Week Ahead on Wall Street: Holiday Flows

Estimated reading time: 5 minutes

The Final Countdown

Investors are approaching what has historically been one of the most predictable and positive periods of the year for the stock market. The so-called “Santa Claus Rally” isn’t just a catchy phrase—it’s a well-documented phenomenon that has generally delivered positive returns for patient investors in the past.

The reasons behind the usual year-end market strength are multifaceted, and not totally clear. For one, trading volumes tend to thin out during this time, as many market participants wind down for the holidays, which can mean that the trading activity that does take place amplifies price action. And when you combine that with the ever-increasing flows that come from passive investing, automated contributions from retirement plans, and robo advisors, it’s not surprising that stocks tend to rise.

This year’s final stretch comes with an added layer of intrigue in the form of the upcoming Federal Reserve meeting. While the actual monetary policy decision is pretty much baked in (with the chances of another rate cut at more than 90%, according to the CME’s FedWatch tool), there’s some uncertainty around what the central bank’s quarterly projections will show. And while the Fed isn’t in the habit of surprising markets, it wouldn’t be unprecedented for the final update of the year to shake things up.

Economic and Earnings Calendar

Monday

• December Empire State Manufacturing Activity: The New York Fed’s survey of manufacturing executives in the region on business conditions and their outlook. 
• December S&P Global US PMIs: These indexes track how purchasing managers across different industries feel about the business environment.

Tuesday

• November Retail Sales: This measures spending at retail stores and is a key indicator of consumer demand. 
• December New York Services Activity: The New York Fed’s survey of manufacturing executives in the region on business conditions and their outlook. 
• November Industrial Production and Capacity Utilization: The industrial sector accounts for much of the cyclical swings in economic activity. 
• December NAHB Housing Market Index: This index tracks how homebuilders feel about the current and future state of the single-family housing market.

Wednesday

• November Building Permits and Housing Starts: Construction data is a leading indicator of economic activity. 
• FOMC Interest Rate Decision: The Federal Reserve will announce any changes to monetary policy after the conclusion of its two-day FOMC meeting, in addition to providing commentary on the economy. It’s one of eight regularly scheduled meetings per year.
• Weekly Mortgage Applications: Mortgage activity gives insight on demand conditions in the housing market.
• Earnings: General Mills(GIS), Jabil(JBL), Lennar(LEN), Micron Technology(MU)

Thursday

• 3Q GDP, Third Estimate: The primary measure of economic activity in the United States, which is measured as total expenditure on a country’s goods and services. 
• December Philadelphia Fed Manufacturing Activity: The Philadelphia Fed’s survey of manufacturing executives in the region on business conditions and their outlook. 
• November Leading Economic Index: This is an index composed of various economic indicators that have historically led changes in the broader economy. 
• November Existing Home Sales: Most home transactions in any given month tend to come from the existing market, and as a result set the tone for the broader housing market. 
• December Kansas City Fed Manufacturing Activity: The Kansas City Fed’s survey of manufacturing executives in the region on business conditions and their outlook.
• Weekly Jobless Claims: This high frequency labor market data gives insight into filings for unemployment benefits. Jobless claims have continued to show a labor market that remains strong despite having cooled.
• Earnings: Accenture(ACN), Conagra Brands(CAG), Cintas(CTAS), Darden Restaurants(DRI), FactSet Research Systems(FDS), FedEx(FDX), CarMax(KMX), Nike(NKE), Paychex(PAYX)

Friday

• November Personal Income and Spending: These numbers give insight into how Americans are doing, which is important since consumer spending accounts for about two-thirds of economic growth in the United States. 
• November Personal Consumption Expenditures Price Index: The Fed targets this inflation measure for its price stability mandate and believes PCE to be the best measure of consumers’ spending habits. 
• December University of Michigan Consumer Sentiment: How consumers feel about economic conditions affect their spending habits. This survey places a particular focus on inflation and its trajectory. 
• December Kansas City Fed Non-Manufacturing Activity: The Kansas City Fed’s survey of services executives in the region on business conditions and their outlook.
• Earnings: Carnival (CCL)

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