This week, the market will be focused on the release of numerous key economic data points that should provide insight into the performance of the U.S. economy during the fourth-quarter decline in equity prices. The Consumer Price Index (CPI) and Producer Price Index (PPI) for January are scheduled to be released on Wednesday and Thursday, respectively. Given the Federal Reserve’s recent dovish language, these two indicators will be closely scrutinized. Analysts expect a 0.1% CPI for the month and an increase of 1.5% year-over-year. Volatile food and energy prices excluded, the increases are expected to be 0.2% and 2.1%, respectively. Bond yields remain near their recent lows, and any surprises in the data, higher than expected, would likely lead to an increase in rates.
In addition to ongoing negotiations to avert another government shutdown, keep an eye on the trade front. Over the next several weeks, the rhetoric will likely increase between the U.S. and China regarding a trade deal. While I do expect a deal to be reached, I believe the market has already priced in this result, so any significant concerns about a deadlock will likely heighten volatility in stocks.
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