Apple (AAPL) had a tough first week of the year, closing down over 6%. This also rippled out to the S&P 500 ($SPX) (SPY) which closed down almost 2% on the week. A big part of the move last week was the headlines, culminating with a better-than-expected Jobs report on Friday which sparked fears that rates may not be coming down as quickly as initially thought.
There are only a few pieces of news out this week that could move the marketers, but they are all intertwined around rates and inflation. We have FOMC members speaking, inflation data due out, and concerns abroad as tensions rise. On top of that we have earnings season kicking off with Bank of America (BAC), Citgroup (C), JP Morgan Chase (JPM), Delta airlines (DAL), UnitedHealth Group (UNH) and Wells Fargo (WFC) all reporting.
Boeing (BA) will also be a stock to watch after one of their planes suffered a scary mid-air window blow out.
This week has the potential to be a wild week.
Here are 5 things to watch this week in the Market.
FOMC Members Speaking
There are several FOMC members slated to speak at various times throughout the week this week. While these speeches in and of themselves can cause some volatility, what could be more important is what they are saying. With a better-than-expected Jobs report last week fears started to circulate that rates could be staying higher for longer again and that the same number of rate cuts could be lower for 2024. Looking for confirmation or detraction of this from the FOMC members could be a big tell for the markets in the coming weeks and months.
10 Year Auction
Inextricably linked to the FOMC members above are the interest rates. The health of the 10-year auctions could be another tell about how investors are pricing in future US rate decisions. If we have a healthy 10-year auction, investors are still confident in the US and the power of its institutions. If the auction is weak or has a long tail, it could be a sign that investor sentiment is starting to shift away from the US markets, or that they at least require a higher return for the risk of investment.
CPI
Out Thursday morning is the CPI report, one of 2 highly anticipated inflation gauges this week. Given the strong jobs data last week, if inflation starts to tick up again it could be cause for the FED to halt any plans of a rate cut. This fear could cause the market to start to slide at the thought of continued high rates. If we see inflation come in at or below estimates though, the market may rally on the hope that it was a one-off Jobs report and we could still see an ease-up in rates in the coming year.
PPI
Out Friday morning is the PPI report, which is the second piece of inflation data out this week. While this is often not looked at with the same reverence as the CPI, it is equally as important because any large increases in the cost of finished goods and services will eventually be passed along to the consumer. Also similar to the CPI, if the PPI comes in higher than expected it's possible we see markets start to sell off in response. If the PPI comes in lower than expected we may see the markets rally in the hope of staying on the rate-cut course.
Geopolitical Tensions
Another thing to watch in the coming weeks is escalating geopolitical tensions in the Middle East. In addition to the conflict between Israel and Gaza, Iran, Jordan, and Yemen are all signaling potential escalations. As things continue to escalate around the shipping routes in the Red Sea, we may see the price of oil and overseas goods start to increase in the US. It would be best if a peaceful resolution could be found and nothing happened, however, if the tensions continue to rise and conflict breaks out it could be a negative for the market initially as goods and fuel prices increase due to higher transportation costs.
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.
