Monday 11th November 2013
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Federal Reserve policy makers will play a lead role in determining sentiment in the coming days with a key focus on Janet Yellen, who's poised to become the world's top central banker.
Investors will closely watch the testimony of Fed Vice Chair Yellen, nominated to succeed Chairman Ben Bernanke when his term ends in January, during her confirmation hearing before the Senate Banking Committee on November 14.
But first, on Tuesday, Dallas Fed President Richard Fisher will speak on monetary policy and growth in Melbourne, Australia, while Minneapolis Fed President Narayana Kocherlakota will talk on monetary policy strategy in St. Paul, and Atlanta Fed President Dennis Lockhart will speak on the economic outlook in Montgomery, Alabama.
On Wednesday, investors will also eye Bernanke's town hall meeting with educators in Washington, while on Thursday Philadelphia Fed President Charles Plosser is scheduled to speak to the annual Cato monetary policy conference in Washington.
A Reuters poll on Friday showed that more US primary dealers now expect the Fed to start easing its stimulus before March; two weeks ago, a similar poll found the majority of dealers expected the central bank would not begin tapering before March.
Wall Street rallied on Friday, pushing the Dow to a record-high close, as a government report showed US companies hired a higher-than-anticipated 204,000 workers last month. The unemployment rate rose to 7.3 percent. The Standard & Poor's 500 Index gained 1.3 percent, the Dow Jones Industrial Average climbed 1.1 percent and the Nasdaq Composite Index jumped 1.6 percent.
Earlier in the week, a report had shown US economic growth unexpectedly accelerated to 2.8 percent pace in the third quarter. Optimism about the outlook is helping to offset concern about the end of the Fed's crutch.
Over the past five days, the S&P 500 advanced 0.5 percent, while the Dow rose 0.9 percent. The Nasdaq edged nearly 0.1 percent lower.
"The equity market appears to be correctly focused on the fact that underlying economic strength is starting to accelerate, which means that corporate earnings could pick up next year versus this year," Phil Orlando, New York-based chief equity strategist at Federated Investors, told Bloomberg News.
US corporate earnings have helped underpin that optimism. Of the 449 companies that have reported this season, 75 percent exceeded analysts' predictions for profit, while 54 percent beat sales estimates, data compiled by Bloomberg showed.
Companies set to release results this week include major retailers Macy's, Wal-Mart, Nordstrom and Kohl's. The biggest shopping weekend of the year in the US is now just weeks away: Thanksgiving.
In terms of economic data, reports scheduled for release this week include the NFIB small business optimism Index and Chicago Fed national activity index, both due Tuesday, Atlanta Fed business inflation expectations, due Wednesday, international trade, weekly jobless claims, and productivity and costs, due Thursday, followed by the Empire State manufacturing survey, import and export prices, industrial production, and wholesale trade, all due on Friday.
While signs of economic strength have helped Wall Street, US Treasuries have been feeling the pinch and this might hurt demand for debt auctions scheduled in the coming days.
"The Fed's accommodation and the possibility of a taper comes right back up to the centre of the market's thinking," Kevin Giddis, head of fixed income in Memphis, Tennessee, at Raymond James & Associates, told Bloomberg News. "We believed this was a March event and now you've got to put it on the table for December. It puts pressure on the auctions [this] week."
In Europe, the Stoxx 600 Index posted a 0.4 percent gain during a week in which the European Central Bank unexpectedly lowered its key interest rate to a record low 0.25 percent, sending a signal it is serious about accommodating the euro-zone's economic recovery.
Here, the latest economic clues will arrive in the form of German CPI data for October, due Tuesday, euro-zone industrial production, due Wednesday, euro-zone third-quarter GDP, due Thursday, and euro-zone CPI for October, due on Friday.
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