FOMC, Energy and Other Key Things to Watch This Week

Last week we received some disappointing news on the inflation front. Both PPI and CPI came in a little hotter than expected, and fears were stoked that inflation could be coming back. Up until Friday most names were up pretty well on the week. Tesla TSLA shot up out of the gate on Monday and had a very tradable week. Apple AAPL had the opposite issue this week, it has slowly trended down the majority of the week on continued fears of the China news and a disappointing iPhone 15 launch. All of these culminated in the S&P 500 SPY ending the week down nearly 1%.

This week looks to be an exciting one, in addition to the normal news in the cycle we also have the FOMC/Fed Funds and then the press conference that follows. Here are 5 things to watch this week in the market.

Building Permits

Housing is still firmly in the news cycle as the strangeness continues. In some private data released last week, existing home sales looked to be at record low levels whereas new homes were still selling as fast as they could be built. This, in addition to existing home sales later this week, will either confirm or counter what was asserted in that private data from Realtors. Watching building permits could be a great way to gauge if builders are racing to meet the excess demand in the market. If they are it could mean that housing prices will eventually begin to subside as supply continues to increase. If this comes in lower, then the opposite could be assumed and this housing issue could be here to stay.

Fed Funds/FOMC

This is the big day everyone has been waiting for recently, with reports starting to show inflation is creeping back up and energy becoming an issue again going into the fall. What happens to the Fed Funds is anyone's guess. The market appears to be pricing in a “no change” decision, and this is what the estimates are across many financial outlets. With housing still an issue, energy starting to push inflation up again, and some other supply chain issues rearing their heads, it's possible Powell will hold firm and not take future hikes off the table. If this is the case, it's possible the market start to sell on renewed fears of hikes. On the other hand, if he pauses and or cuts, It's possible we rally on the assumption the worst is behind us.

Existing Home Sales

Similar to the Building Permits above, Existing home sales have been falling month over month and have been getting revised down in the most recent months. We are looking for an increase in existing home sales to help potentially show that housing is starting to unlock and that prices could start to come down.

Flash PMI

Both Flash Manufacturing and Services PMI are due Friday morning at 9:45. These are typically leading indicators for economic health as they show the impact on forecasted purchasing for both sectors. Usually, a beat would be a positive and would be something we would want to see. As of recently though the “good news is Bad News” seems to be the market paradigm. So it's possible that a miss would be seen as beneficial for the markets as everything seems to still be revolving around interest rates. It's also possible that FOMC impacts how this report is taken by the markets. If a pause or cut is anticipated next, it could help the market to start to look at these reports “normally” again.

Energy

Energy is still in the news and could still be a factor in the markets. This poses more of a macro risk, but as diesel and gas prices continue to rise so will the prices of the goods that need to be transported. It's possible that this fear continues to play into both rate decisions and consumer habits as the prices at the pump continue to increase.

On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.