Stocks Week Ahead: Big Swings Expected as CPI, Retail Sales, PPI Take Center Stage
Stocks had a big rally day on Friday, but most of the week was a real struggle. The rally on Friday didn’t help the equal-weight S&P 500 or Russell 2000 finish positive for the week, despite the S&P 500 and the Nasdaq 100 finishing higher by more than 1 and 2%, respectively. It appears to be more of the same, with just a handful of stocks continuing to power the major indexes higher while the rest of the market is left behind.
However, this week will feature a lot of important economic data, including the CPI, retail sales, and the PPI. Additionally, Wed morning will be the OPEX, and Friday will be the monthly OPEX, and all of this combined could leave the markets with big swings.
On top of that, on Friday, Moody’s Put the US credit rating on negative watch, which puts the US one step closer to a credit rating downgrade, which is a pretty big deal and could mean that bond yields start moving higher again. Additionally, Tuesday’s CPI report seems fairly important, given that we are going to see the health insurance component of CPI reset.
Bond yields have already shown some forms of resilience, with the 10-year rate hanging on to support at the uptrend, the 50-day moving average, and the 4.5% level. If the data this week is supportive, and the 10-year can get back above the 4.7% level, it could open the door for a further push higher back to that 5% region. Which, to this point, has been a resistance zone.
Where the 10-year and long-end rates go is important because when rates on the long-end are rising, it means that the yield curve is steepening, and when the yield curve is steepening, stocks struggle. That dynamic has not changed for months, and part of what has gotten the equity market moving higher again is that the
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