Markets this week will focus on economic fundamentals including the producer price and the consumer price indexes, Prudential’s Chief Market Strategist Quincy Krosby said Monday in her weekly “Connecting the Dots” outlook. With a premium on inflation-related data, due in large part to the Federal Reserve telegraphing that it is considering a December rate hike, investors will assess the message stemming from these reports.
Last week’s employment data showed that average hourly earnings are beginning to rise. While there are hurricane-related factors affecting the numbers, the overall trajectory is slowly climbing higher.
“The Fed is going to take this into consideration to see if inflation is moving in the right direction,” she said.
The third-quarter earnings season begins this week with the large diversified financial institutions reporting. Assessment of the economic landscape; loan growth and type of loans; and trading revenue will be of primary interest to investors, Krosby said. Corporate guidance, as always, will be headline-making as chief executives and chief financial officers offer their short- and medium-term projections of financial conditions.
Another potential mover is geopolitical concerns after President Donald Trump’s comment last week that “This is the calm before the storm” left analysts pondering what he was referring to, she said. North Korea, Niger and Iran have all been in the spotlight recently, and each could lead to dramatic headlines. There are various scenarios involving each nation, and markets will respond accordingly if there’s a military component and/or sanctions from “the storm.” Oil prices, the Treasury market, the Swiss franc, the Japanese yen, and, of course, gold could be market movers.
Other economic data this week include National Federation of Independent Business Small Business Optimism Index on Tuesday; job openings and labor turnover on Wednesday; and retail sales on Friday.
Also, the Federal Open Market Committee will release the minutes from its Sept. 20 meeting on Wednesday.
To talk to Quincy Krosby about her views of the market, contact Lisa M. Bennett or Dara Scerbo.
Read Quincy Krosby’s full Q4 Market Commentary: The End Game.