Stocks have recently experienced a significant rally, with all three major indexes reaching record highs following Donald Trump's victory in the 2024 presidential election. As investors look ahead, key economic indicators such as inflation and retail sales data will play a crucial role in determining the sustainability of this upward trend.
The stock market has shown remarkable resilience, with the S&P 500 and Dow Jones Industrial Average both rising over 4.5% for the week, while the Nasdaq Composite surged nearly 6%. This rally has been fueled by optimism surrounding potential tax cuts and deregulation under the new administration.
In a widely anticipated move, the Federal Reserve announced a 25 basis point cut in interest rates last Thursday. Fed Chair Jerome Powell emphasized the need for caution regarding future rate cuts, stating that the central bank will assess upcoming economic data before making further decisions. This cautious approach reflects the Fed's commitment to balancing economic growth with inflation control.
Investors are keenly awaiting the release of the October Consumer Price Index (CPI) on Wednesday, which is expected to show a slight increase in inflation. Key projections include:
These figures will be critical in assessing whether inflation is moderating, which could influence the Fed's future rate-cutting strategy.
Additionally, the final retail sales report before the holiday shopping season is set to be released on Thursday. Economists predict a 0.3% increase in retail sales for October, which would indicate a solid start to the fourth quarter. The control group of retail sales, which excludes volatile categories, is also expected to show a 0.3% rise.
The economic outlook remains positive, with the Atlanta Fed's GDPNow tracker projecting a 2.5% growth rate for the U.S. economy. This growth, coupled with solid corporate earnings and excitement over advancements in artificial intelligence, has contributed to the bullish sentiment in the stock market.
As the market continues to react to political developments and economic data, investors will need to stay vigilant. The upcoming inflation and retail sales reports will be pivotal in determining whether the current stock market rally can be sustained in the face of potential economic challenges.
The TSX composite index rises to a seven-week high as the Federal Reserve's positive economic outlook boosts investor confidence, while the Bank of Canada cuts interest rates to support the economy.
European shares rebounded as the tech selloff eased, with retail stocks leading the gains. The STOXX 600 index closed at a record high, reflecting renewed investor confidence.
Italy's government supports Banca Monte dei Paschi's bid for Mediobanca, aiming to strengthen the banking sector and enhance the economy.
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