Is the party over? US stocks gave a mixed performance last week following hawkish comments from central bank policymakers. After enjoying its longest winning streak in two years, the S&P 500 slumped after Fed’s Powell said the central bank was not confident it had done enough to rein in inflation.
A tech-driven rally on Friday helped the S&P 500 end the week up +1.1%. Powell’s comments weighed on the markets. European Central Bank’s Christine Lagarde added to concerns about rates staying higher for longer, saying it would take more than the next couple of quarters for the ECB to start cutting rates. To add more salt to the wound, we also had a poor 30-year bond auction last week where primary dealers had to buy more than usual of the bonds offered for sale.
Are you prepared for another “positive” surprise? The consumer price index report for October will be a key event next week as investors look for direction with interest rates. While markets are pricing in less than a 20% probability of a December rate increase, a stronger-than-expected CPI report or hot retail sales print could reset expectations. The consensus estimate is for a 3.3% year-over-year increase in overall CPI, down from 3.7% last month.
President Biden’s meeting in the middle week with China leader Xi Jinping will also be closely watched by investors in the tech sector. I know what some of you are thinking. The last time President Biden met with Xi Jinping was at the G20 summit in Indonesia a year ago, and tensions have only escalated since then.
Come on, it would be naive to expect this meeting to result in breakthrough developments, this meeting will steer the two countries in the right direction to manage geopolitical risks better. Some people will never learn. Calling someone else a “dictator” does not contribute to the prosperity of the world.