Monday, December 16, 2024
It’s a big week for economic data on this second-to-last full week of trading for the year. And while things like Retail Sales and Personal Consumption Expenditures (PCE) will matter a great deal to the appetites of market participants, the Federal Open Market Committee (FOMC) meeting tomorrow and concluding Wednesday will be the big news for the week.
Expectations are strong for another 25 basis-point (bps) cut to the Fed funds rate, which would bring effective interest rates to a range of 4.25-4.50% for the first time since February of 2023. This will bring us rather neatly to 100 bps lower than our year-long highs from August ’23 to August ’24, on what looks to be a near-term settling point of 4% interest rates.
Whether we get down to that round number or not very much depends on what the data tells us: not just last week’s Inflation Rate, which looks to have gotten comfy here in the high 2%s (+2.7% to be exact, in-line with expectations), but in next month’s Employment Report, where we have averaged around +150K new jobs filled per month going back to last spring. In the post-Covid world, this is pretty low.
Thus, once the new interest rate is announced, the intrigue will be just beginning. First, we’ll check to see if there were any dissenters, and how many. Second, Fed Chair Jerome Powell’s press conference will be peppered with questions about the Fed’s forward march into bringing interest rates down further. Wednesday is the day, in the afternoon ahead of the close. That’s the big event of the week.
Empire State Manufacturing Stays Positive (Barely)
The
Empire State Manufacturing Survey, tracking goods-producing productivity in New York State — statistically the most productive in the U.S. — reached +0.2 points in its December index. This is down from an expected +10.0 and well behind November’s unrevised surge to +31.2. It’s still the third positive print in the past four months, but looks to be going the way of the first eight months of the year, which was strictly negative.
What to Expect After Today’s Stock Market Open
S&P flash PMI data for both
Services and Manufacturing are coming out for December after today’s opening bell. Both are expected to tick down slightly month over month — to 55.3 on the Services side and 49.6 on Manufacturing. Notice that each is on the opposite side of 50 — the demarcation point between growth and contraction.
What to Expect for the Rest of the Week in the Stock Market
As we say, it’s a busy week for data. This is a good thing, as the final trading days of a calendar year are usually bereft of high volume. So we’ll see November Retail Sales tomorrow, Philly Fed for December Thursday and the big PCE report Friday. The unfortunate thing about this is that PCE numbers — the Fed’s preferred gauge of inflation — is coming out two days after the last FOMC meeting of the year.
We also expect to learn plenty about the housing market this week, with a new Homebuilder Confidence report for December Tuesday, Housing Starts and Building Permits for November on Wednesday, and Existing Home Sales, also for November, on Thursday. Ultimately, we don’t expect the needle to move much until new Fed policies are enacted — and the new presidential administration takes office roughly a month from now — but we appreciate being able to track all of this data in order to better comprehend our investing climate.
Questions or comments about this article and/or author? Click here>>
Image: Bigstock
Fed Decision Wednesday in Focus This Week
Monday, December 16, 2024
It’s a big week for economic data on this second-to-last full week of trading for the year. And while things like Retail Sales and Personal Consumption Expenditures (PCE) will matter a great deal to the appetites of market participants, the Federal Open Market Committee (FOMC) meeting tomorrow and concluding Wednesday will be the big news for the week.
Expectations are strong for another 25 basis-point (bps) cut to the Fed funds rate, which would bring effective interest rates to a range of 4.25-4.50% for the first time since February of 2023. This will bring us rather neatly to 100 bps lower than our year-long highs from August ’23 to August ’24, on what looks to be a near-term settling point of 4% interest rates.
Whether we get down to that round number or not very much depends on what the data tells us: not just last week’s Inflation Rate, which looks to have gotten comfy here in the high 2%s (+2.7% to be exact, in-line with expectations), but in next month’s Employment Report, where we have averaged around +150K new jobs filled per month going back to last spring. In the post-Covid world, this is pretty low.
Thus, once the new interest rate is announced, the intrigue will be just beginning. First, we’ll check to see if there were any dissenters, and how many. Second, Fed Chair Jerome Powell’s press conference will be peppered with questions about the Fed’s forward march into bringing interest rates down further. Wednesday is the day, in the afternoon ahead of the close. That’s the big event of the week.
Empire State Manufacturing Stays Positive (Barely)
The Empire State Manufacturing Survey, tracking goods-producing productivity in New York State — statistically the most productive in the U.S. — reached +0.2 points in its December index. This is down from an expected +10.0 and well behind November’s unrevised surge to +31.2. It’s still the third positive print in the past four months, but looks to be going the way of the first eight months of the year, which was strictly negative.
What to Expect After Today’s Stock Market Open
S&P flash PMI data for both Services and Manufacturing are coming out for December after today’s opening bell. Both are expected to tick down slightly month over month — to 55.3 on the Services side and 49.6 on Manufacturing. Notice that each is on the opposite side of 50 — the demarcation point between growth and contraction.
What to Expect for the Rest of the Week in the Stock Market
As we say, it’s a busy week for data. This is a good thing, as the final trading days of a calendar year are usually bereft of high volume. So we’ll see November Retail Sales tomorrow, Philly Fed for December Thursday and the big PCE report Friday. The unfortunate thing about this is that PCE numbers — the Fed’s preferred gauge of inflation — is coming out two days after the last FOMC meeting of the year.
We also expect to learn plenty about the housing market this week, with a new Homebuilder Confidence report for December Tuesday, Housing Starts and Building Permits for November on Wednesday, and Existing Home Sales, also for November, on Thursday. Ultimately, we don’t expect the needle to move much until new Fed policies are enacted — and the new presidential administration takes office roughly a month from now — but we appreciate being able to track all of this data in order to better comprehend our investing climate.
Questions or comments about this article and/or author? Click here>>