FOMC meeting minutes, consumer sentiment, and Black Friday holiday shopping

U.S. equity markets rallied on Friday on news of strong earnings reports, but ended lower for the week. The Dow was relatively unchanged for the week, while the S&P 500 shed 0.7%, and the Nasdaq lost 1.6%. U.S. Treasury yields fell early in the week, to their lowest level in over a month, but rebounded after Federal Reserve policymakers indicated a more hawkish stance on monetary policy. The inversion of the yield curve deepened, with the 10-year note yielding 3.8% while the two-year note yielded 4.5%, marking the deepest inversion in over 40 years. Crude oil prices tumbled this week, with the price of West Texas Intermediate (WTI) crude hitting an intraday low of $78 per barrel on Friday—its lowest level since late September, as renewed COVID-19 outbreaks in China and a weakening global growth outlook put pressure on prices.

Next week will be a holiday-shortened one in the U.S., with the Thanksgiving holiday on Thursday. On Wednesday, investors can expect data on October new home sales, a PMI reading from S&P Global, and the final reading of the University of Michigan’s Consumer Sentiment Index (MCSI). Also, the Federal Reserve will release meeting minutes from the FOMC’s latest monetary policy meeting. Earnings reports this week will arrive from Dell Technologies, Zoom, Dollar Tree, HP, Baidu, Dick’s Sporting Goods, and Nordstrom, among others.

The day after Thanksgiving is Black Friday in the U.S., a day filled with shopping deals and discounts that typically marks the beginning of the holiday shopping season. Economists often view Black Friday shopping as a key bellwether for the retail sector and overall consumer confidence. Analysts project that stubbornly high inflation and ongoing supply chain bottlenecks could adversely affect consumers and retailers this holiday season, as consumer purchasing power has declined while stores grapple with higher costs and declining revenues.

FOMC Releases Meeting Minutes

On Wednesday, the U.S. Federal Reserve will release the meeting minutes for the Federal Open Market Committee’s (FOMC) latest policy meeting conducted earlier this month. The transcript could provide clues as to how far Fed officials are willing to raise interest rates in order to tame high inflation. The U.S. central bank has raised its benchmark federal funds rate by a cumulative 375 basis points (bps) since March, with Fed policymakers expected to conduct another 50-bp increase in December. This would put the fed funds rate in a range of 4.25% to 4.5% by year-end—the highest level since 2007, just prior to the Global Financial Crisis.

Consumer Sentiment Update

Also on Wednesday, the University of Michigan will release the final November reading of its Consumer Sentiment Index (MCSI). Economists are projecting a reading of 54.7, unchanged from the initial estimate released earlier this month, and down steeply from 59.9 in October. Rising interest rates, persistently high inflation, and uncertainty over the 2022 midterm election results have contributed to declining consumer confidence in recent weeks. The current index reading marks the lowest since July, and is just above an all-time low of 50 hit in June.