The Week Ahead 14th September – 18th September 2020
The Week Ahead 14th September – 18th September 2020
Market Outlook for Today
U.S. stock futures rose early Monday morning after a sell-off in tech shares led to the market’s first back-to-back weekly declines in months.
Dow Jones Industrial Average futures traded 300 points higher. The S&P 500 and Nasdaq 100 futures were also in positive territory.
Sentiment was lifted in part by news of Nvidia buying chip maker Arm Holdings from SoftBank for $40 billion. Nvidia will finance the deal through a combination of cash and common stock.
The S&P 500 fell by 2.5% last week. It was the broader-market index’s worst one-week drop since June 26. That decline also marked the first time since May that the S&P 500 closed lower in two straight weeks.
Those losses were driven in large part by a steep drop in tech, the best-performing market sector year to date. The S&P 500 tech sector plunged more than 4% for its biggest weekly loss since March. Apple, the biggest U.S. company by market cap, dropped more than 7% last week.
The FOMC’s upcoming meeting this week comes just weeks following the central bank’s annual economic policy symposium, during which officials announced a new framework to inform their thinking on rate-setting in light of inflation. The updated framework will allow for a moderate overshoot of their 2% inflationary target, alleviating the urgency for officials to step in and raise rates to stave off a run-up in inflation.
However, in announcing this decision, Federal Reserve Chair Jerome Powell omitted specifics on how the FOMC would achieve higher average inflation following years of undershooting its target, leaving the committee to discuss tactics at forthcoming meetings. Many economists expect details of the central bank’s means of implementing its new framework will remain elusive at the September meeting.
Powell’s press conference, scheduled to take place Wednesday afternoon following the conclusion of the monetary policy meeting, is expected to include remarks that strike a cautious tone on the pace of the economic recovery amid the ongoing pandemic, even as newly released economic data moves in a marginally more positive direction.
On the economic data front, the August retail sales report released on Wednesday will draw considerable attention, offering an updated view of the state of consumption at the end of the summer as shutdown orders abated further.
The pace of gains in month retail sales has slowed considerably from May’s record 18.2% urge. Retail sales in July rose 1.2% to pop back up above pre-pandemic levels, leaving “much less scope now for rapid monthly gains,” Michael Pearce, senior US economist for Capital Economics, said in a note Friday.
In the UK, the government is to begin debating its controversial internal markets bill which could wreck its EU divorce treaty. Meanwhile, the Bank of England and the Bank of Japan will both hold policy meetings just hours after the Fed on Thursday.
Overview for the Week Ahead
Investors, rocked by a volatile stretch of trading in equity markets last week, will turn their attention this week to the Federal Open Market Committee’s (FOMC) September meeting, along with two key reports on the state of the consumer in the U.S. These events have the potential to influence the markets which means there is plenty of trading opportunities.
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