Non-farm payrolls were the big news last week and it came in weaker than expected. In addition to that they also revised down the previous two months of jobs numbers showing that the labor market in the US is nowhere near as strong as everyone is being told. The plus side to this is that it would appear that it means rate cuts are now nearly 100% expected later this month, the bad news is that it means the economy is weaker than anticipated.
The first half of the week looks quiet on the news front, with the US debate on Tuesday the 10th being something not market-related to watch. Later in the week, there are CPI, PPI, and a few other important releases.
Here are 5 things to watch this week in the Market.
Presidential Debate
Politics aside, the economy will likely be brought up in the debate Tuesday night as how the candidates answer could cause some volatility the next day. With a rate decision this month and elections not too far off, any economic posturing could set the tone for the next several months of trading until elections and the next rate decision.
CPI
Wednesday before the market opens is our first real important piece of news on the week, CPI in all its variations is expected out at 8:30 am EST. Given that rate cuts are expected late this month this may revert to seeing falling price increases as a good thing. If these numbers come in cooler than expected we could see the market catch a bid as that compounds with rate cut expectations. If it comes in hot it could cause some selling, but it could be short-lived heading into a Fed meeting.
PPI
Following CPI on Wednesday is PPI on Thursday at the same time. Similar to the CPI numbers, anything that comes in cooler than expected could be met with buying in the overall markets. Any selling from numbers that come in hotter than expected could also be muted with the hope for a Fed rate cut later this month. One important thing to stress with both PPI and CPI is that these numbers are the rate of change of inflation. Any positive number still means prices are increasing, just doing so at a slower rate.
30-Year Bond Auction
Also on Thursday just after 1pm is the 30 Year bond auction. It has long been said that bond markets are the tell for the rest of the economy, and this could be proven true on Thursday. Watching how the highest rate and Bid-to-Cover ratio come in could provide some insight into how much of a rate cut large investors are expecting. Anything on the weaker side could be seen as a lack of confidence in potential cuts, while a strong auction result could mean that they are expecting the Fed to transfer back to a full rate cut regime.
Prelim UoM Sentiment
The last release for the week is the Preliminary University of Michigan Sentiment report out Friday at 10 am. This may not move the markets a lot, but it can be a good temperature gauge of where the polled consumers see the economy heading. One thing to note here is it's a small sample size of roughly 500 people.
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.
