Preview of the Weekly Market Report: Five Things Investors Need to Pay Attention To

Five key market aspects investors need to watch next week:

1. Federal Reserve Meeting Minutes: Investors will closely monitor the minutes from the Federal Reserve's July meeting, to be released on Wednesday, for guidance on recent interest rate trends. Retail sales data and retail profits will reveal the health of consumer spending, while data from China is expected to highlight concerns over the world's second-largest economy's lackluster recovery. Before the market turns its attention to the Federal Reserve's annual meeting, held in Jackson Hole, Wyoming, at the end of this month, investors will focus on this Wednesday's minutes from the Fed's July policy meeting. Last month, the Fed raised interest rates by 25 basis points and left room for a possible hike in September. These minutes will help investors gauge further interest rate hike intentions, despite market expectations for a pause in September. Last week's data showed moderate increases in US consumer and producer prices in July, but the overall trend indicates that inflationary pressures are easing. Since March 2022, the Federal Reserve has raised interest rates by a total of 5.25 percentage points, aiming to bring inflation down to the 2% target.
2. US Economic Data: The US will release July retail sales data on Tuesday, expected to show an increase in demand at the start of the third quarter, although the rise in June was lower than expected. Other data are anticipated to reveal the manufacturing sector's ongoing struggles, with the Empire State Manufacturing Index expected to fall into negative territory and the Philadelphia Fed Manufacturing Index likely to remain negative. Housing sector data is expected to be more positive, with construction permits and housing starts reports due on Wednesday, expected to show signs of stability. Moreover, the US will release the initial jobless claims weekly report on Thursday, anticipated to show a slight decrease after a significant increase the previous week.
3. Retail Earnings: As the second quarter earnings season draws to a close, the S&P 500 index presents a complex picture—companies exceeded analysts' earnings expectations at nearly the highest rate in two years, though the incidence of revenue exceeding expectations has fallen to its lowest level since early 2020. The largest US retailers will report their results this week, providing important insights for investors into the health of the main driving force of the US economy—consumer spending. Home Depot (NYSE:HD) will release its earnings report before the market opens on Tuesday, followed by Target (NYSE:TGT) on Wednesday, and Walmart (NYSE:WMT) a day later. Other major retailers such as Macy's (NYSE:M), Nordstrom (NYSE:JWN), Kohl's (NYSE:KSS), and Lowe's (NYSE:LOW) will report their earnings in the coming weeks. Investors will pay attention to how retailers address the impact of inflation on profit margins, as higher prices diminish household purchasing power.
4. China Data: After a strong first quarter, China's post-pandemic economic recovery has encountered obstacles in recent months, with weak domestic and foreign demand. Beijing will release retail sales, industrial production, and fixed asset investment data on Tuesday, expected to indicate only modest growth. Last week's data showed that China's consumer prices in July experienced their first year-over-year drop in more than two years, increasing pressure on policymakers to support the economy. Despite government promises to introduce measures to support the economy, the lack of details has left investors disappointed.
5. Oil Prices Rise: After the International Energy Agency predicted global demand would hit a record high and supply tightens, oil prices rose on Friday, marking the seventh consecutive week of gains, the longest streak since 2022. The IEA forecasted that demand reached a record 103 million barrels per day in June, with this month potentially setting a new high. Meanwhile, production cuts by Saudi Arabia and Russia create conditions for a sharp decline in inventories for the remainder of 2023, which the IEA said could further drive up oil prices. The production cuts and improved economic outlook have made oil investors more optimistic, according to OANDA analyst Craig Erlam in an interview with Reuters. However, he noted that after a continuous streak of increases, signs indicate the momentum is gradually weakening.