Key Factors for The week Ahead at wall street: FOMC Meeting, NAHB Housing Market Index , Initial jobless claims etc.

Next week:- Upcoming Focus on Central Banks, Economic Reports, and Political Developments on watch in wall street

Next week, all eyes will be on the Federal Reserve, Bank of England, and Bank of Japan as concerns about rising inflation intensify. Additionally, rate decisions will be announced by the central banks of Norway, Sweden, and Switzerland. In the United States, the Fed’s FOMC is not expected to raise rates, but there may be a slight shift towards a more hawkish stance following a stronger-than-expected inflation report for August. Economic reports throughout the week will cover housing starts, crude oil inventories, and initial jobless claims.

There could also be increased drama on the political front as the countdown to a potential government shutdown on October 1 continues.

Investors will closely monitor the ongoing battle between the United Auto Workers union and Detroit automakers, which could have implications for several stocks. Seeking Alpha analyst Doron Levin described the UAW strike as a self-inflicted wound for the declining Detroit-based auto industry, while other analysts suggest that Tesla (TSLA) may benefit from the labor dispute.

 

Key Takeaways

•  The Federal Reserve and Bank of England will meet to decide on interest rates.
• We’ll get the latest updates on the housing market, including building permits, housing starts, existing home sales, and the NAHB’s Housing Market Index.
• FedEx, AutoZone, and General Mills will report earnings next week.

Weekly Economic calendar USA

Monday 

• NAHB Housing Market Index (Sep) 

Tuesday 

• Building Permits (Aug) 
• Housing Starts (Aug) 
• Day 1 of FOMC Meeting 

Wednesday 

• Day 2 of FOMC Meeting; Interest Rate Decision and Press Conference 
• U.K. Inflation Rate (Aug) 

Thursday 

• U.S. Current Account (Q2 2023) 
• Initial jobless claims (for Week ended Sep 16)
• Philadelphia Fed Manufacturing Index (Sep) 
• CB Leading Economic Index (Aug) 
• Existing Home Sales (Aug) 
• Japan Inflation Rate (Aug) 
• Bank of England (BoE) Interest Rate Decision 

Friday 

• S&P Global Composite PMI – Flash Estimate (Sep) 

TOP FACTORS IN WALL STREET

US Market

US markets saw a significant drop as selling pressure in technology and consumer stocks, along with concerns over inflation and treasury yields, weighed on Wall Street. The Dow 30 fell by 288.87 points or 0.83% to close at 34,618.20. Similarly, the S&P 500 closed at 4,450.32, down by 54.78 points or 1.22%. The Nasdaq Composite also experienced a decline, settling 217.72 points or 1.56% lower at 13,708.30.

Central Banks Decide on Interest Rates

Federal Reserve officials will assemble for the two-day meeting of the Federal Open Market Committee (FOMC) on Tuesday, with an interest rate decision and press conference with Chair Jerome Powell likely on Wednesday.

Fed policymakers are widely expected to maintain interest rates constant, according to fed funds futures released by CME Group, with a chance of one more rate hike by the end of the year, depending on the trajectory of inflation.
The Fed will likely retain its benchmark federal funds rate at 5% through at least summer next year as it seeks to drive down inflation closer to its 2% target.
On Thursday, Bank of England (BoE) policymakers will also meet to decide on interest rate policy.

They’re likely to boost their benchmark rate by 25 basis points to 5.5%—the highest since 2008, according to experts surveyed by Reuters.

This would mark the 15th consecutive rate hike since the central bank started hiking rates in December 2021, in a bid to combat the fastest U.K. inflation in decades.

Housing Market Updates

We’ll get the latest details on the housing market next week, including building permits, housing starts, and existing home sales for August, and the NAHB’s Housing Market Index for September.

Housing starts, a proxy for home construction, are anticipated to have declined to 1.44 million units in August, down from 1.45 million in July. Existing house sales are forecast at 4.1 million, up marginally from 4.07 million in July.

The NAHB’s Housing Market Index, which gauges homebuilders’ future sales estimates, likely climbed to 53 this month after it sank 6 percentage points in August. That’s down from a pandemic-era peak of 84 in 2021, when the Fed’s interest rates hikes contributed to a significant surge in mortgage costs and weaker demand, but above a low of 31 in December last year.

Canada CPI

The Canadian Headline CPI Y/Y is predicted to nudge higher to 3.8% vs. 3.3% prior, while the M/M reading is seen at 0.2% vs. 0.6% prior. The BoC continues to complain about the sluggish disinflation in the underlying measures, which met forecasts in the preceding months albeit they were lower than the prior readings. There’s presently no consensus on the core measures but higher levels would put the central bank in an uncomfortable position given the recent uptick in wage growth. 

Inflation Rises, Led By Gasoline

In August, the annual inflation rate in the United States increased for the second month in a row, reaching 3.7%. This exceeded expectations of 3.6% and was a significant jump from July’s figure of 3.2%. On a monthly basis, the Consumer Price Index experienced a substantial increase of 0.6%, the largest since June 2022.

This surge was primarily driven by a notable 6% rise in gasoline prices. In line with this trend, the Producer Price Index also showed strong growth in August, with a monthly increase of 0.7%. This marked the highest level recorded since June 2022, surpassing market forecasts of a 0.4% rise.

