Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

After Hawkish Powell, Market Rally Faces Big Test Next Week

By Investing.com (Jesse Cohen)Market OverviewNov 10, 2023 08:19AM ET
www.investing.com/analysis/after-hawkish-powell-market-rally-faces-big-test-next-week-200643483
After Hawkish Powell, Market Rally Faces Big Test Next Week
By Investing.com (Jesse Cohen)   |  Nov 10, 2023 08:19AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
TJX
-0.67%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BJ
-2.18%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BURL
+0.29%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
XRT
+0.65%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DKS
+1.88%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AEO
+1.64%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • Investors should brace for more volatility next week amid growing uncertainty over the Federal Reserve’s policy outlook.
  • U.S. CPI inflation, the latest retail sales figures, and a read on wholesale prices, as well as earnings from major retailers will be in focus.
  • Looking for more actionable trade ideas to navigate the current market volatility? Try InvestingPro today.
  • Unlock the potential of InvestingPro for 55% off this Black Friday and never miss out on a market winner again!

Investors should brace for fresh turmoil next week as the stock market faces several market-moving events, including key economic data as well as earnings from the major U.S. retailers.

U.S. stocks slipped on Thursday, ending the longest winning streaks for the S&P 500 and the Nasdaq Composite in two years. The benchmark S&P 500 snapped an eight-day run of gains, while the tech-heavy Nasdaq ended a nine-day string of wins.

Nasdaq Vs. S&P 500 Vs. Dow Chart
Nasdaq Vs. S&P 500 Vs. Dow Chart

Stocks sold off after Federal Reserve Chairman Jerome Powell said the central bank is “not confident” it has done enough in the battle against inflation.

With investors growing increasingly uncertain over the Fed’s monetary policy plans, a lot will be on the line during the week ahead.

U.S. CPI Report - Tuesday, November 14

With Fed Chair Jerome Powell reiterating that his main objective is to bring inflation back under control, next week’s CPI report will likely be key in determining the Fed’s policy moves in the months ahead.

The U.S. government will release the October inflation report on Tuesday at 8:30 AM ET and the number could be hotter than September’s 3.7% year-over-year pace.

As per Investing.com, the consumer price index is forecast to rise 0.1% on the month after edging up 0.4% in September. The headline annual inflation rate is seen rising 3.8%, accelerating from a 3.7% annual pace in the previous month.

U.S. CPI Y/Y
U.S. CPI Y/Y

Inflation has come down substantially since the summer of 2022, when it peaked at a 40-year high of 9.1%, however, prices have resumed their uptrend in recent months and are still rising at a pace nearly twice the U.S. central bank’s target.

Meanwhile, the October core CPI index - which does not include food and energy prices - is expected to rise 0.3%, matching the same increase seen in the preceding month. Estimates for the year-on-year figure call for a 4.1% gain, registering an identical surge as observed in September.

U.S. Core CPI Y/Y
U.S. Core CPI Y/Y

The core figure is closely watched by Fed officials who believe that it provides a more accurate assessment of the future direction of inflation.

Prediction: I believe the CPI report will underscore the material risk of a fresh increase in inflation, which is already running far more quickly than what the Fed would consider consistent with its 2% target range.

A notably elevated figure, with annual CPI reaching 3.9% or higher, will keep the pressure on the U.S. central bank to maintain its fight against inflation.

In remarks made at an IMF event on Thursday, Powell acknowledged that U.S. inflation had come down over the past year but signaled the Fed is far from ready to accept that inflation is on a sustainable path lower.

The fight to restore price stability "has a long way to go," the Fed chair said.

Powell added that "if it becomes appropriate to tighten policy further, we will not hesitate to do so."

Therefore, I hold the opinion that the current environment is not indicative of a Fed that will need to pivot on policy and there is still a long way to go before policymakers are ready to declare mission accomplished on the inflation front.

U.S. Retail Sales, PPI - Wednesday, November 15

With the U.S. central bank being data-dependent, investors will pay close attention to the latest retail sales figures as well as the October producer price index report, which are both due at 8:30 AM ET on Wednesday.

After retail sales blew past expectations last month, the key question is whether consumer spending will remain strong enough for the Fed to maintain its efforts to cool the economy or will American shoppers finally show signs of stress.

Economists forecast a month-over-month decline of -0.1% in the headline number, a sharp deceleration from the +0.7% gain for September, with auto sales coming in weaker during the month.

After stripping out the auto and gas categories, core retail sales are expected to show a 0.2% gain, compared to the 0.6% increase seen in the month before.

Meanwhile, the latest update on producer prices will give inflation watchers another talking point amid the recent increase in oil and gasoline prices.

The headline year-over-year October PPI reading is expected to rise 2.3%, after edging up 2.2% in September. If that is in fact reality, it would mark the fourth straight month in which wholesale prices have picked up from the previous month.

U.S. PPI Y/Y
U.S. PPI Y/Y

The annual core PPI rate is forecast to hold steady at 2.7%, a level which is still too high for the Fed.

Prediction: I anticipate the pair of reports will bolster the case for keeping rates elevated to cool the economy and prevent inflation from rebounding.

Powell said Thursday that the Fed "is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time; We are not confident that we have achieved such a stance."

