With investor confidence in the Fed’s interest rate path eroding rapidly, next week’s inflation data will be crucial for depressed markets. Earnings season is also beginning to accelerate again. Stocks fell for a second straight week after strong economic data this week heightened concerns that the Fed would cut interest rates even less than last month’s forecast, when policymakers projected just two-quarter percentage points of cuts in 2025. The blowout jobs data intensified the sell-off, sending the Dow Jones Industrial Average down nearly 700 points. Bond markets were also in turmoil, with the 10-year Treasury yield soaring to its highest level since late 2023 on Friday. Finally it was higher than 4.76%. US10Y YTD mountain US10Y Next week, consumer and producer price data will be closely watched by investors who worry it will only confirm that price pressures will persist, especially given President-elect Donald Trump’s inflationary trade and immigration Policies may outweigh any benefits of growth. Allison Schrager, a senior fellow at the Manhattan Institute, told CNBC’s “Squawk”: “We may have to accept that inflation is not as low as the Fed wants it to be anyway. That may That’s where inflation is. “I think they’re trying to tell the story, ‘We beat inflation, we’re credible,’ but now it looks like that last half mile is not going anywhere,” she added. Reduce the chances of a rate cut or even reintroduce a rate hike. According to the CME FedWatch tool, the market last priced the probability of one rate cut this year at about 40%, which is a range of 4.00% to 4.25% in most cases. Next, the upcoming Federal Reserve meeting on January 28th and 29th does not consider cutting interest rates. The market “depends” on inflation. According to FactSet’s consensus forecast, the consumer price index in December is expected to increase by 0.3% quarterly and yearly. 2.8%. This compares with increases of 0.3% and 2.7% respectively in the previous report. Excluding volatile food and energy prices, core inflation is expected to rise just 0.2% this month, down from 0.3% previously. Growth is expected to be 3.3% from 12 months ago, unchanged from the previous report. How investors view December’s inflation data could have a significant impact on a market that started the year with valuations already at record highs. The S&P 500’s forward price-to-earnings ratio is nearly 22 times, close to its highest price-to-earnings ratio so far in 2021. It gets more challenging as you work harder. “Valuations don’t give you a lot of wiggle room,” Niles Investment Management founder Dan Niles said this week on CNBC’s “Squawk Box.” That’s why this year, it’s like one of the broadest outcomes I can think of — and I think it really depends on the path of inflation, whether the multiple can sustain or contract 20% to 30%” from 2022. For the first time since the market tumble, Niles named cash as his top choice this year and said it could be a good place to hide. Hotter inflation reports could also weigh on bond markets. John Belton, portfolio manager at Gabelli Funds, said he is watching the 10-year Treasury note because it is currently “not far” from the psychologically important 5% level. “I think that’s going to be an obvious source of pressure on equity valuations,” Belton said. SPX 5D Mountain S&P 500, Past Five Days On the economic front, investors will also be keeping a close eye on retail sales data to see if consumers continue to spend. Profits are also set to rise again as the big banks start the season on Wednesday. Citigroup, Goldman Sachs, Wells Fargo, JPMorgan Chase, BlackRock, Bank of America, Morgan Stanley and others will release reports in the coming week. One week ahead calendar all times are Eastern Time. Monday, January 13, 2pm Treasury Budget (December) Tuesday, January 14, 6am NFIB Small Business Index (December) 8:30am Producer Price Index (December) Wednesday, January 15 am 8:30 CPI (December) 8:30 AM Empire Index (January) 11 AM New York Fed President and CEO John Williams at CBIA Economic Summit and 2025 Profitable Speeches in the Outlook: Citigroup, Goldman Sachs, Wells Fargo, JPMorgan Chase, BlackRock, BNY Mellon Thursday, January 16, 8:30 AM Continuing Jobless Claims (1/4) 8:30 AM Export Price Index (December) 8:30 am Import Price Index (December) 8:30 am Initial Jobless Claims (1/11) 8:30 am Philadelphia Fed Index (January) 8:30 am Retail Sales Sales (December) 10 am Business inventories (November) 10 am NAHB Housing Market Index (January) Gains: JB Hunt Transport Services, Morgan Stanley, U.S. Bank, Bank of America, PNC Financial Services Group, M & T Bank, UnitedHealth Group Friday, Jan. 17 8:30 a.m. Preliminary Building Permits (December) 8:30 a.m. Housing Starts (December) 9:15 a.m. Capacity Utilization (December) 9:15 a.m. Industrial Production ( December) 9:15 AM Manufacturing Production (December) Earnings: State Street, Schlumberger, Fastenal, Citizens Financial Group, Regions Financial, Truist Financial, Huntington Bancshares
