of artificial intelligence computing. AMD shares surged 10% Thursday, following positive analyst commentary.

• Lululemon Athletica (LULU) beat Q3 estimates with a 26.5% EPS gain. Revenue rose 19% to $2.2 billion, just edging past forecasts. But the yoga apparel retailer guided holiday-quarter revenue slightly below views. The board approved a new $1 billion stock repurchase plan. LULU stock rallied to a two-year high.

• Nio (NIO) posted a smaller-than-feared Q3 loss while revenue jumped 49%, slightly beating. Its Q4 delivery outlook was better than feared, but would be below Q3's levels. Nio stock bounced, but from a three-year low.

• C3.ai (AI) stock tumbled, after it reported an adjusted Q3 loss of 13 cents per share vs. 11 cents a year earlier. Revenue rose 17% to $73.2 million, slightly missing $74.3 million. For fiscal Q4 ending in January, the company predicted revenue below estimates.

Hong Kong Market - HSI fell to 13-month low after Moody's downgraded

• Hong Kong stocks cling to 13-month lows after Moody's downgraded its outlook on Hong Kong to negative from stable, just a day after Moody's cut China's credit outlook.

• The Hang Seng Index dropped 2.95% for the week to close below 17,000, while the Hang Seng Tech Index lost 3.26%. The Hang Seng Index has dropped 17% this year, making it the worst performer among the world’s key benchmarks this year, erasing US$631 billion in market value.

• Moody's on Wednesday downgraded its outlook on Hong Kong to negative from stable. The rating action follows Moody's downgrade warning on China's sovereign credit rating on Tuesday, saying costs to bail out local governments and state firms and control its property crisis would weigh on the world's second-largest economy. The downgrade to negative from stable in Hong Kong's outlook reflects assessment of tight political, institutional, economic and financial linkages between Hong Kong and China, Moody's said.

• Tencent fell to HK$305.60 after its major shareholder Prosus sales of 513,500 shares in the company on Thursday stoked fears about more selling.

Singapore Market - SGX tourism-related stocks ride growth

• Singapore stocks ended the week in green. The benchmark Straits Times Index (STI) was up 0.66% to 3,110.73.

• SGX tourism-related stocks ride growth as Singapore and China start 30-day visa-free travel. According to Singapore’s Ministry of Foreign Affairs, both countries will work out the implementation details and implement it in early 2024.

• Retail sales in Singapore saw a slight 0.1% year-on-year dip in October. This decline breaks an eight-month streak of increases. In addition, wage growth is moderating while job uncertainty is also increasing, thereby exerting further downward pressure on retail sales in the coming months.

• Economists remain sanguine for 2024 as Singapore’s inbound tourism recovery remains intact and should see a complete recovery by next year.

Australian Market - The ASX 200 recorded a big weekly rally

• The Australian market took a chance and rose anyway, helped out by bullish price action for iron ore, as a more dovish interest rate approach from the Federal Reserve. The ASX 200 recorded a big weekly rally of 1.72% to close at 7194.9.

• The potential merger between Woodside and Santos sent Santos shares upwards while shares in the larger merger partner weakened. Santos (ASX: STO) shares leapt 5% to $7.25 despite fears of regulatory issues around the merger. Woodside Energy (ASX: WDS) shares eased 4% to $19.63 as investors fear it might effectively “pay too much” for the merger.

• Australia’s economy surprisingly slowed sharply in the third quarter as consumers hunkered down in the face of rising borrowing costs while trade detracted from growth. Gross domestic product advanced 0.2% from the prior quarter, slower than economists’ estimate of a 0.5% gain, Australian Bureau of Statistics data showed Wednesday. From a year earlier, the economy grew 2.1% from a downwardly revised 2%. Australian households are already facing a squeeze with Wednesday’s data showing the savings ratio declined to the lowest level since 2007.