Last week, the market was a real rollercoaster as it plunged more than a percent on Thursday afternoon only to recover most of it Friday on a better-than-expected jobs report. Despite all the excitement the S&P 500 ($SPX) (SPY) still finished the week off almost 1%.
Friday was also exciting for Tesla (TSLA) when Reuters came out and stated they planned to scrape their low-cost EV plans. The stock dropped over 5% on the news. It rebounded swiftly when Musk came out and rebutted them on twitter, but it didn’t last long as the stock ended the week down over 6%.
This upcoming week is a little slower on the news front, but there are some high-power releases towards the end of the week.
Here are 5 things to watch this week in the Market.
Crude Prices
Crude Oil has been off like a rocket these past few weeks closing over $85/barrel for the first time since last year. Oil prices are significant for several reasons, first and foremost is their effect on pricing and inflation. The Fed has started to walk back rate cuts in the last few weeks and if Oil stays persistently high it could be the final nail in the rate hike coffin for this year.
The secondary effect, but related heavily, is the effect it has on the consumer. In addition to higher prices, it also can cause a slowdown in spending because more money is spent on heating and transportation costs.
30 Year Auction
Thursday at 1 pm is the 30-year bond auction and this is important as it shows investor tolerance for risk. If the auction is heavily bid it could be a sign of investor confidence as they are happy with the current risk-free return. A low-bid auction could mean that investors are starting to spook and they would require a higher risk-free rate on the 30-year. This could also have implications for the Fed's rate decisions going forward. Weak confidence at bond auctions could force the Fed to put on hold any ideas they have of cutting rates.
CPI
Given the tone of the Fed speakers last week, CPI this week could be a real market mover. If CPI comes in hotter than expected we could see the market start to sell pretty strongly as rate cuts start to fad in the market expectations and the possibility of cuts returns. The opposite could be true if we come in weaker than expected. The market could hold and potentially rally on hopes that we will at least hold the current rate positioning.
FOMC Meeting Minutes
Also out Wednesday are the FOMC meeting minutes for the latest rate decision. While the market already knows what the decision was and how Powell feels, the minute's release often causes some short-term volatility as traders (and trading algorithms) try and look for any edge in other information that could have been in the meeting. Some items include the rationale for how other members voted, conditions the Fed is watching, and what each is looking for to feel comfortable cutting.
PPI
The flip side to CPI is the PPI which is out on Thursday. Where CPI measures the consumer prices, PPI measures the cost of the raw materials. While the Fed officially looks at the PCE releases to gauge how well they are doing on inflations, if PPI and CPI start to spike it could also start to impact their decision-making, and additionally start to weigh on the average consumer with price increases. PPI is a good place to watch for other downstream price increases as producers often pass price hikes onto the consumer to retain profitability.
Best of luck this week and don’t forget to check out my daily options article.
On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
