By Lewis Krauskopf
NEW YORK, Dec 12 (Reuters) – A host of delayed employment, inflation and other data in the coming week will give a long-anticipated view of the U.S. economy that could help guide markets into year-end.
The S&P 500 ended on Thursday at an all-time closing high, as a third-straight strong year for the benchmark U.S. stock index is nearly in the books. A dovish Federal Reserve meeting on Wednesday cheered investors, although a disappointing report from cloud-computing giant Oracle weighed on the heavyweight tech sector on Thursday.
Investors have been lacking the typical evidence they use to gauge the health of the economy because a 43-day federal government shutdown postponed or canceled key reports, and some of those delayed releases arrive in the week ahead. The U.S. jobs report for November is due Tuesday, while the monthly consumer price index, which is closely watched for inflation trends, is out on Thursday.
“There has been a lack of clarity for investors,” said Jim Baird, chief investment officer with Plante Moran Financial Advisors. “Strong corporate earnings certainly helped to support the markets. The Fed and anticipated rate cuts helped to provide a little bit of a boost. But now it’s time to turn our attention back to the underlying economy and what path we’re on.”
A divided Fed cut interest rates by a quarter percentage point on Wednesday for a third-straight meeting as it seeks to shore up a weakening labor market. But the central bank signaled borrowing costs are unlikely to drop further in the near term as it awaits more economic clarity.
“Because of the government shutdown and the catch-up schedule, we have essentially three months of both labor and inflation data coming out between the December and January Fed meetings,” said David Seif, chief economist for developed markets at Nomura.
U.S. payrolls are expected to have climbed by a tepid 35,000 in November, according to a Reuters poll. Fed Chair Jerome Powell on Wednesday said while payrolls have been averaging an increase of 40,000 per month since April, the Fed thinks those numbers are overstated and could instead be an average loss of 20,000 per month.
“If we start getting negative prints around jobs, you can’t avoid the recession discussion,” said Marvin Loh, senior global macro strategist at State Street.
The monthly CPI data comes as inflation has continued to run above the Fed’s target, which could complicate any further Fed easing if inflation fails to cool. Three policymakers dissented from the decision to lower rates, including two who argued rates should have been left unchanged.
“We continue to expect further cuts in January and April, but if the labor market stabilizes, then future cuts may not come until inflation decelerates,” Morgan Stanley economists said in a note on Thursday.
A report on retail sales is among the other releases next week that will help provide more insight into economic growth.
The S&P 500 is up 17% so far in 2025, pushing its gain during the bull market that began in October 2022 to more than 90%, while December is traditionally a positive month for stocks.
However, investors could seek to lock in year-to-date profits, bringing selling pressure. The approaching holidays also stand to reduce trading volumes, which can lead to exaggerated asset-price moves.
“For the most part, it’s been a very, very good year for risk assets,” Loh said. “If you get some shaky numbers or you don’t get a resounding reason to add risk, it could add volatility in the market just because of the thinner markets.”
(Reporting by Lewis Krauskopf; additional reporting by Laura Matthews; Editing by Lisa Shumaker)
Comments