As the markets prepare for a holiday-shortened trading week, investors are bracing for a series of significant data releases and speeches from Federal Reserve officials that will offer further clues on the central bank's stance on interest rates and economic growth.
This week also brings earnings reports from some major companies like Alibaba and Walmart.
More Fedspeak
Chairman Jerome Powell's testimony last week revealed little in the way of new signals, but investors are still closely watching the continuation of "Fedspeak." Powell's comments indicated that the Fed is in a comfortable position, with growth robust, the labor market strong, and inflation still hovering around target levels.
This week's roster of Fed speakers will include Philadelphia's Harker, Governor Waller, and Governor Bowman, all of whom could provide further insights into the central bank's policy outlook.
Of particular interest will be Waller's remarks, as he has taken a dovish stance compared to other Fed officials, and investors are keen to see whether his tone shifts amid mixed inflation readings and a strong labor market.
The release of the January FOMC minutes on Wednesday will also shed light on internal discussions regarding the level of restrictiveness in the current policy, with the markets particularly interested in how officials are weighing fiscal policy changes in their outlook.
A mixed bag of economic data
Notable reports include the New York Fed Empire Index and Philadelphia Fed Survey on Tuesday and Thursday, respectively, with the latter expected to show some moderation.
Housing data, including housing starts and building permits on Wednesday, are forecast to reflect some weather-related disruptions, while Friday's existing home sales data is expected to remain subdued.
Jobless claims on Thursday will be in focus as they coincide with the survey period for February's employment report. Despite recent weakness in nonfarm payrolls, jobless claims will offer further clues about the ongoing strength of the labor market.
Additionally, the final reading on the University of Michigan consumer sentiment index may provide insight into consumers' inflation expectations, a crucial factor for the Fed's policy decisions in the months ahead.
Consumer strength in focus
Earnings season continues to shape investor sentiment, with a number of high-profile reports due this week. Among the most closely watched is Alibaba's earnings report, which could provide a crucial update on consumer demand in China and whether the economy is poised for an upswing in Q1. Analysts are expecting strong revenue growth and a pickup in net income, especially in light of President Xi's upcoming meeting with Alibaba founder Jack Ma, which is seen as a sign of easing tensions between the Chinese government and business.
Walmart's Q4 earnings report on Thursday will also be pivotal, as the retail giant's performance is often viewed as a bellwether for US consumer strength. With revenues expected to top $180 billion and profits surpassing $5.2 billion, investors will be looking closely at Walmart's outlook amid rising inflation concerns and the potential impact of tariffs. Despite a strong year-to-date performance, Walmart's earnings report could offer further clues as to whether its growth can be sustained.