US equity investors are gearing up for a week marked by key macroeconomic data releases and noticeable political developments despite a shortened holiday schedule. With equity markets closing early at 1 pm ET on Tuesday and suspending activities on Wednesday for Christmas, investors are adjusting their focus to economic indicators. There is an increasing urgency to scrutinize macroeconomic data following a dip in the Federal Reserve's preferred inflation gauge last Friday.
This shift comes on the heels of the central bank’s recent announcement regarding a hawkish stance on interest rate adjustments for December and a downgraded projection for policy easing in the upcoming year. The subsequent relief rally in equity markets on Friday carried on into premarket trading on Monday, indicating a positive investor sentiment in response to the economic climate. Michael Gapen, Morgan Stanley’s Chief US Economist, provided insights into the market dynamics, stating, "The PCE inflation print is favorable for our outlook for continued rate cuts in early 2025.
The positive signal came from the slowdown in shelter inflation, and this effect should manifest once the temporary storm-related firmness in auto prices subsides." The upcoming week holds significant importance, with several scheduled data releases that will shape market perspectives. On Monday, the Conference Board is set to unveil its consumer confidence reading for December.
However, Tuesday stands out as the most data-heavy day of the week, with crucial updates including the Philadelphia Fed's nonmanufacturing index, Redbook same-store sales, durable goods orders, new home sales, and an adjustment to the Atlanta Fed's GDP Nowcast estimate. Following a brief holiday pause, the data flow will notably decrease, concluding the week with weekly jobless claims and an update to the St.
Louis Fed's GDP Nowcast estimate. In addition to economic data, political events also make headlines this week. President Joe Biden signed important spending legislation into law late last week, effectively averting a looming government shutdown. A bipartisan agreement materialized early Saturday that will allow for the temporary funding of federal operations, sidestepping President-elect Donald Trump’s insistence on a debt-limit increase extending into the new year.
Despite the contentious passage of the bill, it provides investors with a glimpse into legislative activity post-January 20th, particularly as Republicans will hold the reins of power across all branches of government under the new administration. With these dynamics at play, attention remains fixed on significant key indicators, including the $US30 and $US500 indices, as investors navigate through these fluctuations in the market landscape..