Market Indices finished the shorter holiday trading week on a mixed note but closed higher for the Week following commentary from members of the Federal Reserve who suggest that the pace ofinterest rate hikesmay slow down soon.
For the Week, the S&P 500 Rose 1.5%, the Dow Closed 1.7% higher, while the tech-heavy Nasdaq inched 0.7% higher.
The Week ahead is packed with crucial inflation and jobs reports, which will help investors gauge the data about the strength of the economy, driving the markets in the Week ahead.
Inflation Updates
The Bureau of Economic Analysis is set to report the personal consumption index (PCE), the Fed’s preferred inflation indicator for October, on Thursday. Consensus forecasts show that PCE inflation will have slowed down in the previous month afterincreasing by 0.3% in September.
PCE Inflation Annual Change, Source:TradingEconomics
Annual inflation is expected to slow down to 5.9% in October vs. 6.2% seen in September, while core inflation, which excludes food and energy, is expected to have decreased to 4.9%compared to 5.2% in September.
November Job Reports
Several key labor market updates are set to be released in the Week ahead, showing how the economy is coping with the recent interest rate hikes and economic downturn. The latest JOLTS survey, which tracks job openings for the month of October, is set to be reported on Wednesday. Job openingshave been falling rapidly in the last six monthsand are projected to fall to 10.4 million in October as compared to 11.9 million seen in March.
Non-Farm Payrolls, Source:TradingEconomics
The bureau of labor statistics is also set to release its non-farm payrolls report for November on Friday, tracking the number of new jobs added. Consensus forecasts show that the number of new jobs added is expected to slow to 200,000, down from the261,000 reported in October, making it the slowest month of growth recorded since December 2020.
Furthermore, the unemployment rate is projected to increase from 3.7% to 3.8% as companies start instituting hiring freezes and layoffs to cut costs as economic uncertainty rises. If unemployment crosses the 5% threshold, the Federal Reserve may be forced to switch its monetary policy from aggressive to accommodative to support the economy.
Technical Indicators
S&P 500 Chart, Source:TradingView
The S&P 500 Index is now down 14.1% for the year. The Fear and Greed Index is now at 64, which indicates that investors are bullish about stocks.
1-Week Relative Performance, Source:Finviz
The three best-performing industries for the past Week were Utilities, Real Estate and Basic Materials, which delivered returns of 5.01%, 2.95%, and 2.94%, respectively.
Bottom Line
The Week ahead is packed with economic data, including inflation and job reports, which should help investors understand the current state of the economy, the Federal Reserve’s next steps, and how it could drive markets ahead.
In recent weeks, markets have continued to drop due tohigher inflationand a weakening economy. Key corporate earnings and housing market updates will clearly depict where indices could be headed next.
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