What we watch next week including the Fed and an update from Eli Lilly
Jerome Powell, Chairman of the U.S. Federal Reserve, speaks during a House Finance Committee hearing in Washington, DC on Wednesday, December 1, 2021.
Al Drago | Bloomberg | Getty Images
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The S&P 500 rebounded this week as we received encouraging updates on the omicron variant, including indications that symptoms may be less severe than the delta variant and that a three-dose vaccination schedule may be a defense. adequate against the risk of severe cases.
Economically, as the market initially pulled back last week after Fed Chairman Jerome Powell became more hawkish around inflation (remember, Powell previously opted to withdraw the term ‘Transient’), the change in position helped us digest one of the hottest CPIs. readings recorded Friday. We’ll know more about how the Fed views cut, tighten and inflation next week after the December FOMC meeting concludes.
Under the hood this week, all sectors closed in the dark, with technology and energy in the lead while utilities and consumer discretionary were the relative laggards, although both finished up more than 2 , 5% for the week.
What we learned this week:
Here’s a quick look at some of the broader market metrics we like to keep an eye out for: The dollar index has held around the 96 level. Gold has hovered just below the $ 1,800 level. WTI crude prices rebounded in the 1970s region. And the yield on the 10-year Treasury rose to around 1.47%.
Within the portfolio, Broadcom (AVGO) and Costco (COT) declared income. (You can read our updates from these companies here and here.)
In addition to earnings, while the week was relatively light on the macro front, we received a key reading on inflation in the form of the Consumer Price Index (CPI).
However, before moving on to the CPI, the US Department of Labor reported on Thursday that in the week ending December 4, initial jobless claims were 184,000, which is a weekly drop of 43,000. and well below estimates of 220,000. The previous week’s reading was revised to 227,000 from the previously reported 222,000.
Importantly, the four-week moving average, used to smooth weekly volatility, stood at 218,750, which is a decrease of 21,250 from the revised average of 240,000 the previous week (revised compared to the 238,750 previously reported). This represents the lowest level of the moving average since March 7, 2020, when it was 215,250.
The Bureau of Labor Statistics released the CPI data on Friday, which measures the price to consumers for a basket of goods and is therefore used as a measure of inflation. On a seasonally adjusted basis, stock readings were up 0.8% in November, stronger than the consensus of 0.7% and following a 0.9% advance in October. Contributing to headline reading, the food index increased 0.7%, with the home food index increasing 0.8% and out-of-home food (not seasonally adjusted) increasing 0, 6% in November. In addition, the energy index rose 3.5%, with the energy commodity index advancing 5.9% and the energy services index increasing 0.3% for the month. This monthly advance resulted in an annual increase in the CPI of 6.8%, an acceleration from the 6.2% rate seen in the 12-month period ending in August, however, in line with expectations. This is notably the largest annual increase since the 12-month period ending in June 1982.
The CPI excluding food and energy, or core CPI, is often taken as an indicator of inflation. Food and energy are cut because their prices tend to be volatile from month to month. Core CPI rose 0.5% in November, matching expectations and leading to an annual increase in core CPI of 4.9%, in line with expectations and an acceleration from the rate of 4.6 % observed over the 12 month period ending in October.
What we are monitoring to come:
No company in the portfolio is slated to report earnings next week, but we have our eyes on something happening. Eli Lilly (LLY) will have an investor meeting next Wednesday at 9:00 am EST.
Here are the earnings for the coming week that we will be watching:
Open: ABM Industries (ABM), REV Group (REVG), Toro (TTC)
Close: HEICO (HEI), Lennar (LEN), Nordson (NDSN), Trip.com (TCOM)
Open: Accenture (CAN), Adobe (ADBE), Jabil (JBL), Worthington (WOR)
Closure: FedEx (FDX), Quanex (NX), Steelcase (SCS)
Open: Darden Restaurants (DRI), Winnebago (WGO)
On a macroeconomic level, in addition to keeping an eye on the geopolitical sphere, we will be monitoring the following releases (all weather ET):
6:00 NFIB Small Business Index
8:30 am PPI
8:30 a.m. Export price index
8:30 am Import price index
8:30 a.m. Empire State Index
8:30 am Retail sales
10:00 Business inventories
10:00 a.m. NAHB Housing Market
14:00 FOMC meeting
8:30 am Building permit
8:30 am Unemployment claims
8:30 am Starts
8:30 a.m. Philadelphia Fed Index
9:15 am Capacity utilization
9:15 a.m. Industrial production
9:45 PMI Composite (Preliminary)
11:00 Kansas City Fed Manufacturing Index
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