The reminder that the Fed's hiking cycle remains alive forced traders to raise their expectations of a rate increase in December or January, however, chances are still slim according to the Investing.com Fed Rate Monitor Tool.

In addition, market participants pushed out bets on the U.S. central bank's first rate cut to June 2024, compared with an earlier forecast for cuts to begin in May.

Retailer Earnings - All Week

Upcoming earnings from the major U.S. retailers will also be in focus next week as the third quarter reporting season draws to a close.

Retailers will be the last group to deliver financial results and investors will be looking for further insight into the health of consumer spending against a backdrop of persistently high inflation and worries over a looming recession.

Topping the lengthy list scheduled to report Q3 results in the coming week are Walmart (NYSE:WMT), Home Depot (NYSE:HD), Target (NYSE:TGT), TJX Companies (NYSE:TJX), Macy’s (NYSE:M), Ross Stores (NASDAQ:ROST), Gap (NYSE:GPS), and BJs Wholesale Club (NYSE:BJ).

Other high-profile retailer companies, such as Best Buy (NYSE:BBY), Lowe’s Companies Inc (NYSE:LOW), Kohl’s Corp (NYSE:KSS), Nordstrom (NYSE:JWN), Burlington Stores (NYSE:BURL), Abercrombie & Fitch Company (NYSE:ANF), American Eagle Outfitters (NYSE:AEO), and Dick’s Sporting Goods Inc (NYSE:DKS) are due to report results the following week.

Most retailers - which are perhaps the most sensitive to shifting economic conditions and consumer spending - have struggled this year amid a gloomy macroeconomic outlook of elevated inflation and slowing economic growth.

The retail industry’s main ETF - the S&P Retail ETF (NYSE:XRT) - is down 1.8% year-to-date, lagging the S&P 500’s near 13% gain over the same period.

XRT Daily Chart
XRT Daily Chart

Underscoring several near-term headwinds plaguing the sector, shares of Home Depot, which is the top U.S. home improvement chain, are down roughly 9% in 2023, as Americans cut back spending on discretionary items due to the uncertain economic climate.

There are some exceptions of course. Take Walmart for example, whose shares are up 15.6% this year as it benefits from changes in consumer behavior due to lingering inflationary pressures that are causing disposable income to shrink.

As such, next week’s earnings updates from the retail heavyweights will be a critical topic for investors.

All things considered, investors may want to exercise caution in the very near term as the current environment in my opinion is not ideal to be adding to your exposure to equities amid a looming pullback.

***

Buy or Sell? Get the answer with InvestingPro for Half of the Price This Black Friday!

Timely insights and informed decisions are the keys to maximizing profit potential. This Black Friday, make the smartest investment decision in the market and save up to 55% on InvestingPro subscription plans.

Whether you're a seasoned trader or just starting your investment journey, this offer is designed to equip you with the wisdom needed for more intelligent and profitable trading.

Disclosure: At the time of writing, I am short on the S&P 500, Nasdaq 100, and Russell 2000 via the ProShares Short S&P 500 ETF (SH), ProShares Short QQQ ETF (PSQ), and ProShares Short Russell 2000 ETF (RWM).

Additionally, I have a long position on the Energy Select Sector SPDR ETF (NYSE:XLE) and the Health Care Select Sector SPDR ETF (NYSE:XLV).

I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials.

The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.

After Hawkish Powell, Market Rally Faces Big Test Next Week
 

Related Articles

Octa
Gold Surges Above 2,040; Bitcoin Corrects By Octa - Mar 01, 2024 4

Gold Surges Above 2,040 as US Dollar Declines After the PCE Report The gold (XAU) price increased by 0.42% on Thursday as the US dollar weakened after US inflation data aligned...

After Hawkish Powell, Market Rally Faces Big Test Next Week

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (9)
SorsTrade RS
SorsTrade RS Nov 11, 2023 7:22PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Put on top of that Michael Gayed's statement and both seem to have a more clear view on the bullsh*tters hopium outlook. See Michael's article here; https://www.investing.com/analysis/media-hopes-for-no-recession-but-forwardlooking-data-suggest-otherwise-200643486
emil spd
emil spd Nov 11, 2023 5:21AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
watching carefully the movement as we approach next wrek
Omar Million
Omar Million Nov 11, 2023 5:21AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
hello, sir I hope you are doing great am Omar am new here in trading I wanna learn how to get rich in trande for my future
SANDFORD MALULU
SANDFORD MALULU Nov 10, 2023 11:29PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
watching carefully the movement as we approach next week
Richard Da
Richard Da Nov 10, 2023 1:36PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Volatility?  What volatility?
Sonu Mech
Sonu Mech Nov 10, 2023 11:18AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
JaneJohn Doe
JaneJohn Doe Nov 10, 2023 10:12AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Inflation expectations came out hot today. Powell won't like it.
FMGK Blue
FMGK Blue Nov 10, 2023 7:53AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Powell wasn't hawkish. He strictly repeated his FOMC press conference comments. Nothing new here. What he said yesterday he did say already last week.
Steve Swisher
Swish Nov 10, 2023 7:35AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This hurts investors. Enough.
Known Unknown
Known Unknown Nov 10, 2023 6:45AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
yes . nice nice
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email