This year’s final rate-setting meeting by the Federal Reserve is approaching as investors on Wall Street await a parcel of economic data.
The consumer sentiment, durable goods orders, and the producer price index (PPI) – which gauges inflation at the wholesale level – take the top spots in terms of importance on the economic calendar. Moreover, the third-quarter reporting season will come to an end with a few more earnings reports, bringing the curtain down on it.
The Federal Reserve holds policy-setting meetings that are preceded by a blackout period, during which public speaking engagements are restricted. U.S. Central bank officials have scheduled a meeting on Dec. 13-14, where it is anticipated that they will increase their benchmark interest rate by 50 basis points.
Inflation, which is currently a popular topic, is being observed by traders to gauge the prices that producers will give. The Consumer Price Index (CPI) is a comprehensive economic data release that is used by officials to set policy. The two most closely monitored releases of economic data are the Consumer Price Index and the monthly jobs report, both of which provide clues for the Fed. The November report, which was released on Friday, exceeded expectations and included fresh data on CPI, giving traders valuable insight.
The core PPI is anticipated to have risen by the same monthly percentage as the headline reading, but decreased from 5.8% to 6.7% on a year-over-year basis. During this period, November’s PPI increased by 0.2%, which is comparable to the previous month, while slowing down to 7.1% from 8.0% on an annual basis.
If the U.S. Had narrowly avoided a nationwide railway strike by workers, which was expected to devastate the economy and particularly hit wholesalers hard, a different picture of inflation may have started to look if Congress hadn’t hastily passed legislation to impose conditions from a tentative deal reached in September.
As things stand, Jerome Powell, Chair of the Federal Reserve, largely affirmed his view during a speech in Washington, D.C. After particularly considering the opinions shared by megabanks on Wall Street and in the markets, he forecasted a 50-basis-point increase in the interest rate for the upcoming week.
“Said he,” it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. And the full effects of our rapid tightening so far are yet to be felt, with uncertain lags, and monetary policy affects the economy and inflation.
Powell added that the “opportunity for slowing down the speed of rate increases may arise as early as the December gathering.”
Investors are currently questioning the duration of the central bank’s tightening campaign, including the length of time it will remain in effect and the potential increase of the federal funds rate. Additionally, there is curiosity regarding the continuation of the campaign, considering the previous four meetings have resulted in 0.75% hikes.
Last week, BofA Chief Economist Michael Gapen speculated in a call with reporters that the rate could potentially increase to 6% because of the strong momentum of the labor market. This viewpoint is shared by many other large banks, and Bank of America predicts that the final rate will be within the range of 5.00% to 5.25%.
The Fed’s view suggests that they will lean in the direction of doing less to put inflation on a sustainable downward trajectory, which means that they will have a slower pace of rate hikes. This seems appropriate from a risk management perspective, given the persistent imbalance between labor demand and labor supply in the hot job market, as noted in a report released on Friday after November’s strong jobs data. This skewed outlook towards higher terminal rates poses risks for our Fed policy outlook. Bofa strategists, led by Gapen, stated this.
“With rates seemingly on hold and the pace of growth slowing down, attention on Wall Street has shifted to the longer-term impacts of a higher interest rate environment. The Federal Reserve’s target for long-term price stability remains at 2%.”
They mentioned in a message, “There is a possibility of considerable disruption in businesses and the job market.” They will decrease the speed at which they are increasing rates and then dedicate a significant amount of time to carefully examine the situation and the potential consequences, in the end, we believe.
Amid a phase of economic stagnation, Larry Fink, the CEO of BlackRock, expressed during a recent conference that he is optimistic about a decrease in inflation, although not necessarily to the extent of reaching the 2% threshold. This perspective was also held by him.
At the Dealbook Summit in New York on Wednesday, Fink expressed concerns about waking up in a world with interest rates around 2ish-3% and inflation ranging from 3-4%.
The global oil market is facing uncertainty due to Russia and China, causing the price of oil to cap at $60 a barrel on Friday. The OPEC+ cartel has agreed to maintain current production levels in order to assess the market and address this commodity uncertainty. This weekend, an OPEC+ meeting will take place, putting energy markets in focus.
Campbell Soup, GameStop, Broadcom, Chewy, lululemon athletica, and Oracle, collectively known as CPB, GME, AVGO, CHWY, LULU, and ORCL, respectively, contribute to the conclusion of the earnings season.
Wall Street strategists have warned that the earnings growth for the third quarter has largely been seen as better than feared, with zero ahead.
According to research conducted by FactSet, analysts have lowered their earnings estimates for the fourth quarter for the companies in the S&P 500. The estimates decreased by 5.6%, from $57.79 to $54.58 per share, between October and November.
