Inflation and Retail Sales Data Greet a Roaring Stock Market Rally: What to Know This Week

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.

Key Takeaways

• Major stock indexes hit record highs after Trump's election win.
• Federal Reserve cut interest rates by 25 basis points last week.
• Upcoming inflation and retail sales data will be critical for market direction.

Stock Market Performance

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.

Federal Reserve's Rate Cut

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.

Upcoming Economic Data

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:

• Headline Inflation: Expected to rise to 2.6% annually, up from 2.4% in September.
• Core Inflation: Anticipated to remain steady at 3.3% year-over-year.
• Monthly Changes: A 0.2% increase in headline inflation and a 0.3% rise in core inflation.

These figures will be critical in assessing whether inflation is moderating, which could influence the Fed's future rate-cutting strategy.

Retail Sales Report

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.

Economic Outlook

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.

Conclusion

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.

Sources

• Inflation and retail sales data greet a roaring stock market rally: What to know this week, Yahoo Finance.
• Inflation data poses test for stocks rally after Trump win, Yahoo.