Investors Nervous Ahead of Fed Meeting Week (Weekly Cheat Sheet)

The stock market is a dynamic and ever-changing landscape, and this past week was no exception. Let’s dive into the recent activities, focusing on the S&P 500 sectors, bonds, and economic data reports. We’ll unravel these complex topics with clear explanations and their implications for investors.

S&P 500: A Mixed Bag of Performances

The S&P 500, a barometer for the U.S. stock market, experienced a modest gain, closing the week at 4,604. This marked an 11.8% rise from its October 27 low. Notably, mega-cap stocks like Alphabet (GOOG) played a significant role in this uptick, with Alphabet alone gaining 2.5% over the week.

  • Consumer Discretionary Sector: Climbed 1.1%
  • Energy Sector: Saw the largest decline at -3.3%
  • Materials and Consumer Staples: Also registered noticeable declines

Economic Data: A Mixed Picture

Investors had to navigate through various economic reports, each painting a different picture of the economy:

  • Moody’s Downgrade: China’s credit outlook was downgraded to Negative, raising concerns about global growth.
  • Job Openings Report: Showed the lowest number of job openings since March 2021.
  • ISM Non-Manufacturing Index: Rose to 52.7% from 51.8%, suggesting a robust service sector.
  • Employment Situation Report: Deemed solid overall.
  • Consumer Sentiment: Improved in December, according to the University of Michigan Index.

Bonds and Interest Rates: A Closer Look

The bond market also saw significant movements:

  • Treasuries: Ended the week with losses, influenced by the jobs report.
  • Yields: The 2-year note yield climbed to 4.74%, and the 10-year note yield rose to 4.25%.

Key Takeaways for Investors

  • Market Overbought?: There’s a growing sense that the market might be overbought on a short-term basis.
  • Sector Performance: Diversification across sectors is crucial, as seen in the varied sector performances.
  • Economic Indicators: Investors need to stay alert to global economic changes and domestic economic reports.
  • Interest Rates: The bond market’s movements suggest a cautious approach to interest rate-sensitive investments. The Fed continues to drive market sentiment.

Commodities

Oil & Energy

The energy market has been buzzing with the latest OPEC+ decision to slash oil production by over 2 million barrels a day. But here’s the twist: the market seems to be shrugging it off. Why, you ask? Well, achieving this target seems like a tall order, with some producers either unable or unwilling to cut back.

  • European Brent: Dropped to $76 per barrel.
  • US WTI: Fell to $71.30 per barrel.

This is the seventh consecutive week of price drops, folks! The slowdown in Chinese crude imports is a big deal here, considering China drives more than half of the global demand for oil. A dip in their demand? Yeah, that’s going to leave a mark.

Metals: Copper and Gold Shine

Industrial metals had a bit of a seesaw week in London. While most metals took a nosedive, tin bucked the trend and climbed to $24,400. Let’s break it down:

  • Copper: Trading around $8,200 a tonne.
  • Aluminum: At about $2,100.
  • Zinc: Hovering around $2,400.

But here’s an interesting nugget: Beijing reported a 10% jump in copper imports in November. As for precious metals, gold reset to its starting point but managed to stay afloat above $2,000 an ounce.

Crypto: Bitcoin’s Steady Ascent

Hold onto your hats, crypto enthusiasts! Bitcoin kicked off December with a bang, soaring by more than 9.70% since Monday. We’re talking about a comeback to nearly $44,000 – a peak last seen in early 2022. And it’s not just Bitcoin; ether, the second most highly-valued cryptocurrency, is up by almost 8%, flirting with $2,400.

  • Bitcoin: Nearing $44,000.
  • Ether: Approaching $2,400.

This surge rides on the coattails of a buoyant Wall Street and speculation about a Bitcoin Spot ETF’s imminent approval. The total crypto market? It’s now valued at over a whopping $1,500 billion.

CALENDAR & MOVERS

  • Tuesday, CPI MoM (November)
  • Wednesday, Fed Interest Rate Decision

The Federal Reserve’s Final Meeting of the Year

Next week’s Federal Reserve meeting is the hot topic in financial circles. While the Federal Open Market Committee (FOMC) is expected to keep rates steady, the real intrigue lies in the tone set by Jerome Powell and his team. Here’s the scoop:

  • Core PCE Inflation: This key inflation gauge is projected to end the year below the central bank’s forecast, inching closer to the Fed’s 2% target. This metric is crucial as it influences the Fed’s rate decisions, impacting everything from mortgage rates to business loans.

Economic Data on the Radar

Apart from the Fed meeting, several key economic reports are due:

  • Consumer Price Index (CPI) and Producer Price Index (PPI): These inflation indicators are critical for understanding price trends in the economy.
  • Retail Sales and Industrial Production: These figures shed light on consumer behavior and industrial output, offering clues about economic health.

Earnings Calendar: Who’s Reporting?

The earnings calendar is slowing down, but there are still some big names to watch:

  • Oracle (ORCL), Costco (COST), and Darden Restaurants (DRI): These companies span different sectors, providing a varied glimpse into the corporate landscape.

Earnings Highlights

  • Monday, December 11: Casey’s General Stores (CASY) and Oracle (ORCL) take the stage.
  • Tuesday, December 12: Johnson Controls International (JCI) steps into the spotlight.
  • Wednesday, December 13: Adobe (ADBE) and ABM Industries (ABM) share their numbers.
  • Thursday, December 14: Retail giant Costco (COST), Jabil (JBL), and Lennar (LEN) reveal their earnings.
  • Friday, December 15: Darden Restaurants (DRI) wraps up the week.

Dividends: The Cream of the Crop

  • Dividend Watch: Keep an eye on companies like ABM Industries (ABM), WD-40 (WDFC), American Tower (AMT), and WEC Energy (WEC), all projected to increase their dividends. This is often a sign of financial health and confidence.
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