US Markets closed higher on Friday after a stronger-than-expected jobs report calmed nerves about the severity of a recession but fell for the week on account of the Federal Reserve’s sixth consecutive interest rate hike of the year, raising benchmark rates by 75 basis points again.
The Federal Reserve is now widely expected to slow down the pace of rate hikes in the coming months but remain hawkish, stating that they may continue to raise rates for longer than previously anticipated, while peak interest rates are expected to be higher than the 4.6% forecasted by the Fed in its September meeting.
Market Indiceshave been digesting the mixed news, with the Dow Jones falling 1.4%, the S&P 500 declining 3.3%, and the tech-heavy Nasdaq shedding 5.6% for the week. $DJIA(.DJI)$ $S&P 500(.SPX)$ $NASDAQ(.IXIC)$
The week ahead is packed with key data for inflation and consumer sentiment, which will help provide additional data for markets to understand the strength of the US economy amidst the monetary tightening from the central bank. $Cboe Volatility Index(VIX)$
Consumer Price Index
The Bureau of Labor Statistics (BLS) is set to release its report for the Consumer Price Index on Thursday, tracking the change in prices for the month of October.
Despite the aggressive stance taken by the Central Bank and decline in household savings and subsequent increase in credit card spending, prices have continued to rise as inflation remains nearthe 40-year high of 9.1% set in July.
US CPI Yearly Change, SourceInvesting.com
Consensus forecasts show that prices will have likely increased by 0.7% from the prior month, which is higher than the 0.4% gain seen in September. However, on an annual basis, inflation is expected to have decelerated from 8.2% in September to 8% in October.
However, core inflation which doesn’t account for food or energy will likely accelerate by 0.5% to 6.7% on an annual basis, reaching a new 40-year high. If CPI remains high, the central bank may be forced to stay hawkish, leading to a narrower path for the soft landing.
Consumer Sentiment Index
The University of Michigan will release its reading for the Consumer Sentiment Index, tracking consumer confidence in the US for the month of November. The Index hit an all-time low of 50 in June, surpassing the reading seen in the Great Recession of 2008 and the Dot Com bubble in 2001.
US 3-Year Consumer Sentiment Index, Source —YCharts
However, with oil prices retreating and inflation moderating, consumer sentiment has improved in recent months. The Index is projected to show a reading of 60, which is a slight increase compared to the 59.9 reading seen in October. An improvement in the Index would indicate that the economy remains strong, dispelling fears of a recession.
Technical Indicators
S&P 500 1-Year Return, Source:TradingView
The S&P 500 is now down 19.41% over the past year. The fear and greed index stands at 58, which indicates that investors are buying equities based on the current inflows.
1-Week Relative Performance, Source —Finviz
The three best-performing sectors over the past week were Basic Materials, Energy, and Utilities, with all other industries showing a decline.
Bottom Line
Market Indices have continued to slide sideways as a result of mixed economic data. The week ahead is packed with data, including reports on inflation and consumer sentiment, which should help guide markets on the strength of the economy.
In recent weeks, markets have continued to drop due to higher inflationand a weakening economy. Key corporate earnings and housing market updates will clearly depict where indices could be headed next.
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