The Week Ahead in Wall Street: What to Watch for

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•  Jun 11 2023
 

The main events this week are the interest rate decision on Wednesday which will be published after two important macro data. The inflation rate on Tuesday and the producer price index on Wednesday, which may influence the FED decision.

Inflation May Slow, but Fed Likely to Stay on Course

The chances of keeping the interest rate at 5.25% are high. The market will listen to Powell at the press conference that will take place half an hour later and will want to see both the predictions and the tone in Powell's words that may provide an assessment of what is going on.

The forecast is that the consumer price index in May will show an increase of 0.3% and the annual index will remain unchanged at 4.9%. The core index is expected to increase by 0.4% and remain at an annual rate of 5.5%. The producer price index is also expected to indicate stability, with a monthly increase of 0.2%, but the annual rate will decrease to 1.1%, better than 2.3% the previous month. The core Yaleh index is expected to register a decline to 2.9%, better than 3.2% in the previous month.

There is still at least a 50% chance that interest rates will rise this week: "The PCE inflation figure followed by the FED was higher than forecast, including in the core index. If the consumer price index that will be published two days before the FED's decision is in line with the forecast, the rate of inflation according to the latest indicators will remain Close to 5%. Consumer spending in April was significantly higher than forecasts. The real estate market is showing signs of recovery.

Investors seem to have become more resistant to losses. The ratio between the total net financial wealth of households and disposable income and annual consumption expenditure began to rise rapidly since the crisis in 2008 after many years in which it was relatively stable. The increase was recorded thanks to the increase in the accumulation of savings by consumers and thanks to increases in the financial markets.

Fed Hike Could Trigger Stock Market Correction

The conditions are ripe for a correction in the shares. The S&P500 ended a fourth week of gains. The Nasdaq rose 7 weeks in a row. There was an improvement in the stocks of industrial companies. The performance of the indices of small stocks improved compared to the large ones and it seems that the risk of correction in the market has increased in the short term.

There is a higher chance than is reflected in the market that the FED will raise interest rates this week, contrary to forecasts. The increases in stocks have become more horizontal and optimism among investors has risen to the highest levels since 2021. There was an increase Sharp in the reported exposure to shares of the active investment managers and in the proportion of private investors with bullish sentiment

Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.

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