Top Things to Watch

Last week, Wall Street experienced its worst weekly performance since early September, marking a downturn in three of the last four weeks.

However, it was a landmark week for the S&P 500, which closed above 6,000 points for the first time on Monday. Trump's election win had previously driven the S&P 500 to its strongest week in over a year. Yet, as the week progressed, attention shifted back to economic indicators and the Federal Reserve (FED).

Slightly elevated consumer and producer inflation figures, coupled with a statement from FED Chair Jerome Powell on Thursday indicating that the central bank would not rush to lower interest rates, put pressure on the markets, particularly on Friday.

The CME FedWatch tool now shows that the likelihood of a 25 basis point interest rate cut in December has decreased to around 60%, down from 72% just a day earlier and nearly 65% a week prior.

This week, all eyes will be on two significant events: NVIDIA's earnings report and the S&P PMI. In addition to these data points, here are my top recommendations for events that could influence the markets.

November 19th

Eurozone: Consumer Price Index (CPI) YoY - October

The previous report indicated the CPI was aligned with expectations, reinforcing the notion that the European Central Bank (ECB) is poised to continue reducing interest rates.

Additionaly, economists are warning that Trump's promises to reinstate protectionist measures, including new tariffs on European exports, may compel the ECB to accelerate interest rate reductions to mitigate anticipated harm to eurozone growth. Heightened trade tensions are expected to significantly impact growth, with Europe’s economic output projected to suffer a 0.5% decrease in real GDP, while Germany could experience a 0.6% contraction and Italy a 0.3% decline.

November 20th

U.K.: Consumer Price Index (CPI) YoY - October

Analysts are expecting the annual rate of inflation to have risen, climbing back above the Bank of England’s (BoE) 2% target.

The BoE implemented a second 25-basis point rate reduction earlier this month, indicating that any additional cuts would likely occur gradually as it evaluates ongoing inflationary pressures, particularly in light of the new government's initial budget. Last week, the GBP/USD currency pair recorded its lowest weekly close in six months, reflecting significant bearish momentum. The British Pound (GBP) emerged as the weakest among major currencies, and the downward trend driven by disappointing economic data requires a more rapid rate cut.

U.S.: NVIDIA third-quarter results

This is a major event that will happen after the bell on Wednesday, and investors are frenzy hence Nvidia shares surge has contributed to approximately 25% of the S&P 500's gains for 2024.

As the most valuable company globally, Nvidia's stock, which has already seen a remarkable 186% increase this year up to early last week, could experience further growth if the upcoming report meets or exceeds expectations. Nvidia has consistently outperformed earnings estimates for the last four quarters, with earnings soaring in the triple digits and maintaining gross margins exceeding 70%. Additionally, the company has achieved notable milestones, including its inclusion in the Dow Jones Industrial Average (DJ30).

The results from Nvidia could significantly influence the direction of the U.S. stock market, as investors shift their attention back to the technology sector and artificial intelligence following a pause in the election-driven rally. Furthermore, Nvidia's performance may play a vital role in justifying the broader market's elevated valuation, with the S&P 500's forward price-to-earnings ratio exceeding 22 times, nearing its highest point in over three years. The benchmark index has risen by 23% this year, but despite an initial surge following Trump's victory, stocks have experienced a pullback this week as the market continues to assess the election's ramifications.

November 21st

U.S. Initial Jobless Claims

This report measures the number of individuals who filed for unemployment insurance for the first time during the previous week.

Jobless claims experienced a significant increase in early October due to disruptions caused by Hurricanes Helene and Milton, along with a strike by Boeing factory workers. However, layoffs continue to be at historically low levels, providing support to the economy. Last week, the number of Americans seeking unemployment benefits dropped to its lowest point in six months. Even if this week's report shows a slight rise, the markets are expected to respond mildly.

November 22nd

U.S. : S&P Global Purchasing Managers Index (PMI)

On Friday, we will receive the Manufacturing PMI, which gauges the activity levels of purchasing managers in the manufacturing sector, along with the Service PMI, derived from surveys of more than 400 executives in private sector service firms.

Traders pay close attention to these surveys since purchasing managers typically have early insights into their company's performance, making this data a potential leading indicator of broader economic trends. A reading that exceeds expectations is generally viewed as a positive signal for the USD.

October marked the seventh consecutive month that the PMI remained below the 50 threshold, yet it stayed above the 42.5 level that the ISM indicates typically suggests economic expansion. However, the survey has tended to overstate the weakness in manufacturing. Notably, goods spending surged at its fastest rate in a year and a half during the third quarter. Despite rising borrowing costs, goods spending has remained resilient and could increase further now that the FED has begun to lower interest rates.