Stock investors are anxious to see the Producer Price Index results this morning as the Federal Reserve’s next moves continue to be heavily debated.

Most economists expect the year-over-year gain in wholesale prices will fall back to +7.2% from +8.9%, which would be a pretty dramatic decline.

Bulls’ case 

Bulls will welcome any signs that inflation is easing but will really want to see a lower PPI read reinforced by a decline in the Consumer Price Index next Tuesday.

For the bulls, lower reads on both indexes will be viewed as validation that we have hit “peak inflation”, which bulls believe could compel the Fed to take a less aggressive approach to its tightening campaign.

These are the last two inflation reads before the Fed’s final policy meeting of the year, which is next Tuesday and Wednesday, December 13-14.

 

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Bulls believe if they can nail the trifecta – lower CPI and PPI, and a more dovish tone from the Fed – it could allow stocks to climb higher through the end of the year. However, bears continue to question the longer-term upside potential with many believing that stocks remain overvalued and likely have further to fall, especially if the US and/or the global economies hit a major stumbling block in early-2023.

Data to watch

Economic data next week will provide some insights into how things are trending, with the key reports being NFIB Small Business Optimism on Tuesday; Retail Sales, Industrial Production, Business Inventories, the Philadelphia Fed Index, and Empire State Manufacturing on Thursday; and preliminary reads on IHS Manufacturing and Services PMIs on Friday.

There will also be some international data of interest, most notable being China growth on Thursday and PMI numbers on Friday.

Investors will also be anxious to hear monetary policy updates from Bank of England and the European Central Bank on Thursday. On the earnings calendar next week, Oracle on Monday and Adobe on Thursday are the highlights.

Have a great weekend! There are only two weekends left until Christmas…

Producer Price Index To Predict Fed’s Move?

Wishing you a great week!

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