Can This Rally Continue?
The Week Ahead
It was a very strong week for the markets with Bitcoin gaining over 20%, the Nasdaq up 3.9% and the S&P500 adding 2.25%. Stocks are closed Monday to observe Martin Luther King Jr. Day. Aside from that, we have a US PPI print on Wednesday and CPI prints from Canada, Japan, and the UK.
In a week which saw US headline CPI inflation decline by -0.1% MoM, investors took courage in that the days of the Fed’s tightening program are numbered. Adding fuel to the fire was Wall Street’s big banks largely beating estimates on Friday.
The banks expressed concerns over economic uncertainties due to high interest rates and the possibility of a recession in 2023. They will finish releasing this week with Morgan Stanley and Goldman Sachs set to report before the Tuesday market open.
The first of the FAANG stocks will report this week, starting with Netflix on Thursday.
December retail sales are expected show a decline of -0.8% MoM. This would be interpreted as bullish for the markets (less inflation) and could send the dollar lower. The opposite is true if there’s an upside beat.
With a short trading week and light economic calendar, volatility should be lower. That may give risk assets a chance to continue the momentum that’s already been built or consolidate in bullish fashion.
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Jay Charles
Editor in Chief, The Trading Tank.
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