The Federal Open Market Committee is expected to accelerate the reduction (“tapering”) of its monthly asset purchases. Fed officials will revise their projections of growth, unemployment and inflation at this meeting.
The dot plot should head higher, meaning that officials expect to raise rates sooner (in September, officials were evenly split on whether there would be a rate increase in 2022). Fed Chair Jerome Powell is expected to talk tough in the defense against the risk of inflation.
Happy Monday. Good Luck out there this week.
Global Spotlight
Antony Blinken visits Southeast Asia to counter China’s rising influence. The U.S. secretary of state will visit Indonesia, Malaysia and Thailand from Dec. 13-16 to advance Washington’s strategic partnerships as part of President Joe Biden’s new Indo-Pacific Framework.
The European Central Bank Governing Council strategizes 2022 policy. The council will convene Dec. 16 to review new economic projections for 2021-2024 and strategize policy for 2022. Euro area inflation is at historic highs, but most ECB policymakers are convinced this will be temporary and subside in late 2022, coming back below the ECB’s 2% average target in 2023 or 2024 at the latest.
The Federal Open Market Committee meets amid inflation worries. The two-day meeting that begins Dec. 14 will likely see FOMC accelerate its phase-out of purchases of Treasury- and mortgage-backed securities to increase the Fed’s balance sheet by the end of March or April at the latest.
The Organization of Islamic Cooperation meets on Afghanistan. The foreign ministers of some of the OIC’s 57 member states will meet Dec. 17 in Islamabad, Pakistan, to discuss how to support stability in Afghanistan following the Taliban takeover of the country earlier this year.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
The Consumer Price Index (CPI) rose 0.7% in November, up 6.8% year over year (vs. +1.3% y/y a year earlier). Ex-food and energy, the CPI rose 0.5%, up 4.9% from a year earlier (vs. +1.6% y/y in November 2020). The report noted that the November increase reflected “broad increases in most component indexes.”
Why I think Inflation is here to stay.
- Broadening of price hikes, a sign that higher inflation is becoming more rooted, is a key concern for U.S. Federal Reserve policymakers.
- The Cleveland Fed’s Trimmed-Mean CPI, which excluded the highest and lowest 8% of monthly price changes, rose 4.6% year over year – further evidence that inflation is broadening in contrast to the narrow range of increases seen in the spring.
- Basically if the Fed is trying to talk inflation down, it is probably going to continue up.
Jobless claims fell to 184,000 in the week ending December 4, the lowest level since September 1969. The weekly figures can be choppy in the final weeks of the year (largely reflecting difficulties in seasonal adjustment), but the four-week average is back to pre-pandemic levels, consistent with a tight labor market.
Last Weeks Numbers
Review Last weeks numbers here.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 21Q3 Y/Y earnings are expected to be 42.6%. Excluding the energy sector, the Y/Y earnings estimate is 34.3%.
- Of the 499 companies in the S&P 500 that have reported earnings to date for 21Q3, 81.0% have reported earnings above analyst estimates. This compares to a long-term average of 65.8% and prior four quarter average of 84.7%.
- 21Q3 Y/Y revenue is expected to be 17.0%. Excluding the energy sector, the growth estimate is 13.6%.
- During the week of Dec. 13, 6 S&P 500 companies are expected to report quarterly earnings.
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Macro Technicals
The SP 500 is almost back to our all time highs. I use this chart to alert me if we are over bought or oversold. Look for resistence at 4726 and 5741 and support at 4683 and 4655. The pivot for next week is 4700.
