Wall Street Eyes Key Economic Data For Clues on Stock Market’s Next Move
The stock market’s recent surge, fueled by the Federal Reserve’s rate cut, has pushed major indexes to record highs. However, the upcoming week could be crucial in determining whether this upward trend can sustain itself, especially as investors brace for October, a historically volatile month for equities. The potential for a correction looms large, with several key economic indicators, including consumer confidence and durable orders, expected to show signs of a softening economy.
Key Takeaways:
- The Fed’s rate cut fueled a rally in stocks, pushing major indexes to all-time highs.
- The upcoming week will be crucial as investors look for signs of a continued bull run or a potential correction.
- Key economic indicators like consumer confidence and durable orders are expected to show signs of a softening economy.
- While the Fed’s focus shifts to employment, investors will closely watch inflation data to confirm the effectiveness of its rate cut.
The Week Ahead: Economic Data to Watch
The next several trading sessions will be pivotal for investors, as they closely monitor upcoming economic data for clues about the market’s direction. Several key indicators are scheduled for release, including:
Consumer Confidence & Durable Orders
- Consumer confidence is expected to decline in September, falling to 102.9 from 103.3 in August, according to FactSet. This could be a sign of weakening consumer sentiment, which could negatively impact spending and economic growth.
- Durable orders are also expected to show a decline, with projections indicating a 2.9% drop in August after a 9.8% increase in July. This could signal a slowdown in manufacturing activity and further fuel concerns about the economy’s trajectory.
Inflation Data: A Key Indicator of Fed’s Next Steps
- Following the Fed’s focus shift to employment from inflation, investors will be paying close attention to the Personal Consumption Expenditure (PCE) price index for August, expected to release on Friday, September 27th. This index is a key measure of inflation, and a continued decline in pricing pressures would confirm the Fed’s decision to cut rates.
- Analysts anticipate the August PCE to show a further pullback from its previous highs, indicating that inflationary pressures are continuing to ease.
Breakout Uncertainty: The S&P 500’s Potential Correction
While the S&P 500 recently broke through resistance at 5,670, its ability to sustain this breakout remains uncertain. Katie Stockton, founder of Fairlead Strategies, has called the breakout "pending confirmation," emphasizing the need to see continued strength to confirm the bullish trend.
Stockton is closely monitoring this level over the next few days, as a failure to confirm the breakout could signal a potential near-term correction. A successful confirmation would, in turn, increase the possibility of the S&P 500 reaching 5,935 within the next three to eight weeks.
A Seasonal Correction?
Even with the potential for a near-term breakout, Stockton anticipates a seasonal correction in October, which could be exacerbated by the upcoming U.S. presidential election.
Despite a potential correction, Stockton’s overall outlook for the S&P 500 remains positive, with her expecting a "trading range environment" for the next nine months.
Looking Ahead: The Next Few Days Will Be Crucial
The upcoming week will be filled with important economic data releases that could reveal the direction of the stock market in the near future. Investors will be looking for signs of a continued bull run or a potential correction, with the confirmation of the S&P 500 breakout and the upcoming inflation data at the forefront of their observations.
The Fed’s focus on employment adds another layer of complexity, raising questions about the potential for further rate cuts and their impact on the markets.
With a host of economic and political factors at play, the next few days will be critical in determining the trajectory of the stock market in the weeks and months to come.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial professional for investment advice tailored to your specific needs.