Core Inflation Declines, Investor Confidence Remains Strong

When we exclude volatile food and energy components from inflation calculations, a different picture emerges, which is closely watched by the Federal Reserve. The core CPI decreased slightly from 4.7% to 4.3% year-on-year, while the core PPI reached its lowest point since January 2021 with a year-on-year rate of 2.2%.

This positive trend in core inflation has contributed to maintaining a positive market sentiment. Investors have shown a high level of confidence in the Federal Reserve’s plan to keep interest rates unchanged during the upcoming meeting. In addition, strong retail sales reports, indicating robust consumer spending, have further reduced the risk of a recession.

US Jobless Claims  

The US Jobless Claims surpassed forecasts once again the last week as the job market continues to deteriorate while it remains pretty tight. This week the consensus anticipates Initial Claims at 225K vs. 220K prior and Continuing Claims at 1695K vs. 1688K prior. 

Weekly Global Market Calendar (18 Sep-22 Sep)

Monday September 18

• NZ Services PMI,  
• US NAHB Housing Market Index. 

Tuesday, September 19

• RBA Meeting Minutes,  
• Canada CPI,  
• US Building Permits and Housing Starts. 

Wednesday, September 20

• PBoC LPR  
• UK CPI  
• BoC Summary of Deliberations  
• FOMC Policy Decision. 

Thursday, September 21

• NZ GDP  
• SNB Policy Decision  
• BoE Policy Decision  
• US Jobless Claims. 

Friday, September 22

• Japan CPI  
• BoJ Policy Decision  
• UK Retail Sales  
• Canada Retail Sales  
• Flash PMIs for AU, JP, UK, EZ, US. 

Day-Wise Events in details

Tuesday 19 Sep

Canada CPI

The Canadian Headline CPI Y/Y is predicted to nudge higher to 3.8% vs. 3.3% prior, while the M/M reading is seen at 0.2% vs. 0.6% prior. The BoC continues to complain about the sluggish disinflation in the underlying measures, which met forecasts in the preceding months albeit they were lower than the prior readings. There’s presently no consensus on the core measures but higher levels would put the central bank in an uncomfortable position given the recent uptick in wage growth. 

WEDNESDAY 20 Sep 

UK Core CPI YoY 

The UK Headline CPI Y/Y is predicted to grow to 7.1% vs. 6.8% prior, while the M/M reading is forecast at 0.7% vs. -0.4% before. Such a huge increase is attributable to increasing energy prices with the central banks more focused on the core policies at the present. The UK Core CPI Y/Y is projected at 6.8% vs. 6.9% prior, while the M/M number is seen at an unpleasant 0.7% vs. 0.3% prior. This study is unlikely to impact the market’s pricing for this week’s BoE meeting when the central bank is predicted to rise by 25 bps, but it will influence the expectations for the future meetings. 

FOMC Policy Decision

The Fed is anticipated to leave rates stable at 5.25-5.50% but the market’s focus will be on the Summary of Economic Projections (SEP) and the Dot Plot to determine if the central bank still sees the need for another rate hike or it has reached its terminal rate already. As a reminder, in the June Dot Plot the Fed boosted its terminal rate estimates by 50 bps to 5.6% from the prior 5.1% in March. The market presently estimates a 50/50 possibility for another rate hike at the November meeting given the strength in the economic indicators recently with rate cuts being priced for Q3 2024. 

THURSDAY SEP 21

SNB Policy Decision

The SNB is expected to maintain rates steady at 1.75% given the dismal economic data and both the headline and core inflation gauges being in the SNB’s 0-2% target area. 

BoE Policy Decision

The BoE is projected to rise by 25 bps increasing the bank rate to 5.50% with Dhingra being the regular dissenter. Recent communication seems to be leaning more towards keeping interest rates high long enough to permit the tightening in the pipeline to come through. Nonetheless, the central bank should keep all the alternatives on the table given its inflation and wage growth rates.

 US Jobless Claim

The US Jobless Claims surpassed forecasts once again the last week as the job market continues to deteriorate while it remains pretty tight. This week the consensus anticipates Initial Claims at 225K vs. 220K prior and Continuing Claims at 1695K vs. 1688K prior. 

Friday SEP 22

BoJ Policy Decision

The BoJ is likely to maintain everything unchanged with rates at -0.10% and YCC to target 10yr JGBs at 0% with a soft ceiling at -/+0.50% and a hard cap at 1.00%. The yield on the 10yr recently jumped to 0.70% following BoJ Governor Ueda comments on a “quiet exit” from NIRP if the data justifies such a move. The BoJ, of course, interfered by buying limitless number of JGBs last week as they already repeated many times that they will do so if the pace of the moves is too quick. Moreover, the wage growth data continues to suggest to a downturn, and this is something that the BoJ examines very carefully.  

Flash PMI

The Flash PMIs are usually huge market movers as they are the most crucial leading indicators we have. The market should focus on the Eurozone and the US PMIs, with the latter likely to have a stronger impact on global markets depending on the outcome. The US Manufacturing PMI is predicted to match the prior number at 47.9, while the Services PMI is seen lower at 50.3 vs. 50.5 prior. 

EARNINGS CALENDAR

Monday, September 18  

• Stitch Fix (SFIX)

Tuesday, September 19  

AutoZone (AZO)

Endava PLC (DAVA)

Steelcase (SCS)

Apogee Enterprises Inc. (APOG)

Wednesday, September 20 

FedEx Corp. (FDX)

General Mills (GIS)

KB Home (KBH)

Thursday, September 21  

Darden Restaurants (DRI)

FactSet Research Systems Inc. (FDS)

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