The U.S. stock market may get off to a constructive start at the opening bell today, as the broader equity futures have been moving higher this morning.
Investors will be facing a busy week, with the latest inflation numbers and the Federal Reserve moving back into the spotlight. Tomorrow, we will get a look at the monthly Consumer Price Index (CPI) report, which will surely not go unnoticed on Wall Street. The majority of analysts currently expect that consumer prices rose approximately 0.3% during the month of November (7.3% year over year). Although the report may show progress has been made in some areas, the numbers will still probably be too elevated for the Federal Reserve to ignore.
On a related note, the Federal Open Market Committee (FOMC) will meet this week, and an interest-rate announcement will take place on Wednesday afternoon at 2PM (EST). The investment community widely expects that the central bank will approve a 50 basis-point interest rate hike at the meeting. Such an outcome would seems to suggest that the central bank is softening its stance, however that may not actually be case. In fact, interest rates could still move up in smaller increments over a longer time frame, pushing the terminal rate to around 5%, or even higher.
In corporate news, we will hear from a couple of widely followed technology companies over the next few days. This afternoon, leading provider of IT (information technology) solutions, Oracle (ORCL), will post results. Later in the week, Adobe (ADBE), a provider of software for digital designers, will weigh in with its numbers. Wall Street will want to see how these corporations, and many others, have been faring in the current environment. At this point, analysts are starting to voice concerns that profits could stagnate in 2023, especially if a recession materializes.
From a technical vantage point, the rally that started in mid-October, may be encountering some resistance. At the start of December, the S&P 500 Index moved up to its 200-day moving average (near the 4,040 mark), but was unable to meaningfully advance beyond this key level. However, a pause at this point is not surprising, given the progress achieved over the past several weeks.
Looking ahead, it remains to be seen if the bulls can push stocks higher from here. It should be noted that short-lived rallies often occur during bear markets, and can be confusing for traders. History has proven that attempts to time the market with any precision can be difficult. Instead, many portfolio managers with longer time horizons tend to focus on asset allocation strategies to maximize returns.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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