The US stock market rally seemed to have paused last week. The hawkish comments from different Fed officials kept the rally at bay and despite good news on the inflation front, the investors remained cautious. Traders remain upbeat about the U.S. economy, and the Retail Sales number—which came up higher than expected (1.3% vs. 1.0% projected)—confirmed this. The data has increased traders’ and investors’ confidence in riskier assets by providing reassurance that Americans are still making purchases.
FOMC minutes are to be released on Wednesday afternoon. Insofar as the Fed expresses satisfaction with the rate of the inflation decrease, markets will view it as a good sign. Also, Wednesday’s flash PMIs and Fed minutes will take center stage in an otherwise quiet week for economic data because the US stock market will be closed on Thanksgiving day, November 24. The next day November 25, will be an interesting trading day for the market because later on Federal Reserve Chair Jerome Powell talks on the state of the economy and the evolving job market on November 30.
Companies announcing quarterly earnings this week will include firms from across different sectors. On Monday, November 21 Agilent Technologies, Inc., Dell Technologies Inc., Zoom Video Communications, Inc., J.M. Smucker Company , Toro Company and Futu Holdings Limited are some coming out with results.
On Tuesday, November 22, BHP Group Limited, Baidu, Inc., HP Inc., Best Buy Co., Inc, Warner Music Group Corp. Will be the ones among others. Pinduoduo Inc. Will announce quarterly results on November 25, Friday.
After a resilient performance last week, the market is now doubting central bank policies once more this week. Have we already reached the peak of inflation something the market is closely looking at? They had anticipated that central banks may begin to think about loosening monetary policy, but Fed officials dashed such dreams.
The difference between the US two-year and ten-year yields is falling precipitously and is now negative. In the past, a recession has always come after this situation. Many expect the US to get into a recession in 2023 and the duration of this spread in negative territory is usually a good indicator of the depth of the recession that follows.
The markets continue to focus on higher terminal rate risk and persistently high service inflation. Existing home sales decreased for the ninth month in a row in October, but they slightly outperformed expectations. Volatility may return at any time given the looming prospect of a global recession and the recent sharp rise in financial markets. Investors in the US stock market may be preparing for a Santa Claus bounce before the year ends. Following a year-long fall, the optimistic market sentiment suggests that stock prices will soon begin to rise.