As active options traders, staying ahead of the curve is essential. In this edition of “The Weekly Rebel Lookahead,” we delve into the recent market movements and key events that could shape the financial landscape in the coming week. Notably, key focus will be on a lot of Fed speakers, Tuesday’s CPI, Wednesday’s PPI, and several big-box earnings who report this week.
Here’s a quick look at the most notable events and reports this week:
11/13-11/17 Market Calendar
- Remarks by Lisa Cook
- 3-Month Bill Auction
- 6-Month Bill Auction
- Treasury Statement
- Speeches by John Williams and Philip Jefferson
- NFIB Optimism Index
- Consumer Price Index (CPI)
- Testimonies by Michael Barr and Austan Goolsbee
- Producer Price Index (PPI)
- U.S. Retail Sales
- Empire State Manufacturing Survey
- Speeches by John Williams, Michael Barr, and Tom Barkin
- Business Inventories
- Testimonies by Michael Barr, Loretta Mester, and Christopher Waller
- Jobless Claims
- Import Price Index
- Philly Fed Manufacturing Survey
- Industrial Production/Capacity Utilization
- Home Builder Confidence Index
- Remarks by Lisa Cook and Susan Collins
- Housing Starts
- Building Permits
- Remarks by Susan Collins, Michael Barr, Austan Goolsbee, and Mary Daly
- The CPI (inflation) report takes center stage, offering critical insights into economic trends.
- Key economic reports include retail sales, CPI, and housing starts, providing a comprehensive view of economic health.
- An active Federal Reserve speaker schedule featuring notable figures such as Cook, Jefferson, Barr, Mester, Goolsbee, and Waller.
- The Biden-Xi meeting in San Francisco is anticipated, although substantive outcomes are not widely expected.
- The looming U.S. government shutdown deadline on Friday adds an element of uncertainty to the week’s proceedings.
Earnings Watch: Keep a close eye on earnings reports from Walmart, Home Depot, Target, PANW, and Cisco, as they provide valuable insights into the performance and expectations of key players in the retail and technology sectors.
Bond Market Volatility: A Rollercoaster Ride
Last week’s 30-year bond auction left investors uneasy, coupled with hawkish statements from Fed Chair Jerome Powell that sent treasury yields rallying.
The 30-year bond yield hit a peak of 4.787%, closing the week at 4.756%, while the 10-year Treasury note peaked at 4.654, ending the week at 4.646%. This surge in yields has implications for borrowing costs and economic growth, making it a crucial point to watch in the coming days.
Following Powell’s speech and last week’s events, odds of a December rate hike have increased slightly, from 10% to 14%.
These odds will likely be highly impacted by the results of Tuesday’s CPI report and possibly by Wednesday’s PPI report. These are the two most important economic events of the week, so be on the watch for that.
Credit Card Debt on the Rise
On the domestic front, U.S. credit card debt has reached a staggering $1.08 trillion, with the average cardholder carrying a balance of over $6,000. TransUnion reports that this is the highest average balance per consumer in a decade. The surge in credit card debt is accompanied by a rise in delinquencies, painting a complex picture of consumer financial health.
The State of the Rally: Moving Averages Crossed
After the broad market rallied for 9/10 days of the past two weeks, both the S&P 500 and the Nasdaq are now firmly above their 5, 20, 50, 100, and 200 day moving averages. While it wouldn’t be surprising to see stocks pare back some gains early this week (in part due to a new negative outlook on U.S. credit from Moody’s credit agency, which gave this update on Friday after the close), the broad direction of the market is currently up.
Market Insights and Predictions
Equity Index Futures: The past week saw a significant rally, with the S&P 500 futures closing at 4430.50 (+1.25%/week) and the Nasdaq-100 at 15,596, marking a 2.75% increase for the week. Notably, the Russell 2000 and S&P 500 equal weight indexes lagged behind, recording -3.08% and -0.61%, respectively.
Interest Rate Futures: The Fed Funds futures market predicts no further rate hikes through mid-2024, with a projection of 65 basis points in cuts by the end of 2024. Despite Powell’s cautious stance, the market remains vigilant, watching for any signs of policy adjustments.
Chair Powell emphasized a cautious approach to policy, stating the commitment to achieving a monetary policy stance restrictive enough to bring inflation down to 2% over time. However, the Federal Open Market Committee (FOMC) is not yet confident it has achieved this goal, keeping the door open for further policy adjustments if needed.
CPI Report Expectations: As the market eagerly awaits the CPI report, expectations are for core CPI to rise by 0.3% month over month in October, matching the rate seen in September. The annual rate of core inflation is anticipated to remain unchanged at 4.1% year over year. Stable energy prices and potential declines in vehicle prices may contribute to the October data, reflecting the impact of high borrowing costs on consumer demand.