Fed weeks always make for a good time with trading, and last week was no different. While the Fed Funds rate did not really move the market as it hit where it was expected with a 25 basis point increase. The presser that followed made for a lot of fun. Powell signaled that not only are they not pausing, but they are also still looking to tighten on the rate front. His speech marked the high of the week on the S&P 500 ($SPX) (SPY) as it sold off from then on.
Even with a tough back half of the week for the S&P 500, tech seemed to shrug it off as AAPL, TSLA, NVDA, and META all retained their weekly gains at the end of the week. This week looks relatively calm on the news front, but there are some lingering items from last week that could manifest some movement this week.
The Dow Jones Industrials Index ($DOWI) (DIA) was down -0.15% for the week
Here are 5 themes to watch this week in the Market.
Bond Auction Results
Last week's 28-day T-Bill posted a bit of an anomaly last week, their low rate was 0.00%. This means that someone bid so high for the Government bonds they were content just to get their principal back at the end of the month. This can be construed as a request for safety, one of the only times you request nothing but the principal back is if you fear any risk at all in the market. This could be viewed as a vote of low confidence in the usual “risk-free” assets such as CDs and banks as they offer higher interest than 0% on your money and there is almost no chance the US government will default on 28-day notes.
Consumer Confidence
This month's consumer confidence number would spark some excitement in the markets. The SVB collapse and the bailout of a few other banks will be included in this month's survey. In addition to a labor market that looks bifurcated between reports and actuality, inflation is still running warm. If the number comes in high it's possible the market will see volatility to the downside as it could show that the main street household still is not feeling the pressure that the Fed is trying to enforce. If it comes in low it could be good for the markets as it will show confidence is falling and the economy is starting to slow for people.
Final GDP
Thursday at 8:30 am Est the final GDP for last quarter comes out. While this has the potential to move the markets in its own right, some other information is usually released with it. It will be essential to keep an eye on any revisions that may have occurred to previous quarters' GDP and how the final and preliminary differ for the quarter being released. There is a potential that no matter what the number is the markets react negatively. A strong read means more tightening is needed, a weak number means that the economy is weakening and this is bad on a macro level.
Yellen Speaks
Thursday at 3:45 pm EST Sec. Yellen speaks at the Econ. Policy Conference in DC. While it's not expressly published what she will talk about, usually the speeches have the ability to move the markets. Usually the Treasury Secretary comes out when a shift is getting ready to occur, so it's possible that the markets rally on the hope that the tightening is coming to an end.
US Reserve Currency
This last point has less of a potential immediate effect on the market, but Russia and China have agreed to use the Yuan instead of the USD to settle some of their transactions. This is a big deal for Dollar-denominated assets if something comes of it. It has been stated in the past by several other countries that they will stop using the Dollar standard but seldom has anything come of it. This could significantly impact the FX markets if something materializes from this.
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.
