Week Ahead on Wall Street

Market Expectations vs Fed Caution

All eyes are on the Federal Reserve as they gear up for their interest rate decision this Wednesday. It’s a big deal, and the financial community is buzzing with anticipation. But here’s the thing: market expectations and the Fed’s caution seem to be at odds with each other.

So, what’s the deal? Well, the market seems to be leaning toward interest rate cuts in 2024. Traders are even pricing in a more than 50% chance of a rate cut by March 2024. They’re feeling pretty confident about it. But hold your horses, because Federal Reserve Chairman Jerome Powell is urging caution.

Chairman Powell has been dropping hints that it might be too early to start talking about rate cuts. In fact, he’s even mentioned that the central bank hasn’t ruled out the possibility of further rate hikes. Talk about mixed signals, right?

Within the Fed itself, opinions are all over the place. Some officials believe that rate cuts could be on the table if inflation continues to ease. They’re all about keeping things flexible. On the other hand, there are those who advocate for a more restrictive stance to tackle inflation head-on. It’s a real tug of war within the Fed.

In his recent remarks, Chairman Powell acknowledged the current restrictive policy stance and the risks of both over-tightening and under-tightening. He’s trying to strike a balance, but it’s not an easy task. The markets have reacted positively to his comments, but let’s not forget the elephant in the room: the uncertain economic outlook. We’re still dealing with the aftermath of the pandemic, inflation is a concern, and monetary policies are up in the air.

As we inch closer to Wednesday’s decision, the market is on edge. We’re all trying to make sense of the mixed signals coming from the Fed and the optimistic expectations floating around. It’s a suspenseful time — buckle up and get ready for the ride!

Economic Reports

Monday

•   November Consumer Inflation Expectations : U.S. consumer inflation expectations decreased from 3.7% in September to 3.6% in October 2023.

Tuesday

•   November CPI Inflation (Headline and Core ): The annual inflation rate in the U.S. slowed to 3.2% in October, while core inflation edged down to 4%.

Wednesday

•   Weekly Mortgage Rate Update: The average 30-year fixed-rate mortgage fell to 7.17% last week, its lowest level since August.

•   Producer Price Inflation: Producer prices fell 0.5% month-over-month in October 2023, defying expectations of a 0.1% increase.

Thursday

•   November Retail Sales: Retail sales in the U.S. decreased by 0.1% month-over-month in October, ending a six-month trend of increases.

Friday

•   Monthly Composite, Services, and Manufacturing PMIs .

Earnings Reports

Monday

•   Oracle (ORCL): Last quarter, Oracle shared that its $28.2 billion acquisition of Cerner was slowing down its revenue growth , but it was in the process of an accelerated transition to the cloud.

Wednesday

•   Adobe (ADBE): In September, Adobe announced record revenue of $4.89 billion for its fiscal third quarter.

Thursday

•   Costco (COST): Much like other major retailers including Target and Walmart, Costco said it was seeing weaker trends in discretionary spending in its last earnings announcement.

Friday

•   Darden Restaurants (DRI): In its previous earnings, the Olive Garden owner saw a double-digit increase in sales , despite a decline in its fine-dining segment.

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