economic data before fed december meeting

While US stocks closed mixed on Friday following the strong November jobs report, they were in the green for the week. Here’s a recap of the last week and the list of economic data and earnings that markets would watch in the week ahead as investors brace for the December Fed meeting.

Looking back at the last week, Fed chair Jerome Powell made dovish comments in his speech at the Brookings Institution. He said, “The time for moderating the pace of rate increases may come as soon as the December meeting.” Powell added that the US central bank does not want to “overtighten.”

Powell’s comments triggered a rally in US stocks. However, on Friday, the Labor Bureau released the November jobs report which showed that nonfarm payrolls increased by 263,000 which was well ahead of the 200,000 that economists were expecting.

US stocks whipsawed after the data was released. While stocks were sharply lower in early trade, they eventually recovered and the Dow Jones closed with marginal gains. Markets expect the Fed to take a somewhat hawkish stance after the strong jobs report.

US Stocks Closed in the Green Last Week

PMI data released last week showed that US manufacturing activity contracted in November. On multiple occasions, 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.

Meanwhile, amid reports of easing COVID-19 curbs in China, there was a sharp rally in Chinese stocks last week. Chinese EV names like NIO, Xpeng Motors, and Li Auto rebounded strongly last week.

The rally in Xpeng Motors looked intriguing as the company not only posted lower-than-expected Q3 earnings last week but also disappointed with its November deliveries.

Economic Calendar for the Next Week

Looking forward to the next week, Chinese stocks would be in focus as markets look out for more signs of easing. Despite the recent rally, Chinese stocks are underperforming this year.

Several US companies are considering moving out their production from China to other Asian countries. Apple, for instance, is reportedly looking to increase its sourcing from India and Vietnam. There is a guide on how beginners can buy Apple stock.

Meanwhile, we also have some economic data next week which might have a bearing on the upcoming Fed meeting.

Key Economic Data to Watch ahead of the December Fed Meeting

Next week, we’ll get the final ISM Services data. On Friday, the final Producer Price Index and early consumer sentiment would be released. US consumer sentiment has weakened amid high inflation and macroeconomic worries.

The Fed is trying to tame inflation through rate hikes and other monetary policy actions. Inflation has indeed dropped from 9.1% in June to 7.7% in October. However, it is still nowhere near the 2% that the Fed targets.

While many economists believe that inflation would drop considerably next year, Bill Ackman of Pershing Square Holdings has a contrarian view and believes that it won’t fall below the Fed’s targeted range of 2% anytime soon.

Higher inflation has taken a toll on US stocks, especially the growth names. However, there is a list of investments that can do well in inflation.

Markets Await Fed December Meeting

Next week, there are some key earnings also including from Costco. The company’s earnings would help shed light on the consumer spending in the US. Last week, the stock dropped following weak November sales data. Lululemon Athletica, Campbell Soup, Broadcom, and Li Auto are also expected to release their earnings in the next week.

Overall, the key event for markets this month for the November inflation report and the Fed’s December meeting. The keys for a December Santa Claus Rally might lie with Fed chair Powell.

Wharton professor Jeremy Siegel predicts that the Fed would pause its rate hikes after a 50-basis point rate hike in December. He also said that markets would not retest their 2022 lows and can deliver 30% returns over the next two years. There is a guide on how beginners can invest in stocks online.

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