The Week Ahead

Market Report for the Week Ahead, December 9, 2024

United States

• Market Overview: The U.S. stock market is poised for a critical week with key inflation data releases. The S&P 500 and Nasdaq Composite ended the previous week on a positive note, gaining 0.96% and 3.34%, respectively, while the Dow Jones declined by 0.06%

• Economic Data: The November Consumer Price Index (CPI) and Producer Price Index (PPI) reports are due this week, which will provide further insights into inflationary pressures. The market is expecting a 25-basis point rate cut this month, with an 85% chance according to the CME FedWatch Tool

• Corporate Earnings: Earnings reports from companies like GameStop (GME), Adobe (ADBE), Macy’s (M), Broadcom (AVGO), and Costco (COST) are scheduled to be released this week.

Canada

• Labour Market: The Canadian unemployment rate jumped to 6.8%. In addition to the personal impact, this could impact consumer spending and economic growth.

• Economic Outlook: Despite challenges, consumer spending and business investment in Canada are expected to remain steady into the start of fiscal 2025, supported by anticipated interest rate cuts and inflation trending towards 2%

• Banking Sector: VersaBank’s management discussion and analysis suggest that the Canadian economy’s trajectory is favorable for the bank’s operations, particularly in the context of continued stable demand for durable goods.

Asia

• China Trade Balance: China will release its trade balance figures on Tuesday, which will provide insights into the country’s export and import dynamics

• Market Sentiment: The Asian markets are expected to be influenced by global economic data releases, particularly the U.S. inflation reports

Europe

• Germany CPI: Germany will report its Consumer Price Index (CPI) on Tuesday, which will offer insights into the European inflation landscape

• Eurozone Interest Rate: The European Central Bank (ECB) will announce its interest rate decision on Thursday, which could impact the Eurozone’s economic trajectory

• UK GDP: The United Kingdom will release its GDP data on Thursday, providing a snapshot of the country’s economic performance

Commodities and Currencies

• WTI Crude Oil: WTI crude oil futures are trending higher, hovering near $68.57 per barrel

• U.S. 10-Year Treasury Yield: The U.S. 10-year treasury yield is up, floating near 4.185%

• Currency Flows: Brazil will disclose foreign exchange flow data on Wednesday, which could impact currency markets

This week’s market dynamics will be shaped by critical economic data releases, corporate earnings, and monetary policy decisions across major economies. Investors are advised to monitor these developments closely to make informed investment decisions.

Upcoming earnings

These earnings reports will provide valuable insights into various sectors of the economy. None are particular recommendations to buy or sell, just to watch for macro trends.

Inflation Report Scenario Deep Dive

The upcoming CPI (Consumer Price Index) inflation report, set to be released on Wednesday, December 11, 2024, is expected to have a significant impact on the market this week.

CPI Report Impact

The CPI report, a key measure of inflation, will be closely watched by investors and the Federal Reserve:

Inflation Trends

• If CPI indicates rising inflation, it could lead to expectations of higher interest rates, potentially negatively impacting stock prices

• Lower inflation might suggest economic cooling, which could have mixed effects on the market

Sector-Specific Effects

• High inflation could disproportionately affect growth stocks, as their future cash flows become less valuable in an inflationary environment

Federal Reserve Implications

Both CPI and PPI (Producer Price Index) reports will influence the Federal Reserve's decision on interest rates:

• Higher inflation might lead the Fed to maintain or increase interest rates, potentially causing market volatility.

• Signs of economic cooling could increase the likelihood of rate cuts, which might boost stock prices in the short term.

Market Sentiment and Volatility

• The stock market is currently near historic peaks, making it potentially sensitive to the reports this week

In conclusion, these reports will be critical in shaping market expectations for economic growth, inflation, and monetary policy. Investors should be prepared for potential volatility as the market digests this important economic data.

Notable Headlines

Links for additional reading

1. Earnings Calendar

2. FedWatch CME Rate Cut Probability

3. CPI Effects on the stock market 

Disclosures: All content provided by The Leverage Club is for informational and educational purposes only and should not be taken as trading or investment recommendations.

This product uses the FRED® API but is not endorsed or certified by the Federal Reserve Bank of St. Louis.