Sure, stocks weren’t so sure-footed as they started out of the gate for 2024, but the first full trading week of the new year may be the one that sets a tone across markets for the coming year.
After all, the question of whether inflation has been tamed — or whether it will stay tamed — remains a crucial one when it comes to determining if, when and by how much the Federal Reserve will cut rates in 2024.
See: Why stock-market investors will remain at mercy of shifting rate-cut expectations after wobbly start to 2024
So this week’s release of December’s consumer-price index on Thursday, followed by the month’s producer-price index on Friday, carries the potential for market-moving fireworks.
Check out: Financial markets may be overlooking ‘one remaining ember’ that could reignite inflation
CPI is forecast to rise 0.2% in December, according to economists surveyed by the Wall Street Journal, with the closely followed core rate that excludes food and energy expected to rise by the same amount. That wouldn’t be a big jump, but it would see the year-over-year headline figure tick up to 3.3%, from 3.1% in November, and halt some of the recent progress on inflation. The year-over-year core rate, however, could still slow to 3.8% from 4%.
The inflation readings and other events in the week ahead will also offer a window into the strength of the American consumer and the prospects of a “soft landing” for the economy. That’s central to the “Goldilocks” backdrop that helped a fuel run of nine straight weekly gains for the stock market, which came to an end as the calendar flipped to 2024.
Read: Inflation back in the spotlight this week with CPI and PPI on deck
“Looking at the week ahead, the strength of the consumer is a top priority as we receive critical economic information on the subject, particularly on CPI, PPI, banks and consumer credit,” said Mark Hackett, chief of investment research at Nationwide, in a Monday note. “This should help us better understand the market and earnings outlook for Q1.”
Earnings season sees its unofficial kickoff Friday with results from JPMorgan Chase & Co. JPM, -0.15% and Delta Air Lines DAL, +2.69%, followed next week with a raft of big Wall Street banks.
As MarketWatch’s Bill Peters reported, many analysts expect companies to use their fourth-quarter results as an opportunity to sound a cautious note on the year ahead.
“Bottom-up estimates for the S&P 500’s year-over-year earnings growth rate in Q4 have fallen from 9.2% at the end of September to 0.9% as it stands now. Such a lower bar makes earnings surprises easier to come by but perhaps less impressive or meaningful to investors,” said strategists at Glenmede in a note.
Last year’s stock-market rally, which saw the S&P 500 SPX jump more than 24% to come within a whisker of its record close from January 2022, was led by mega-cap tech stocks, with gains enhanced by a bout of euphoria over the prospects for artificial intelligence. Chip maker Nvidia Corp. NVDA, +6.43% soared nearly 240% in 2023 as it led the so-called “Magnificient Seven” of mega-cap tech cohorts set to benefit most from an AI revolution.
The AI revolution also puts the Consumer Electronics Show, or CES, which gets under way in Las Vegas on Tuesday, further in the spotlight.
Once an amusing event focused on unveiling the latest gadgets, the trade show is now seen as a representation of how tech has seeped into every corner of modern life, said Nicholas Colas, founder of DataTrek Research, in a Monday note.
“The important themes at CES 2024 will be artificial intelligence, mobility, and healthcare. How companies are incorporating AI into new products will be especially important for investor sentiment towards tech stocks,” he wrote.
And don’t forget about crypto. After a stellar 2023 run that saw bitcoin BTCUSD, -0.27% shake off the criminal conviction of FTX founder Sam Bankman-Fried, as well as the $ 4.3 billion fine and plea deal involving Changpeng “CZ” Zhao, co-founder of the world’s largest crypto exchange Binance, all eyes are on the Securities and Exchange Commission this week.
The agency must decide by Wednesday on whether to approve applications for a spot-bitcoin ETF — an approval that is widely expected.
Crypto: Bitcoin ETF — here are the 10 funds set to debut after SEC decision
“For the uninitiated, trillions of dollars in institutional and retirement assets can only invest in regulated financial assets, a situation that has hampered the adoption of bitcoin as an investible asset in the world’s richest economy,” said Matthew Weller, global head of research at Forex.com and City Index, in a note.
“Crucially, unlike past high-profile, derivative-based bitcoin product launches, like futures contracts or futures-based ETFs, spot ETFs will be required to buy and hold underlying bitcoin equal to their underlying assets, fundamentally altering bitcoin’s supply-demand balance,” Weller wrote.
So no surprise that there’s intense interest around the decision as bitcoin trades just above $ 47,000 — up more than 12% in the new year and nearly 180% over the last 12 months, but still some way below its all-time high above $ 65,000 in November 2021.