The Federal Reserve two-day policy meeting is the main event event for the markets this week, although the central bank is not expected to take any action but maintain an ultra-loose monetary stimulus. All eyes will turn to comments from Fed Chair Jerome Powell for clues about the central bank's latest view on inflation.
While the outcome of the Fed meeting will take the limelight, investors will also be looking closely at economic data on U.S. retail sales and producer prices for an update on the strength of the economic recovery.
Here is what you need to know to start your week.
S&P500 (US Market)
$SPX rose +0.41% (+17.4 points) for its third straight positive week, closing at a all time high level of 4,250. Investors are giving growth stocks another chance as bond yields come down. The 10-year Treasury went below 1.43% on Friday, a three-month low.
Stock markets are likely to tread water, with investors reluctant to take new positions ahead of Wednesday’s Fed statement which will be scrutinized for clues regarding its timetable for raising interest rates. $SPX continues to reflect a minor bearish divergence as highlighted last week.
The immediate support to watch for $SPX is now at 4,165, a breakdown of its classical support, along with 20D and 50D major moving averages.
Fed meeting
Investors will be zeroing in on the Fed's statement at the conclusion of its two-day policy meeting on Wednesday against a background of persistent concerns over whether inflation spikes could pressure the central bank to start tapering its stimulus sooner than expected.
The Fed has repeatedly said that near-term price spikes will not translate into lasting inflation and Chairman Jerome Powell is expected to stick to this stance and reassure markets the Fed’s policy will remain accommodative.
While inflation numbers are rising, the recovery in the labor market remain sluggish. The economy added 559,000 jobs last month after gains of just 278,000 in April. That left employment about 7.6 million jobs below its peak in February 2020.
Most analysts are not expecting the Fed to begin discussing scaling back its asset purchase program before its annual conference in Jackson Hole, Wyoming, in late August.
Economic data
Away from Fed meeting, the U.S. is to release May data on retail sales and producer price inflation on Tuesday.
Also out on Tuesday is industrial production data which will be closely watched amid issues over supply constraints and labor market shortages. This could translate into increases in producer price inflation.
The economic calendar also features reports on housing starts and initial jobless claims. Data on Thursday showed the number of Americans filing new claims for unemployment benefits fell last week to the lowest level in nearly 15 months as the reopening continues.
Meme Stocks Mania
Meme stocks could also remain in the headlines after a volatile ride last week. GameStop ($GME) hit a high of $344.66 Tuesday and dropped as low as $206.13 Friday before closing at $233.34 per share.
Besides meme stocks, Treasuries could also be in focus after an unexpected slide in yields. There was a major move in the rate of the benchmark 10-year, watched most closely by investors, as it influences mortgages and other important lending rates.