Equity markets in the United States continued to trend lower in the week ended on December 16, 2022 due to the 0.5% interest rates hike by the Federal Reserve as well as disappointing retail sales data.
Major indices such as the Dow Jones, the S&P 500 and the Nasdaq Composite fell by 1.7%, 2.1% and 2.7% respectively in the last five trading sessions. Further, the fears of a global recession meant the yield curve remain deeply inverted. The 10-year Treasury note currently yields 3.49% while the two-year note yields 4.19%.
Oil prices continued to tumble on Friday and reversed gains from earlier trading sessions as rising bond rates and a fall in industrial output across developed economies has worsened outlook for global energy demand.
The price of WTI crude which is the U.S. benchmark fell to $74 per barrel on Friday, compared to $78 per barrel last Wednesday.
Additionally, a report from Investopedia states, “A bill to fund the government through Sep. 30, 2023—the end of the current fiscal year—is expected to pass Congress next week, after the U.S. Senate passed a record $858 billion annual defense bill and stopgap spending bill to extend current government spending levels by a week, giving negotiators more time to pass a full-year deal.”
Key macro developments to watch out for this week
The housing market will be under the radar as the NAHB Housing Market Index will release on Monday, while data for housing starts and building permits will be published on Tuesday. Further, data on new and existing home sales for the last month will release later this week.
Housing starts are forecast to fall to 1.415 million in November from 1.425 million units in October. Existing home sales are also expected to fall to 4.2 million units from 4.43 million units in this period, after peaking at 6.5 million in January. In fact, existing home sales have fallen to their lowest levels in more than a decade, after excluding for pandemic-related disruptions in the first half of 2020, due to higher mortgage rates, limited supply and declining affordability.
Data on new home sales will release on Friday and is likely to fall to 608,000 in November, from 632,000 in October.
The Bureau of Economic Analysis or the BEA will issue Personal Consumption Expenditures or PCE price index for November on Friday. The PCE is the Federal Reserve’s preferred metric for inflation.
The PCE is estimated to increase by 5.5% year over year, lower than the 6% gain experienced in October. Moreover the core rate which excludes costs associated with food and energy is expected to touch 4.7% for the month of November, from 5% in October.
The PCE Price Index tracks the purchasing decisions of consumers much more accurately, compared to the Consumer Price Index metric. The PCE consists of a basket of goods that is updated frequently and reflects changes in consumer preferences. On the other hand, the consumer price index consist of a fixed basket of goods and services that are not updated as frequently.
Finally, corporate earnings for publicly listed companies including Nike (NYSE: NKE), Carnival Crop (NYSE: CCL), Micron (NASDAQ: MU) and General Mills (NYSE: GIS) are also due in the week ending on December 23.
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