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Top 5 Things to Watch in Markets in the Week Ahead

EconomyAug 22, 2021 21:40
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By Noreen Burke -- The main event in the coming week is the Federal Reserve’s annual symposium, with investors hoping for indications on when the Fed will begin tapering the monetary stimulus that has powered stocks to record highs. The economic calendar also features a string of economic data, including updates on home sales, durable goods and personal income and spending. Equity markets could be looking at a choppy week after last weeks Fed minutes rattled investors. Earnings will continue with Best Buy , Dell and HP among the companies reporting and in the euro zone PMI data will give some fresh insights into how the economy is performing. Here’s what you need to know to start your week.

  1. Jackson Hole

The Fed is expected to communicate its plans for slowing its $120 billion per month asset purchase program, the first step down the road to eventual interest rate hikes.

But the prospect of stimulus being reduced at a time when the rise of the highly contagious delta variant is clouding the outlook for the economic recovery has spooked markets.

The Fed announced Friday that its annual symposium would be held online instead of at its usual location in Jackson Hole, Wyoming. The symposium will run from Thursday through Saturday, but the main event will be the keynote speech by Fed Chair Jerome Powell, scheduled for 10 AM ET (1400 GMT) on Friday.

Last week’s minutes of the Fed’s July meeting pointed to a greater likelihood of a taper beginning this year and Powell's speech could be the last hint at the central bank’s next steps before its September policy meeting.

  1. Economic data

Besides the Fed’s annual get-together market watchers will also have to digest a slew of economic data in the week ahead, including reports on home sales, durable goods and personal income and spending.

Figures on existing home sales are released on Monday, followed a day later by a report on new home sales. Data on durable goods orders is due out on Wednesday and initial jobless claims numbers will be released Thursday. Revised figures on second-quarter GDP are also out on Thursday but are expected to show little change.

Friday brings the release of personal spending data along with the core PCE price index, the Fed's preferred gauge of inflation, which has been running near a 30-year high.

  1. Choppy markets

One of the main risks facing equity investors is the prospect that the Fed will begin scaling back its support for the economy just as growth starts losing momentum and the delta variant threatens to rollback reopenings across the country.

"We got such tremendous Federal Reserve monetary support for the economy for some time, so the market has trepidation about Fed taper and what that is going to do for growth," said Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management.

Last week Goldman Sachs economists lowered their tracking estimate of U.S. economic growth in the third quarter to 5.5% from 9% due to the impact of the delta variant.

While stocks are still hovering near record highs all three major U.S. indexes posted weekly losses last week after tumultuous trading and more volatility looks likely to be in store in the week ahead.

  1. Earnings

While the second-quarter reporting season has essentially run its course, there are still some companies left to report during the week. (NASDAQ:JD), Palo Alto Networks (NYSE:PANW) and Madison Square (NYSE:SQ) Garden (NYSE:MSGS) are reporting on Monday. Best Buy (NYSE:BBY), Nordstrom (NYSE:JWN), Urban Outfitters (NASDAQ:URBN) and Toll Brothers (NYSE:TOL) are some of the names reporting on Tuesday. Salesforce (NYSE:CRM) and Dick’s Sporting Goods are due to report on Wednesday. HP, (NYSE:HPQ) Dell (NYSE:DELL), Gap (NYSE:GPS), Abercrombie and Fitch (NYSE:ANF), Dollar General (NYSE:DG), Dollar Tree (NASDAQ:DLTR), Ulta Beauty (NASDAQ:ULTA) and Peloton (NASDAQ:PTON) will all report on Thursday.

It’s been a stellar earnings season - so far 476 of the companies in the S&P 500 have posted results and of those, 87.4% have beaten consensus, according to Refinitiv data.

  1. Euro zone

The euro zone will publish PMI data on Monday and while easing restrictions are expected to boost travel supply chain issues are expected to act as a drag on manufacturing activity. At the same time, Germany will publish the latest reading of its Ifo index, which is expected to ease slightly from a two-and-a-half year high.

On Thursday the European Central Bank will publish the minutes of its July meeting, when it unveiled updated forward guidance on interest rates and implemented a new monetary-policy strategy designed to bolster inflation.

The minutes will be scrutinized for clues on how future stimulus plans may evolve beyond the current planned end date for the ECB’s asset purchase program in March.

-Reuters contributed to this report

Top 5 Things to Watch in Markets in the Week Ahead

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