Despite the shortened week on Wall Street, the fourth-quarter earnings season heats up. High-profile companies reporting this week include Goldman Sachs, Netflix, Proctor & Gamble, and United Airlines. Forecasts for the S&P 500 overall are expected to be up approximately 20%, but investors will pay very close attention to the impacts of heightened inflation on both earnings and guidance.
High-profile economic reports this week include a last look at 2021 inflation. December CPI and PPI will be released Wednesday and Thursday, respectively, and are expected to post the highest readings of this cycle and in the case of CPI, the highest since the early 1980s. CPI is expected at 7% and PPI (final demand) at 9.8%. In addition,
The new year starts with a busy calendar. Top-tier economic releases this week include The ISM manufacturing survey for December, released on Tuesday and the employment report released on Friday. The jobs report is forecasting 400,000 new jobs and an unemployment rate of 4.1%, the lowest since pre-pandemic. Both reports are expected to reflect that the economy closed the year on solid footing.
The so-called Santa Claus Rally is a seasonal pattern that has seen the stock market make gains the last week of the year and the first two trading days of the new year. Stocks have averaged a 1.4% gain over this time frame since 1969, with 75% of the years posting positive returns. This year the Santa Claus Rally will run headlong into concerns over the new Omicron variant of the COVID-19 virus,
This will be a shortened trading week. Friday is a holiday since Christmas falls on Saturday. Typically, Christmas Eve is a half day of trading for stocks. Trading is expected to be quiet.
Economic reports out this week include readings on housing (new and existing home sales), consumer confidence (Consumer Confidence from the Conference Board and University of Michigan Consumer Sentiment) and inflation (personal consumption expenditures deflator).
The Federal Open Market Committee meeting on Wednesday sits front and center this week. Fed Chairman Jerome Powell has already indicated that the Fed might accelerate its pace of tapering and the markets are pricing Fed rate increases in the first of calendar year 2022. Traders will listen closely to the Fed’s latest thoughts on the pandemic, inflation and the future path of monetary policy.
The economic calendar is highlighted by November CPI on Friday. Overall inflation is expected to be up 6.7% year-over-year with core inflation (sans food and energy) climbing 4.9% from a year ago. If the headline number reaches 6.7%, it will be the highest inflation rate since 1982.
Friday will also bring the University of Michigan inflation expectations for one-and five years.
Despite a full calendar of important economic news, the markets will focus on the new emerging coronavirus strain in South Africa. The news that it could be more transmissible and the uncertainty surrounding the efficacy of vaccinations against it, will overshadow what is expected to be strong economic news this week.
Economic releases this week include consumer confidence on Tuesday,
The markets will be closed on Thursday and stocks will have a shortened session on Friday, closing at 1 pm ET. There are few earnings reports due out this week with both Zoom and Best Buy reporting. Investors will look for guidance on how those companies expect to fare in a post-pandemic environment.
The consumer, and in particular, consumer spending will be in the spotlight this week. On Tuesday retail sales for October will be released and they are expected to be strong, up 1.3% for the month, which would be the third consecutive month of gains and the strongest of the three. In addition, the big box retailers report earnings,