Week Ahead on Wall Street: Winter Blackout

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To Cut or Not to Cut

The Federal Reserve is approaching a critical inflection point in its monetary policy journey. Here’s why: Fed officials are increasingly indicating that interest rates may be near the upper end of the so-called “neutral rate” (i.e. the level at which monetary policy is neither stimulating nor restraining economic activity). And that means the possibility that central bankers will slow the pace of rate cuts. It could even mean pausing rate cuts altogether. 

But for the upcoming December meeting next week, the stars seem to be aligned for another rate cut (following one in September, and one in November), despite some recent strengthening in jobs data. Perhaps the only thing that could knock them off course is this week’s inflation data, if it surprises to the upside.

Complicating matters for the market, the Fed has entered its communication blackout period over the weekend (when no official makes public comments until the next policy announcement). That means that investors will have to parse through the data and infer what the central bank’s reaction could be without any direct guidance. 

But it’s not just about this meeting. If you recall, it took a while for Fed officials to gain the confidence to lower interest rates, so if they were to lose confidence it could take a long time for them to get it back. This could lead to some turmoil for investors.

Economic and Earnings Calendar

Monday

• October Wholesale Inventories and Sales: Wholesalers often operate as an intermediary between manufacturers and retailers, serving as a key part of the goods supply chain. 
• November New York Fed Survey of Consumer Expectations: This is a measure of peoples’ expectations for inflation, jobs prospects, earnings growth, and more.
• Earnings: Oracle (ORCL)

Tuesday

• November NFIB Small Business Optimism: This measures how small business owners feel about current and future economic conditions. 
• 3Q Productivity and Unit Labor Costs: These measures provide a breakdown of how productive workers were per hour of work and at what cost.
• Earnings: AutoZone (AZO)

Wednesday

• November Consumer Price Index: The CPI is one of the most popular indicators for tracking consumer price trends and is a marquee release for market watchers.
• Weekly Mortgage Applications: Mortgage activity gives insight on demand conditions in the housing market.
• Earnings: Adobe (ADBE), Nordson (NDSN)

Thursday

• November Producer Price Index: The PPI tracks price trends that producers face and is down significantly from its peak earlier in the cycle.
• 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: Broadcom (AVGO), Costco (COST)

Friday

• November Import/Export Price Indexes: These indexes track the changes in the prices of nonmilitary goods and services traded between the U.S. and the rest of the world.
• Earnings: Lennar (LEN)

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