The interest rate outlook will get another look next week. Here’s what’s ahead
Federal Reserve Chair Jerome Powell ‘s legacy at the helm of the central bank will gain greater attention in the coming weeks, as its dual mandate of maximum employment and stable prices appear to be in better balance. The Fed’s latest meeting minutes set to release in the week ahead will be one of the final ones under Powell’s chairmanship, which comes to an end in May. The Fed leader, who was initially appointed by President Donald Trump in 2018, and then reappointed under President Joe Biden , has overseen a tumultuous period for the central bank , including emergency interventions at the onset of the pandemic, and the start of a historically aggressive rate hiking cycle. In that time, Powell has come under fire for the central bank’s lateness in addressing inflation, notoriously regarding it as “transitory,” before embarking on a tightening cycle that brought the overnight lending rate to over 5% from near zero. However, Powell managing a “soft landing” for the economy — tackling inflation without also breaking the labor market — will be a key part of his legacy. Other aspects of his tenure will include his barbed relationship with the Trump administration. “All in all, he has been able to navigate some situations,” said Jay Woods, chief market strategist at Freedom Capital Markets. “And I think what we’re going to see over the next few Fed meetings are the shaping of Jerome Powell’s legacy, whether or not he stays on as a voting member.” The Fed will soon have a new chair at a time when the central bank’s dual mandate is coming into better balance, given the strength of the recent jobs report , and inflation that is trending back toward the central bank’s 2% target. December’s personal consumption expenditure is set to release next week, but investors expect they have a good handle of what the report will show. On Friday, the CPI came in cooler than expected . That could throw a wrench into the central bank’s interest rate outlook. Markets were last pricing in just two quarter-point cuts through the rest of the year, according to the CME FedWatch Tool . Woods said he doesn’t see a reason for the Fed to lower interest rates this year, not when the stock market is at all-time highs, the economy is expanding, and inflation is mostly under control. He said the central bank would likely prefer to hold onto some slack in the case of some exogenous event that threatens its dual mandate, and added that a speedy reduction under any incoming Fed chair will likely set off alarm bells around the central bank’s independence. A broadening trade An interest rate cut timeline that moves further out could be a disappointment for a market that’s been on edge lately, as more and more potential victims of AI disruption are crumbling. Software stocks were the first to fall, then it moved on to financials, real estate and other names. Now investors are searching for the next dominoes to fall. Earnings season could help traders sniff out which names will emerge winners or losers, especially as markets grow more discerning on which earnings beats they will reward. Among the companies reporting in the week ahead are Walmart , an economic bellwether, as well as industrial giant Deere . Both have proven to be beneficiaries of the rotation in the market that is boosting so-called real economy companies over the ones operating in the cloud. Walmart is already up nearly 19% this year. Deere has climbed more than 28%. The broadening out continues in the market, with the equal weighted S & P 500 besting the market cap index. As of Thursday’s close, the Invesco S & P 500 Equal Weight ETF (RSP) is up nearly 5% this year, while the market cap benchmark is negative. Those who consider the tech sell-off overdone consider now a good opportunity for traders to step into some of those names. However, plenty others expect the pullback could have further to go before there’s any comeback. “At some point these tech stocks are going to be very good value plays, and I look forward to when I get the signal that we have some sort of all clear,” Woods said. “But I don’t see that right now.” The New York Stock Exchange is closed Monday for Presidents Day. Week ahead calendar All times ET. Monday, Feb. 16 NYSE closed for Presidents Day. Tuesday, Feb. 17 8:30 a.m. Empire State Index (February) 10 a.m. NAHB Housing Market Index (February) Earnings: EQT , Devon Energy , Cadence Design Systems , Palo Alto Networks , Kenvue , FirstEnergy , Expand Energy , Builders FirstSource , Genuine Parts , Labcorp Holdings , Leidos Holdings , Vulcan Materials , DTE Energy Wednesday, Feb. 18 8:30 a.m. Durable Orders preliminary (December) 8:30 a.m. Housing Starts (December) 9:15 a.m. Capacity Utilization (January) 9:15 a.m. Industrial Production (January) 2 p.m. FOMC Minutes Earnings: CF Industries , Edison International , Carvana , Molson Coors Beverage , Booking Holdings , Texas Pacific Land , Occidental Petroleum , Invitation Homes , Host Hotels & Resorts , DoorDash , Verisk Analytics , Analog Devices , Insulet , Global Payments Thursday, Feb. 19 8:30 a.m. Initial Claims (2/14) 8:30 a.m. Philadelphia Fed Index (February) 8:30 a.m. Wholesale Inventories preliminary (December) 10 a.m. State Job Openings and Labor Turnover (December) 10 a.m. Pending Home Sales (January) Earnings: Live Nation Entertainment , Newmont , Akamai Technologies , Alliant Energy , Extra Space Storage , Evergy , Quanta Services , CenterPoint Energy , Targa Resources , EPAM Systems , Walmart , Deere Friday, Feb. 20 8:30 a.m. GDP Chain Price first preliminary (Q4) 8:30 a.m. Personal Consumption Expenditure (December) 8:30 a.m. Personal Income (December) 9:45 a.m. S & P Global PMI Manufacturing preliminary (February) 9:45 a.m. S & P Global PMI Services preliminary (February) 10 a.m. Michigan Sentiment final (February) 10 a.m. New Home Sales (December) Earnings: PPL
Source – CNBC
