Stock investors have a shortened trading week with US stock, bond, and commodity markets closed on Thursday for the Thanksgiving holiday and most closing early on Friday.
The short week could bring with it added volatility as trading thins and many turn the holiday into a four-day weekend.
Events and data
Most of this week’s key economic data is scheduled for Wednesday, including critical PMI flash reads and Consumer Sentiment. Wednesday also brings the release of the “minutes” from the Fed’s November policy meeting which investors will be combing for signals that divisions may be growing among Fed officials over the central bank’s aggressive tightening program.
Several Fed members have warned about the dangers of “over-tightening” in recent weeks which has raised hopes among bulls for a slowdown in rate hikes or possibly an outright pause.
Most Fed messaging implies that rate hikes will be reduced to 50-basis points starting in December, versus 75-basis points. At the same time, officials have been stressing that smaller rate hikes does not mean the Fed is close to ending its tightening campaign and that rates will likely need to stay higher for longer in order to curb inflation that is still stubbornly trending near a 40-year high.
Today, investors are anxiously awaiting the final votes from two railroad unions that could determine whether workers go on strike, potentially shutting down about 30% of the US freight network.
Three unions so far have already rejected a tentative contract agreement and the cooling off period for two of them ends December 4, meaning they could strike as soon as December 5 regardless of what the other unions vote.
BMWED, which represents the Brotherhood of Maintenance of Way Employees, agreed to extend its cooling off period to December 8 if one of the larger unions rejects the deal. However, the Brotherhood of Railroad Signalmen (BRS) is sticking to the December 4 date, at least for now.
If one union strikes, members of the other unions are unlikely to cross picket lines, meaning a full-scale rail strike could essentially begin. But railroad carriers are required by federal law to begin prepping for a strike seven days before the strike date, meaning slowdowns and stoppages could be as much as 4 days before that, when security sensitive materials like chlorine for drinking water and hazardous materials must be halted.
The railroad industry says a strike could cost the country as much as $2 billion a day. A month-long strike is estimated by the American Chemistry Council to shave -$160 billion, or one percentage point, off GDP and raise the Producer Price Index by a whopping +4%.
Keep in mind, the entire US freight system is already under stress due to low water levels on the Mississippi that have disrupted barge traffic. Congress has the option to intervene to keep railroads operating by extending the cooling off period or even imposing a contract on union members, though it’s unclear when they might be willing to act.
Bottom line, a rail strike is not going to be viewed as “good news” by investors so a “no” vote by union members today could create more headwinds for the bulls.
There are also a few key earnings due today, including Dell, JM Smucker, SoftBank, Urban Outfitters, and Zoom. Tomorrow the market will hear from Best Buy, Dick’s Sporting Goods, and Dollar Tree. On Wednesday we’ll hear from John Deere.
As we head into the Thanksgiving holiday, just keep in mind, there are only 27 trading days left in 2022. I suspect we will see some increased tax loss selling. Meaning that some of the biggest losers in the market might feel a bit more pressure as investors and traders try to harvest the losses into yearend for tax purposes.
What Is Special About This Short Trading Week?
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