The Fed, CPI and Other Key Themes For This Week

It was a fairly exciting week in the S&P price-wise last week given there were so few news 
releases. We saw some sell come into the index in the beginning of the week potentially caused 
by the ISM number in the US. The week then finished off with a bang with the PPI number 
which came in a little hotter than expected producing some more price excitement on the 
release.

This week though we have some big hitters in the news area with CPI, Fed announcements, 
retail sales, and unemployment claims. We are also entering into a period of the year where 
volume typically fades off as funds close out positions and adjust for the new year. This usually 
makes for some interesting moves mixed with all the geopolitical and economic drama around 
the Globe.
 

With all that said, here are 5 things to watch this week.
 

CPI
 

Inflation has been a key theme in the market as of late, and this week will be no different. With 
CPI due on Tuesday it will be interesting to see how the market will react. If CPI continues to 
cool then it could be seen as a positive by market participants. It could also signal that the FED 
is finally making some headway in terms of inflation control. It will be important to watch given 
that the next theme to watch this week will be the FOMC Meeting. 
 

FOMC/Fed Funds Rate

The FOMC presser is due on Wednesday afternoon as well as the Fed Funds rate decision. 
This has the potential to be a real driver for the market direction for the remainder of the year. If 
the Fed raises less than expected it could signal that they feel inflation is under control, typically 
a positive for the market. If they raise more than expected it will signal the opposite and it could 
bring the market down.
 

Almost as important as the actual rate decision is the press conference that happens after it. 
The market will look for the language used to try and figure out the Fed’s next steps and how 
they are feeling about everything. This has the potential to be a volatile time in the market so be safe.
 

Retail Sales
 

Retail sales will be out on Thursday and will further give a gauge to consumer sentiment as it 
should include the numbers for Black Friday and Cyber Monday. If they are as expected or 
better it could be another catalyst for positive momentum in the market showing that retail has
been able to adjust to the inflation numbers. One thing to note about this report though is that it 
has the potential to be misleading. The prices of everything are higher than they were the year 
prior, so a beat will have to factor in the price increases as well as increased demand.
 

Unemployment Claims
 

Unemployment is also due out Thursday and similar to retail sales will give a better overview of 
the economy as a whole and how it is coping with higher prices and workforce participation. 
Unemployment usually does not move markets with any lasting effect (unless it is a huge beat 
or miss), but it is possible it will help add to whatever momentum the market has from the 
reports early this week. 
 

Volume 
 

Another theme to watch is the overall trading volumes in the markets. The SPY average daily 
volume has been on the decline(which is common going into the year's end), but it is worth 
paying attention to. With volume on the overall indexes lower than average, it means that the 
potential for higher volatility is there. While this makes for exciting trading it also means that 
trade plans should be adjusted accordingly. It is also possible that this spills over into individual 
tickers and that they trade in a more subdued manner. 

Best of luck this week and don’t forget to check out my daily options article.

More Stock Market News from Barchart

• Stocks Retreat as Strength in U.S. PPI Boosts Bond Yields
• Chinese Tech Investors Pivot to Hong Kong from U.S. Exchanges
• Stocks Edge Lower as Bond Yields Rise on Strength in U.S. PPI
• Markets Today: Stock Indexes Tumble as Bond Yields Rise on Strong U.S. PPI