Bohnsack and Mayfield also noted in their weekly report that when you incorporate looks like the economy’s not being damaged much, the drop in earnings associated with a recession might be considered normal-sized. This is especially true when prices, which remain elevated due to higher profits and sales levels, create the illusion of money and inflation. There’s something to be said for this idea.
“We anticipate an increase in continuing expenses and a decrease in earnings estimates, which is causing us to lower our corporate guidance. We have started to see some acute real pain across the landscape, and we are very focused on the profitability level and corporate profit margins,” they added.
November (with an expected value of 53.5, compared to 54.4 in the previous month); ISM Services Index, final for October (1.3% in the previous month); Non-defense Capital Goods Shipments Excluding Aircraft, final for October (0.7% in the previous month); Non-defense Capital Goods Orders Excluding Aircraft, final for October (with an expected value of 0.5%, same as the previous month); Durables Excluding Transportation, final for October (1.0% in the previous month); Durable Goods Orders for October (with an expected value of 0.7%, compared to 0.3% in the previous month); Factory Orders, final for November (46.3 in the previous month); S&P Global U.S. Composite PMI, final for November (46.1 in the previous month); S&P Global U.S. Services PMI, final for November (with an expected value of 46.1, same as the previous month); Monday:
Tuesday: Trade Balance, October (-$77.0 billion, $73.3 billion anticipated).
The week ending on December 2 saw a decrease of 0.8% in MBA mortgage applications compared to the previous week. The final Q3 report showed a 0.3% increase in nonfarm productivity, which was in line with expectations. Similarly, labor unit costs remained unchanged at 3.5% during the same quarter. In October, consumer credit reached $26.500 billion, slightly higher than the previous month’s figure of $24.976 billion.
On December 3rd, there were 225,000 initial jobless claims for the week ending on Thursday. On November 26th, there were 1.608 million continuing claims for the week ending.
In November, the month-to-month Trade and Energy, Food Excluding PPI remained at 0.2%, as expected and as it was in the previous month. The month-to-month Energy and Food Excluding PPI also remained at 0.2%, as expected and as it was in the previous month. Additionally, in November, the month-to-month Trade, Energy, and Food Excluding PPI remained at 0.2%, as expected and as it was in the previous month. On a year-over-year basis, the Demand Final PPI in November was 7.1%, as expected, compared to 8.0% in the previous month. The year-over-year Energy and Food Excluding PPI in November was 5.8%, as expected, compared to 6.7% in the previous month. Furthermore, the year-over-year Trade, Energy, and Food Excluding PPI in November remained at 5.4% as it was in the previous month. In October, the month-to-month Sales Trade Wholesale remained at 0.4% as it was in the previous month. The final month-to-month Inventories Wholesale in October remained at 0.8% as it was in the previous month. Lastly, in December, the Preliminary Sentiment of the University of Michigan was 56.8, as expected and as it was in the previous month.
Calendar of Earnings
On Monday, we have GitLab (GTLB) and Sumo Logic (SUMO).
On Tuesday, Toll Brothers (TOL), Smith & Wesson Brands (SWBI), Stitch Fix (SFIX), Signet Jewelers (SIG), MongoDB (MDB), Dave & Buster’s (PLAY), Conn’s (CONN), Casey’s General (CASY), AutoZone (AZO), and AeroVironment (AVAV) will be active.
On Wednesday, the companies Verint Systems (VRNT), United Natural Foods (UNFI), Thor Industries (THO), Sportsman’s Warehouse (SPWH), Ollie’s Bargain Outlet (OLLI), Lovesac (LOVE), Korn/Ferry (KFY), GameStop (GME), C3.Ai (AI), Campbell Soup (CPB), and Brown-Forman (BF.B) will be in focus.
On Thursday, AVGO (Broadcom), CHWY (Chewy), CIEN (Ciena), COST (Costco Wholesale), DOCU (DocuSign), DOMO (Domo), MOMO (Hello Group), LULU (lululemon athletica), FIZZ (National Beverage), RH (RH), and MTN (Vail Resorts) will be active.
Friday: Li Auto (LI), Oracle (ORCL).
Alexandra Semenova is a journalist for Yahoo Finance. Follow her on Twitter @alexandraandnyc.
Click here for the most recent popular stock symbols of the Yahoo Finance platform.
Click here for the most recent updates on the stock market and comprehensive examination, encompassing occurrences that influence stock movements.
Stay updated with the most recent financial and business updates from Yahoo Finance.
Download the Yahoo Finance application for Apple or Android devices.
Connect with Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube.