With U.S. CDC (Centers for Disease Control and Prevention) reversing its stance on mask for vaccinated people amid the resurgence of the coronavirus pandemic, Investors will be watching closely on the main U.S. economic data reports on consumer and producer price inflation for any potential scale back of stimulus by the Federal Reserve.
Several Fed officials are slated to speak during the week and their comments could help clarify the Fed’s position on tapering. Earnings will continue but will be fewer in number as earnings season winds down.
Here’s what you need to know to start your week.
The US market ended at all time highs on Friday, after monthly U.S. jobs report came in better than expected, as the economy continues to navigate out from the COVID-19 pandemic. The benchmark index $SPX ended the week gaining +0.79% (+34.9 points), closing at 4,438 level.
$SPX remains above its multi-month long trend channel that was earlier highlighted. Every break out of $SPX trend channel resistance has been met with a rejection (6 times since 2021). It is also important to note of the diminishing volume observed, reflecting a short term price-volume divergence in this run up.
The immediate support to watch for $SPX this week is revised up to 4,370 level; a breakdown of two weeks price support.
Inflation numbers
The U.S. consumer price index and the producer price index released Wednesday and Thursday, respectively will provide an insight into the current pace of inflation, one of the key factors along with the labor market, that the Fed looks at when making its monetary policy decisions.
CPI is expected to moderate slightly after last month’s jump of 0.9%, the strongest gain since June 2008. The Fed has said the current surge in inflation is just temporary, but market sentiment has been hit by fears of higher inflation resulting in a sudden tapering.
Friday’s stronger-than-expected nonfarm payrolls report was the last before the Fed gathers for its annual meeting in Jackson Hole, Wyoming, at the end of the month to discuss policy and decide future stimulus strategy.
The upbeat jobs numbers coupled with uncomfortably hot inflation data could prompt Fed officials to announce plans to begin tapering bond purchases as soon as September, the first step down the road to eventual interest rate hikes.
Earnings wind down
Earnings will continue in the coming week, but the number of companies reporting will tail off as earnings season continues to wind down.
Some of the names reporting include AMC Entertainment ($AMC), Coinbase Global Inc ($COIN), Sysco ($SYY), Chesapeake Energy ($CHK), eBay ($EBAY), Wendy’s ($WEN), Lordstown Motors ($RIDE), Walt Disney ($DIS) and Airbnb ($ABNB).
It has been a stellar earnings season – out of the 427 companies in the S&P 500 that have reported earnings so far, 87.6% beat analyst expectations, the highest on record.
Bitcoin higher as sentiment recovers
Bitcoin rose to its highest level in two months on Sunday as market sentiment recovered but remined fragile. The digital currency hit $45,284, its highest since mid-June.
One area of uncertainty for crypto investors is the U.S. infrastructure bill currently making its way through Congress, which contains a cryptocurrency tax provision, tacked on at the last minute.
