The U.S. stock market may come under some pressure this morning, as traders digest the sizable gains logged over the past couple of weeks. In the days ahead, investors will receive important inflation reports, along with several other economic releases. A number of leading retail companies will also be weighing in with their latest results, an indication of the health of the consumer. Meanwhile, last Friday a major rating agency lowered its outlook on the U.S. government’s debt to negative from stable, and this development may weigh on investor sentiment. At the time that we were writing this piece, the S&P 500 Index futures were down about eight points (0.20%) in pre-market trading.
In economic news, there are no major reports scheduled for this morning. However, tomorrow the Consumer Price Index (CPI) for the month of October will be published. Analysts expect the numbers will show that prices rose about 3.3% for the month (year over year), down slightly from the September reading. Notably, inflation has been moving in the right direction for some time now, however prices still remain elevated according to the Federal Reserve. On Wednesday, we will get a look at the monthly Producer Price Index (PPI), which measures inflation on the wholesale level. In addition, retail sales for the month of October will be released, and this report should warrant attention. The most recent numbers may well show that consumers have started to become more cautious about spending. For some time, consumers have used credit cards to fund purchases, but clearly that situation has its limits. It is worth noting that the annual percentage rate (APR) for many credit cards now easily exceeds the 20% mark.
Meanwhile, numerous retail companies will be weighing in with their results this week. Tomorrow, we will hear from Home Depot (HD), a leading provider of building supplies and accessories. On Wednesday, Target (TGT) and TJX Companies (TJX) will report their numbers. Also, later in the week we will hear from Walmart (WMT), which is considered a bellwether for the broader retail sector.
The stock market has clearly firmed up over the past couple of weeks. The S&P 500 Index is now sitting comfortably above its 50-day moving average, situated near the 4,340 area. However, it remains to be seen if further gains can be achieved at this point, or if a brief period of consolidation might be needed. The equity markets often rally at the end of the year. However, the current market environment is quite complicated, and increased political and military unrest across the globe adds a degree of uncertainty. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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