U.S. stocks came back from the Thanksgiving holiday and posted solid gains as the tech sector rebounded from a disastrous week and retail stocks climbed on expectations of a strong holiday season.
ShopperTrak reported shopper visits resulted in only a combined 1.0% decline for the two-day period compared to last year, with a 1.7% decline in traffic on Black Friday versus 2017. The shift to online selling continues to grow as internet sales on Black Friday according to Adobe Analytics rose 23.6% from a year ago, a record high to $6.22 billion. Cyber Monday was also expected to deliver a record online shopping day of $7.8 billion in sales, an increase of almost 18% from last year.
The US dollar initially weakened against its high-beta trading partners but recovered most of its losses in afternoon trade. The greenback against the Japanese yen outperformed, gaining over a half a percentage point to 113.55.
What to focus on Tuesday:
An hour before the US stock market open Federal Reserve Vice Chairman Richard Clarida will speak about data dependence and monetary policy at The Clearing House and Bank Policy Institute’s Annual Conference. On Friday, November 16th he noted that the central bank is getting closer to neutral and should be ‘data dependent’ on more hikes. On inflation the Vice Chair stated he does not expect a big pick up in inflation or inflation expectations next year. He also added that the Fed will have to pay attention to slowing global growth.
Currently, Fed Fund Futures are pricing a 79.2% chance of a hike at the December 19th meeting. For 2019, the market is expecting 2 rate hikes, while the Fed’s forecast is still for three rate increases. Many analysts are worried about over-tightening of the Fed and expecting the softer global economy to eventual weigh down on the US. If we continue to see softer economic data, it should be only a matter of the time for the Fed to make a key speech to indicate it will substantially bring down its rate hikes for next year.
In the afternoon at 14:30 PM EST (19:30 GMT) Federal Reserve Bank of Atlanta President Raphael Bostic will join a panel discussion about the economy, regulation, financial innovation, and the future of payments at The Clearing House and Bank Policy Institute’s Annual Conference. Bostic, a known dove last spoke on November 15th and noted neutral is where we want to be and that the conditions warrant ‘final steps’ in adopting neutral rate policy.
Key data for Tuesday in the US will be both the S&P CoreLogic Case-Shiller Home Price Indices and the Conference Board Consumer Confidence Survey. At 9:00 AM EST (14:00 GMT), the Case-Shiller housing data is expected to register its sixth straight decline at 5.3%. Last month the annual gains fell below 6% for the first time in 12-months. The housing sector, which is roughly a sixth of the US economy has been a sore spot for the world’s largest economy.
At 10:00 AM EST (14:00 GMT) US confidence data is expected from to decline from 137.9 to 136.2. The October reading increased to an 18-year high. The Conference Board’s survey also highlighted the optimism consumers have with the economy.
A combination of dovish comments from the both Fed speakers along with softer economic data could provide some pressure for the US dollar. Price action on the dollar yen daily chart highlights a potential triangle formation. If we see downward pressure, initial support could come from the 113.00 level, followed by the 112.17 level, which is 100-day SMA. To the upside 114.50 remains critical resistance.