Too Good to Be True – US Economic Data
Interest rates continue to be a discussion for the American economy, who had their own data to report on Monday. In what affected global markets, oil prices dropped as the topic discussed yesterday went into effect, taking oil stocks down with it. The recent services sector reading came out to be 56.5 in November, exceeding expectations of 53.7, and factory orders were greater than expected. This, paired with the November jobs report released on Friday, shows a strength in the US economy that we haven’t seen from Europe. In comparison, energy prices are only up by around 17 percent and retail sales were up by 1.3 percent a couple of months ago.
However, this strength had investors worried as their eyes are fixated on the Federal Reserve. Interest rate hikes are feared, but this economic strength paired with inflation levels that are still high signal an increase in rates by 50 basis points next week. Additionally, investors fear that the Fed will continue to raise rates in 2023, placing increased pressure not only on the economy but the stock market. Analysts believe that the euphoric November rally is going to witness a slowdown in the holiday months of December and January depending on the attitude displayed by Powell and the Fed. Investors also look towards China to see its effect on economic numbers across the globe and in US corporations due to the controversial zero-COVID policies, which look to be removed in the upcoming weeks as there has been extreme backlash. Expect the markets to be jittery until the decision is made next Wednesday and make your trades accordingly.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.