US stocks closed in the red last week but are still in the green for November. Next week, Fed and economic data would be in focus in the holiday-shortened week.
US stock markets would be closed on Thursday due to the Thanksgiving holiday. Trading activity is expected to be tepid on Wednesday and Friday as well. However, there is still plenty of action in the week, including updates from the Fed.
Looking back at the last week, retail sales came in better than expected while retail earnings were mixed. Target stock slumped after its earnings release. The retail giant has a high share of discretionary products in its sales mix.
Slowing sales of discretionary products have taken a toll on Target’s earnings. Fed’s rate hikes and high inflation has negatively impacted sales of discretionary products.
Macy’s stock surged last week after the earnings release as it raised its forecast. Walmart too posted better-than-expected earnings but its guidance on holiday shopping was below what the street was expecting.
Last month, Amazon also spooked markets with its earnings and guidance. Amazon stock slumped after its Q3 2022 earnings release. Fed’s rate hikes have triggered a sell-off in growth names like Amazon.
Several analysts lowered their target price on Amazon stock but overall, Wall Street is overwhelmingly bullish on the stock. We have a guide on how beginners can buy Amazon stock.
Key Earnings to Watch Next Week
Several key earnings are lined up this week including from Nordstrom which will provide more insights into the retail industry’s health. Also, PC makers like Dell and HP are expected to report their earnings this week.
PC sales fell by double digits in the third quarter. Along with PC makers, chip companies like Nvidia are also witnessing a fall in sales due to the falling PC sales. Nvidia reported its earnings last week. While its gaming revenues fell by over 50% YoY, the data center business surprised on the upside.
For the long term, Nvidia is a play on multiple exciting themes like autonomous driving and metaverse. We have a list of companies that are a play on metaverse.
Economic Indicators to Watch This Week
The housing sector is among the worst affected due to the Fed’s rate hikes. In October, existing US home sales fell 4.9% seasonally adjusted. Existing home sales have fallen for nine consecutive months now which is the highest stretch on record.
Next week, we’ll get the new home sales data which would provide more insights into how badly the Fed’s rate hikes are impacting the US housing sector. The November flash PMIs and durable goods orders would also be released next week.
Fed Rate Hikes are Raising Recession Fears
On multiple occasions, Fed chair Jerome Powell has said that the rate hikes might lead to recession. He also however emphasized that the Fed is not trying to force one. While recession impacts most sectors of the economy, some of the investments are largely recession-proof.
US stocks had fallen after the Fed’s November meeting. Next week, we’ll get the minutes of the Fed’s November meeting. Markets would look out for the report to gauge the hawkishness of the US central bank amid a slowing US economy.
Markets Await Fed Minutes Next Week
Fed minutes have led to a market sell-off over the last couple of months. Powell has dashed hopes of a pivot multiple times and has warned of premature easing. In the Fed minutes, markets would look for signs of how far the Fed is looking to raise rates to tame inflation.
For now, economists expect Fed to raise rates by another 50 basis points in December also. Wharton professor Jeremy Siegel believes that the Fed would pause its rate hikes after a 50-basis point rate hike in December.
Meanwhile, traders don’t seem to believe that the Fed would pause after a 50-basis point rate hike in December and see another 50-basis point rate hike in February 2022 as well.
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