It’s a shortened trading week with markets closed Wednesday in observance of New Year’s Day. Economic data releases remain light, and there are no major earnings announcements on the calendar this week. Note: the December’s jobs report will be released next Friday, Jan. 10, not the usual first Friday of the month.
It has been a banner year for stocks with the S&P surging 29% in 2019. The S&P 500 (^GSPC) and Dow (^DJI) closed at record highs Friday, and investors will be monitoring whether or not the rally continues in 2020.
The Federal Reserve will also be in focus this week. Friday, the Federal Open Market Committee’s (FOMC) December meeting minutes will be released. As far as the near-term outlook is concerned, Deutsche Bank economist Brett Ryan anticipates that the minutes will mostly fall in line with Chair Jay Powell’s message earlier this month that monetary policy is in the right place barring any “material assessment.” Ryan also noted that it will be important to see how much agreement there was among committee members.
“The FOMC minutes, should they show growing support for some form of an averaging inflation targeting strategy, may be more telling with respect to how the Fed's reaction function may begin to evolve next year,” Ryan said.
As for what to expect from the Fed in 2020, Goldman Sachs economists do not expect any rate cuts in the new year.
“Fed officials appear to have settled on a consensus that monetary policy is ‘in a good place,’ and the bar for a change in either direction over the next year appears high,” the firm wrote in a note to clients on Dec. 27. “Instead, the most interesting monetary policy development might be the conclusion of the Fed’s framework review in mid-2020. We expect the FOMC to adopt average inflation targeting, setting a target of somewhat above 2% for expansions.”
Deutsche Bank also predicts zero rate cuts in 2020, but 50 basis points worth of cuts in 2021.
Economic calendar
Monday: Wholesale Inventories month-on-month, November preliminary (+0.2% expected, +0.1% in October); MNI Chicago PMI, December (48.0 expected, 46.3 in November); Pending Home Sales month-on-month, November (+1.3% expected, -1.7% in October); Dallas Fed Manufacturing Activity, December (0.0% expected, -1.3 in November)
Tuesday: FHFA House Price Index month-on-month, October (+0.4% expected, +0.6% in September); Conference Board Consumer Confidence, December (128.2 expected, 125.5 in November)
Wednesday: Markets closed in observance of New Year’s Day
Thursday: Initial Jobless Claims, week ended December 28 (222,000 expected, 222,000 prior); Continuing Claims, week ended December 21 (1.719 million prior); Bloomberg Consumer Comfort, week ended December 29 (62.3 prior); Markit US Manufacturing PMI, December final (52.5 expected, 52.5 prior)
Friday: Construction Spending month-on-month, November (+0.3% expected, -0.8% in October); ISM Manufacturing, December (49.0 expected, 48.1 in November); ISM Prices Paid, December (47.5 expected, 46.7 in November)
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Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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