Stocks Week Ahead: Year-End Rally Faces Critical Test Ahead of Key Macro Events
This week will be the capstone of 2023 because whatever happens this week will be a send-off message as 2024 approaches.
This week will feature CPI, PPI, and retail sales on the economic front. A 3,10, and 30-year Treasury auctions and central bank meetings from the Fed, ECB, and BOE.
To finish it off, it will be quadruple witching options expiration on Friday. Did I miss anything? Next week will perhaps be the penultimate central bank meeting, the Bank of Japan.
The week will kick off with a $50 billion auction of 3-year Treasury notes at 11:30 AM, followed by a $37 billion reopening of the 10-year Treasury notes the same day at 1 PM ET. Then, on Tuesday, the Treasury will auction a $21 billion reopening of the 30-year Treasury bond at 1 PM ET.
The last time the 30-year was auctioned off in November, it had its largest tail going back to 2011, during the debt downgrade.
Of course, before that, the 30-year auction will be the inflation data, and it is not clear to me that the CPI report will hold any major surprises.
Expectations are for the inflation gauge to rise 0.0% m/m in November flat to October while climbing by 3.1% y/y down from 3.2% y/y. Core CPI is expected to climb by 0.3% m/m, up from 0.2%, and 4.0% y/y flat with October.
I don’t see the Fed endorsing rate cuts, and it will stick to its being premature to talk about rate cuts now. I guess that the message will sound very similar to what Powell gave in his speech before the blackout period, which the market ignored.
That message will be conveyed through Powell and the dot plots, with the 2024 median remaining unchanged, 2025 increased, and possibly the longer-run rate pushed up, too.
I think that ultimately, we will see a rebound in long-end rates. I’m not
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