Last week was a great week in the market, the S&P 500 ($SPX) (SPY) finished the week up over 4%. In addition, it looks like the Fed could be considering a hefty 50 basis point cut this week, and if that's the case we could see the market move.
In addition to the Fed this week, there are retail sales, unemployment numbers, and potentially a BoJ rate decision. Policy decisions outside the US aren’t often discussed, but this has the potential to create some drama in the market.
Here are 5 things to watch this week in the Market.
Empire Manufacturing Index
This is due out Monday morning and is expected to continue to show contraction in the manufacturing sector in New York. The last positive reading was at the end of last year, so it could be good for the overall markets if this is a surprise beat. If this shows continued contraction, then we could also see the markets rally later in the day as the Fed could see more of a reason to go with a larger rate cut.
Retail Sales
Tuesday morning Retail sales and Core retail sales are out with the difference being core excludes automobile purchases. Core is expected to come in with a slight increase month over month of 0.2% whereas regular retail sales are expected to contract by -0.1%, which would be a huge change from the 1.0% increase of last month. Higher rates could finally be catching up with the automotive piece of the number as car purchases are usually made with debt. Either way an increase in retail sales could be seen as a positive by the market and a decrease could be seen as a negative.
FOMC
There are 3 pieces of data due out Wednesday at 2:00 and 2:30 EST. First are the FOMC rate decision and the economic projections. It is estimated that there will be a 25 basis point cut to the current rate and projections are to go along with this. If the rate cut comes in higher than expected we could see a lot of volatility enter the market as traders try and figure out if a higher-than-expected cut is positive or negative. The third piece of information is the FOMC presser at 2:30 EST. This will also cause some volatility as Powell talks about the decision and what he sees in the future for both the economy as a whole and for rate decisions.
Unemployment claims
Thursday morning Unemployment claims come out, and on the back of a rate decision, this could cause some volatility on release. A weaker unemployment number could be seen positively by the market, especially if rates are cut the day before, and could cause the market to rally. If unemployment comes in strong then we could see some weakness in the overall market.
BoJ Policy Rate
Other countries' rate decisions don’t often have a direct effect on the US markets, but the Bank of Japan could have a profound effect. The Yen and the US markets are tied together as we all saw earlier this year in what is known as the Carry Trade, and if the BoJ raises domestic rates this could cause a portion of that trade to be unwound to cope with the new rates. This could put some pressure on the US markets and some upward pressure on the Yen.
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.
