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The last few weeks’ worth of volatility may have come from jitters relating to slowing Chinese growth, but now we are finally going to see the elephant in the room: the Federal Reserve’s decision on a rate hike. With the market digesting every bit of information, and trying to handicap whether or not Janet Yellen and the Federal Reserve governors will actually raise rates, the markets should continue their pattern of volatility until the announcement is actually made.
Despite the fact that the Fed’s rate decision is THE piece of economic data this week, there are several other pieces of data that actually are quite important to the markets/economy—though they might get swallowed or contribute to the week’s potential volatility. Consumer retail numbers, core inflationary numbers, home starts and key manufacturing indexes will be released this week, all of which will lead up to the Fed’s big dance.
On the earnings front, the wind down of so-called “earnings season” will have fewer firms reporting their quarterly numbers throughout the week. This should come as good news as investors already have enough on their plates with the Fed.
Here in the U.S. Monday will prove to be a slow day. There will be no economic data released, however, traders and investors may not want to rest on their laurels as the day could still prove to be a volatile one. Across the pond the Bank of Japan will release their monetary policy statements. This is essentially a guide on what the BoJ is thinking and offers a window into what they might do. More or less stimulus, bond buying, and overall yen weakening could really shift the global markets outside of Japan. Investors should be on guard.
While Monday is slow relative to new economic data, Tuesday hits the ground running. The Census Bureau will release both core and regular retail sales numbers. The core number will back out automobile sales numbers which make up about 20% of consumer spending. Both numbers offer the first glance at how the consumer is actually doing in the U.S, and both are set to show declines, coming in at 0.1% and 0.4%, respectively.
The Federal Reserve Bank of New York will also report its Empire State Manufacturing Index. The measure of business activity in New York came in unexpectedly negative last reading. This month, economists are predicting a 0.7% increase. The Federal Reserve will also release capacity utilization rates and industrial production.
There are no dividend-related earnings reports on Tuesday.
On Wednesday, investors will be treated to key inflation data. The Bureau of Labor Statistics will report both Consumer Price Index (CPI) and Core CPI data before market open. The metrics measure the change in the price of goods and services purchased by consumers (core backs out energy and food). Consumer prices account for a majority of overall inflation and as such are a major contributor to interest rate policy. The two metrics are set to diverge, with CPI decreasing by 0.1% while Core is set to rise by 0.1%. The Energy Information Administration’s crude oil inventories will also be released on Wednesday.
Welcome to D-day for the Federal Reserve interest rate decision. But before Janet Yellen & Crew make their announcement at 2 p.m. regarding whether or not the Fed will actually raise rates or kick the can down the road for another few weeks, there is other, equally important, data that will be published.
To start with is residential building permits. This key piece of housing data represents the number of new residential building permits issued during the previous month. Analysts are expecting a decrease to just 1.12 million permits. Also, the Department of Labor will publicize unemployment data. The figure should show a slight increase in the number of newly laid off workers, reaching 276,000.
The Federal Reserve will begin their portion of the show at 2 p.m. and hold a press conference with their rate decision at 2:30 p.m. Expect the markets to be very volatile during the day’s trading.
There are no dividend-related earnings to report.
Investors will get a much needed break at the end of the week. The only economic metric released will be the Conference Board’s Leading Index. The measure, which is a combined reading of economic indicators related to employment, manufacturing, consumer confidence, housing, stock market prices, and credit trends, is designed to predict the overall direction of the economy. The reading usually has a muted effect on the stock market as all the data contained in the index has already been distributed. This time the metric should be even more muted as the markets will still be dealing with the Fed’s rate decision. Even so, analysts are expecting the metric to show positive results.
There are no dividend-related earnings to report.
While there will be plenty of key data to digest this week, all eyes will be on the Fed leading up to Thursday. All in all, the Fed’s decision on whether or not to raise rates will drive the markets and its volatility this week. And bad news coming from Europe or Asia will only heighten the overall jumpiness of investors. Luckily, there won’t be too many earnings announcements that will exacerbate any major issues this week.