There's a flurry of Fed speakers Tuesday and October's retail sales — but more important to investors will be whether the Trump rally can keep on going.
"Headline retail sales will be good. We sold a lot of cars and trucks last month. It's really a vehicle story," said Joseph LaVorgna, Deutsche Bank chief U.S. economist.
The retail sales report is the most important data since the election. There will also be four Fed speakers at various events Tuesday, ahead of Fed Chair Janet Yellen's congressional testimony Thursday, the most important Fed appearance of the week.
"Almost every economic data right now is effectively backward looking. Post-Trump's election, you want to look at the rotation and the overall level of stock prices, and look at the slope of the yield curve. Those things tell me that growth is going to meaningfully accelerate, relative to expectations," LaVorgna said. Stocks have stalled but some stocks continue to gain, like financials, up 2 percent Monday.
LaVorgna said he expects Trump's fiscal stimulus and tax cut proposals to have a positive impact, and he sees growth picking up to a rate of 3 to 4 percent, sometime in late 2017, early 2018.
The spending and tax cut proposals have prompted a big move in interest rates since the election, and a stock market rally. The 10-year Treasury yield hit a high of 2.30 percent Tuesday and was at 2.26 percent in late trading. Pre-election it was at 1.80, but so far strategists say the yield move is not a problem for the market, though the move is affecting individual stocks and sectors.
"I think most people had expected interest rates to move up over time, but this obviously is a little quicker than most expected," said Bill Stone, PNC Wealth Management chief investment strategist. "You've seen the fallout in the market with interest rate sensitive stocks getting hit very hard, and on the other side, stocks like the financials are having a party."
Stone said it makes sense for the market to ease off a little after its run, and longer term its move will be impacted by how Trump prioritizes his agenda.
"History would say after an election you typically do have some pretty good markets," he said. Stocks can continue to rise "if the market continues to see the priorities are corporate tax reform, personal tax cuts … and more deregulation … if that's what it looks like, the priorities are versus the more protectionist things he's talked about. If you start to see a slide into a real consideration of those protectionist impulses, then we have some trouble."
Stocks ended mixed Monday, with the Dow rising 21 to 18,868, the sixth day of gains. But the and Nasdaq closed lower. The S&P was basically flat and down just a fraction of a point at 2164, while the Nasdaq fell 18 to 5,218 on continued selling in the tech names — Facebook, Amazon.com, Netflix and others. Traders are watching the level of 2,150 as key support for the S&P.
Oil fell 0.2 percent to $43.32 per barrel, its lowest settle since Sept. 19, and was just above the $43 level some traders are watching as a negative area for stocks.
Retail sales data, import prices and the Empire State survey are released at 8:30 a.m. ET, and business inventories are out at 10 a.m.
Economists are looking for a consensus 0.6 percent gain in headline retail sales. "It will look like a good month because of the autos. The question is what does the core look like," said Diane Swonk, CEO of DS Economics. She expects a half percent increase in headline retail sales, but 0.3 percent when automobiles, gasoline and building materials are excluded.
"I've been hearing mixed stuff about October but retailers sound pretty optimistic about the holiday season, so they must have started off November pretty well," she said.
LaVorgna expects headline retail sales to rise by 1 percent.
More news from the retail sector will come from retailers themselves. Home Depot, TJX Cos and Dick's Sporting Goods, are all reporting ahead of the opening bell.
Fed speakers include Boston Fed President Eric Rosengren at 8 a.m. ET, Fed Governor Daniel Tarullo at 9:05 a.m., Fed Vice Chair Stanley Fischer at 1:30 p.m. ET and Dallas Fed President Rob Kaplan also at 1:30 p.m.