US stocks plunged last week as Fed chair Jerome Powell dashed hopes of a Santa Claus rally. Here’s the breakdown of the key earnings and economic indicators that investors would watch next week.
Looking back at the last week, the November CPI came in lower than expected at 7.1%. The headline number has now fallen 2 percentage points from the June high of 9.1%. After the CPI data was released, investors expected Powell to take a somewhat dovish stance.
As expected, the Fed raised rates by 50 basis points. At the news conference, Powell said, “The historical record cautions strongly against prematurely loosening policy. We will stay the course, until the job is done.” FOMC members also lifted their projection of terminal rates to 5.1%, 50 basis points higher than the previous dot plot.
Last week’s economic data otherwise spooked investors. US retail sales fell 0.6% in November which was worse than the 0.2% fall that analysts were expecting. Higher inflation has taken a toll on consumer spending. While high inflation is invariably negative for stocks, some investment strategies can do well in inflation.
Manufacturing surveys released last week also spooked investors. However, Adobe’s earnings were better than expected and the stock soared on Friday.
Key Earnings Investors Would Watch Next Week
Next week, trading activity might be tepid next week ahead of Christmas. However, we do have some key earnings in the week. Nike, Micron, FedEx, and General Mills are among the notable earnings scheduled for the week.
Notably, during their previous earnings call, FedEx warned of a global recession. Investors would watch the company’s earnings release for inputs on the health of the global economy. Micron would be another crucial earnings release that investors would watch amid the slump in PC and smartphone sales.
Nike’s earnings would also shed light on the supply chain issues and the state of consumer spending. Investors would especially watch the company’s sales in China amid concerns over the health of the world’s second-largest economy.
Chinese Economy Continues to Sag
While China has relaxed some of the COVID-19 restrictions, its economy has continued to sag. Amid the geopolitical tensions and changing business landscape in China, several countries are looking to diversify their production base to other Asian countries.
India is offering incentives to electronics manufacturers as the country seeks to capitalize on the “China plus one” sourcing strategy that many US companies are contemplating. Indian stocks are also outperforming global markets this year amid a strong domestic economy. We have a guide on how beginners can buy stocks in India with a regulated broker.
Key Economic Indicators Investors Would Watch Next Week
Next week, investors would watch several key economic indicators. We’ll get housing industry indicators including building permits, home builder index, and existing home sales. The US housing market has sagged amid rising interest rates. Investors would closely follow these indicators to gauge the health of the US housing sector.
We’ll also get the consumer confidence index and the PCE index, which is the Fed’s preferred inflation index. The median projections of FOMC members signal a 100 basis point rate hike in 2023. However, the pace of hikes would depend on data, especially how fast inflation comes down.
At his press conference, Powell said that a soft landing for the US economy was still possible if inflation comes down.
He added, “I just don’t think anyone knows whether we’re going to have a recession or not. And if we do, whether it’s going to be a deep one or not … it’s not knowable.” While recession impacts most sectors of the economy, some of the investments are largely recession-proof.
Overall, the next week looks action-packed for investors even as hopes of a Santa Claus rally are fast dying down.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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