Stocks Week Ahead: Can GDP, PCE Help Sustain Year-End Run?
The market surged this past week following a confusing Fed meeting that created more questions than answers. The Fed tried to go into damage control on Friday by sending out John |Williams, Raphael Bostic, and Austan Goolsbee. None did much on the surface to improve the situation Jay Powell left behind following the Wednesday press conference.
This week will be the Austan Goolsbee show, with the Chicago Fed President speaking four times starting today through Wednesday. We may have already gotten a sneak peek of what he will likely say following a Wall Street Journal piece on Friday where the Chicago Fed President noted concerns over rising unemployment down the road.
The equity markets seemed unphased by the doom and gloom type of language. Still, then again, Friday was December options expiration, creating a rather significant $5.8 billion buy imbalance for the market on the close late in the day. This week will also be the final whole week of the year and feature more than just Austan Goolsbee. It will include a 20-year Treasury auction on December 20 and a 5-year TIPS auction on December 21 at 1:00 PM ET.
We will also get economic data, including the final read on the third-quarter GDP and the November PCE reading. The PCE is expected to show that inflation moderated again in November to 2.8% y/y, down from 3.0% last month, while the core is expected to rise 3.3% in November, down from 3.5% in October.
As inflation falls, it becomes interesting because what has driven the market outside of the mechanical aspects we have discussed AdNauseam over the past seven weeks makes me believe the rally has been built like a house of cards due to multiple expansions.
Despite the rally, earnings estimates haven’t gone up. They
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