This will be an important week for economic data that could significantly sway market sentiment. Several key reports are on tap, giving investors fresh insights into the strength of the economy, inflation trajectory, and likely next moves by the Federal Reserve.
The headliner is the third and final estimate of Q1 2024 GDP on Thursday. Economists expect GDP growth to be revised up slightly to 2.4% annualized, but any major deviation from expectations could drive volatility. A much stronger print could stir worries that an overheating economy will prompt more aggressive Fed rate hikes to cool growth and inflation. Conversely, a weaker GDP reading may renew recession fears.
On Friday, we'll get an update on the core PCE price index, which is the Fed's favored inflation gauge. With annual inflation still running above the 2% target, any upside surprise could embolden Fed officials to extend their rate hiking campaign at upcoming meetings. Easing price pressures could conversely open the door to pausing rate hikes sooner than anticipated.
For the housing market, new home sales data for May arrives on Wednesday, while pending home sales follows on Thursday. These reports will shed light on whether higher mortgage rates continue cooling the previously red-hot housing market. Unexpectedly strong or weak numbers could move homebuilder and mortgage lender stocks.
The personal income and consumer spending report, also on Friday, will provide clues about the resilience of the U.S. consumer. Failure of incomes to keep pace with spending could signal consumers drawing down savings, an unsustainable dynamic that could imperil economic growth.
Manufacturing and business investment trends will also come into focus with durable goods orders on Wednesday and regional Fed factory surveys. Weak results could point to slowing capital expenditures and industrial activity, a potential leading indicator of economic softness ahead.
With Fed Chair Powell reiterating that policy decisions will remain data-dependent, this onslaught of high-impact economic releases has the potential to markedly shift market expectations around the course of monetary policy. Buckle up for another volatile week for stocks and bonds as investors parse each report for clues about the Fed's next moves and the economy's trajectory.
In summary, pay close attention to the GDP, inflation, consumer spending, housing and manufacturing data points. The numbers will help shape the market's economic outlook and forecasts for interest rates going forward.
Key Economic Releases:- Monday: Chicago Fed National Activity Index (8:30am ET)
- Tuesday: Consumer Confidence (10:00am ET)
- Wednesday: New Home Sales (10:00am ET), Durable Goods Orders (8:30am ET)
- Thursday: GDP Q1 2024 Third Estimate (8:30am ET), Jobless Claims (8:30am ET), Pending Home Sales (10:00am ET)
- Friday: Personal Income/Spending (8:30am ET), Core PCE Inflation (8:30am ET), Consumer Sentiment (10:00am ET)