The U.S. stock market may get off to a lackluster start this morning, given that the equity futures have been under some pressure in pre-market trading. A few notable economic reports are set to be released over the next couple of days. Today, The Institute for Supply Management (ISM) Non-Manufacturing Index will be published. This report, which covers numerous industries, will probably show that business conditions continued to expand, although at a slower pace, during the month of November. Tomorrow, the nation’s trade balance will be released, and this item may warrant some attention. At the end of the week, traders will receive another key inflation reading. On Friday, the Producer Price Index (PPI) for November will be published (with consumer prices following a few days later). Wall Street will be reviewing these numbers, as they could influence the Federal Reserve’s policy decisions. It should be noted that the Federal Open Market Committee (FOMC) will hold a two-day meeting early next week, which will conclude with an interest-rate decision and a press conference. Most traders expect that a 50-basis-point hike will be approved, especially since Chairman Jerome Powell has suggested that outcome. Inflation does seem to be easing, and the Fed may take a more measured approach, but monetary policy will probably remain restrictive well into 2023.
In corporate news, no major earnings reports are scheduled for today. However, later this week, we will hear from Lululemon Athletica (LULU), Oracle (ORCL), and Costco Wholesale (COST). Investors may carefully review these reports, as these companies are sizable, and their results reflect industrywide conditions. Meanwhile, the final quarter of 2022 will soon draw to a close, and traders will start to focus on the outlook for 2023. Many analysts have voiced concerns that the economy could slow considerably in the months ahead, and that corporations might struggle to deliver profit advances. Unfortunately, if earnings are revised downward, equity valuations could come under pressure.
From a technical perspective, the stock market rally that commenced in mid-October remains intact. Last week, the S&P 500 Index managed to cross over its 200-day moving average (located near the 4,045 level). While this accomplishment was an impressive feat for the bulls, it remains to be seen if these gains can be meaningfully extended. It should be noted that when market conditions are not clearly defined, traders may feel uncertain and take profits quickly. This could cause continued volatility, especially for shares of smaller companies that are not supported by large institutional investors. – 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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