A culmination of events will signal the beginning of the final trading week of 2023 for the US stock market.
The Federal Reserve is nearing its objective of restoring inflation to 2%, according to inflation data released on Friday. This development positions the central bank in a position to consider reducing interest rates.
Recession indicators continue to be scarce. This autumn, interest rates moderated from levels not seen in over a decade. S&P 500 (GSPC) and Dow Jones Industrial Average (DJI) are approaching all-time highs. This year, the Nasdaq Composite (IXIC) has increased by more than 40%.
Whether the S&P 500 sets a new high during the upcoming week’s rally—the Dow did so last week—should be the most material concern for investors in the coming week, given the lackluster economic calendar and earnings report.
Information regarding property prices Tuesday morning’s economic update and Thursday’s report on initial unemployment claims will constitute the most significant events on the agenda. It is anticipated that no significant corporations will disclose their earnings.
Monday, markets will be closed in observance of Christmas.
Nearing the Fed’s target, inflation
Friday’s inflation data indicated that the Federal Reserve had taken a pivotal step toward restoring inflation to its target of 2%.
The Personal Consumption Expenditures Price Index, the preferred inflation gauge of the Federal Reserve, revealed that prices increased 3.2% year-over-year in November on a “core” basis, excluding food and energy. Annual growth slowed to its lowest level since April 2021.
A finer analysis of this data, however, indicates that the central bank has essentially accomplished its objective.
Regarding the preceding half-year, the “core” PCE for November was 1.9% annualized.
Andrew Hunter, deputy chief US economist at Capital Economics, wrote in a note published on Friday, “This week saw a renewed attempt by some Fed officials to push back against market expectations for interest rate cuts, but with core PCE inflation running at an annualized pace below 2% over the past six months, this final flurry of hawkishness isn’t fooling anyone.”
