Markets celebrated another record close on Friday, as the relentless market rally propelled the S&P 500 (SPX) index above the 5,000 level for the first time. The rally was driven by technology stocks, with Big Tech leading the charge.
Besides overall positive earnings results, stock gains were fueled by continued optimism regarding the economy, which received another validation as December’s headline inflation data was revised lower. This week, markets will focus on economic reports, hoping to receive confirmation that the Federal Reserve will begin to cut rates in the near future, lifting corporate profit outlook and helping stocks to maintain momentum.
While the SPX’s crossing the 5,000 line injects a fresh dose of optimism into the markets, pulling in money from the sidelines, concerns over stretched valuations keep mounting. With the stocks trading in overbought territory, economic reports have the potential to wield a “make or break” power over risk sentiment going forward.
Four Economic Events
Here are four economic events that could affect your portfolio this week. For a full listing of all upcoming economic events, check out the TipRanks Economic Calendar.
» January’s CPI and CPI ex. Food and Energy (Core CPI) – Tuesday, 02/13 – The CPI report is one of the two key indicators used to measure inflation (the second one is the Personal Consumption Expenditures, or PCE). Policymakers, businesses, and consumers closely watch the CPI report, as it reflects the price trends in the economy, shapes consumer spending and business outlooks, and directly affects the Federal Reserve’s policy rate decisions.
» January’s Retail Sales – Wednesday, 02/15 – This report provides information on the amount of money consumers are spending on various durable and non-durable goods. It helps to gauge the economy’s health and consumer spending habits, as well as the level of the buy-side inflation pressures.
» January’s Producer Price Index (PPI) – Friday, 02/16 – This report reflects input prices for producers and manufacturers. Since PPI measures the costs of producing consumer goods – which directly affects retail pricing – PPI is seen as a good pre-indicator of inflationary pressures, i.e., a leading indicator for the next month’s CPI. Thus, the PPI directly impacts the overall inflation outlook among policymakers.
» February’s Michigan Consumer Sentiment Index and UoM 5-year Consumer Inflation Expectations (preliminary readings) – Friday, 02/16 – These reports portray the results of a monthly survey of consumer confidence levels and consumers’ views of long-term inflation in the United States. The level of confidence affects consumer spending, which contributes about 70% of the U.S. GDP. The inflation expectations index is used as a component of the Fed’s calculations of the Index of Inflation Expectations.
