The Dow will try to keep its record-setting momentum in the week ahead as more inflation data looms

Published Fri, Dec 15 20232:39 PM ESTUpdated Fri, Dec 15 20234:05 PM EST

The Federal Reserve's preferred inflation gauge will be on deck next week as investors seek further confirmation price pressures are easing, after a dovish pivot from the central bank pushed the Dow Jones Industrial Average into record territory. The November personal consumption expenditures index, set for release next Friday, will come after the consumer and the producer price indexes this past week showed the Fed's efforts to cool inflation are taking hold. That added to investor confidence that the Fed can start cutting rates. Stocks surged this week, and Treasury yields dropped, after the Fed on Wednesday held rates steady and indicated several rate cuts could come next year. The Dow rallied more than 2%, closing above 37,000 for the first time ever this week. Meanwhile, the 10-year Treasury yield broke below the 4% level for the first time since August. Next week is expected to be a slower one. With the last Fed meeting of 2023 behind them, investors are heading into the holidays with few catalysts. But any indication the Fed may not start to cut rates as they suggested in 2024 could hurt stocks. In fact, investor sentiment cooled somewhat Friday after New York Fed President John Williams said the central bank does not currently consider rate cuts a topic of discussion. "Anything that bites the narrative that the Fed is going to have the authority and the ability to cut rates in March of next year is worth watching," said Bryant VanCronkhite, senior portfolio manager at Allspring Global Investments. He added: "Honestly, it's not going to be one data point, it will be several data points in the course of the next several months that ultimately matter." But the PCE is expected to show the trend is intact. Bank of America said it expects the core PCE, which strips out food and energy prices, will gain just 0.1% for the month, and rise just 3.2% on a yearly basis. Notably, it would suggest a six-month annualized inflation of 2% — which is also the Fed's target. Stocks on Friday registered their seventh straight week of gains. For the S & P 500, that's the best winning streak since 2017. For the Dow, it's the best going back to 2019. Market exuberance Some investors expect stocks could pull back next week after their rally. This Friday is known as the Triple Witching Day, an occasion when stock options, stock index futures, and stock index options contracts all expire on the same day, meaning trading and volume will be more elevated than usual. But next week is expected to be a lighter volume week as investors head into the holiday weekend. Some notable earnings on deck will also be FedEx on Tuesday and General Mills on Wednesday. Results from retail company Nike is also on deck Thursday, and should give investors insight into the state of the consumer, as well as clarity into markets abroad, particularly China. Still, investors expect stocks can rally into the final part of the year in the so-called Santa Clause Rally. Some consider this the stretch between Christmas Day on Dec. 25 through Jan. 2. "We've got the broadest rally where the tide is lifting all boats," said Jay Woods, chief global strategist at Freedom Capital Markets. "We are extremely overbought, but the tailwinds are tremendous." Week ahead calendar All times ET. Monday 10 a.m. NAHB Housing Market Index Tuesday 8:30 a.m. Building Permits preliminary (November) 8:30 a.m. Housing Starts (November) Earnings: FedEx Wednesday 8:30 a.m. Current Account (Q3) 10 a.m. Consumer Confidence (December) 10 a.m. Existing Home Sales (November) Earnings: General Mills , Micron Technology Thursday 8:30 a.m. GDP Chain Price final (Q3) 8:30 a.m. GDP (Q3) 8:30 a.m. Initial Claims (12/16) 8:30 a.m. Philadelphia Fed Index (December) 10 a.m. Leading Indicators (November) Earnings: Nike , CarMax Friday 8:30 a.m. Durable Orders preliminary (November) 8:30 a.m. Core PCE Deflator (November) 8:30 a.m. PCE Deflator (November) 8:30 a.m. Personal Consumption Expenditure (November) 8:30 a.m. Personal Income (November) 10 a.m. Michigan Sentiment final (December) 10 a.m. New Home Sales (November)