The three major benchmarks simultaneously closed at record highs for the first time since 1999 last week, buoyed by earnings beats and a large rebound in crude oil prices. While the Dow and the Standard & Poor’s (S&P) 500 pulled back slightly Friday, the Nasdaq hit another record with its seventh straight weekly gain. The bulls were alsooff to a good start on Monday in an effort to build on those advances.
Futures markets forecast a 12 percent chance for a rate hike in September and 38 percent in December, based on recent mixed reports. Several influential Fed officials are scheduled to speak this week and could influence these odds. Atlanta Fed President Dennis Lockhart will deliver prepared remarks on Tuesday, St. Louis Fed president James Bullard will speak on Wednesday and San Francisco Fed President John Williams will detail his economic outlook on Thursday. The most recent FOMC meeting minutes will be released Wednesday as well. The 10-year Treasury yield started the week at 1.5 percent, up from Brexit panic lows of 1.3 percent, but below the March high of 2.0 percent.
Key reports this week will include the consumer price index, July housing starts and industrial production, as well as weekly unemployment claims data. Homebuilder sentiment edged higher in August as the number of existing homes fell. Housing starts and building permits will be out on Tuesday. Economists forecast 1.180 million starts. Industrial Production and Capacity Utilization will be released Tuesday. Economists forecast 0.4 percent growth in production and a 75.6 percent utilization rate. Analysts predict July inflation was flat and core prices rose 0.2 percent.
Energy has experienced a sharp short-term rally from $39 to $45 per barrel on a short-squeeze, though the weekly oil inventory report is expected to reflect a drawdown and continued volatility is likely. The Bank of Japan (BoJ) could announce additional monetary policy action this week following weaker-than-expected GDP growth.
Although earnings season is winding to a close, a few important reports in the housing, retail, technology and manufacturing sectors are due out this week. Home Depot (HD) and Lowe’s (LOW) will announce quarterly earnings in addition to major retailers Target (TGT) and Wal-Mart (WMT). Cisco (CSCO), a major holding in many technology funds, will also report this week. Agriculture and construction manufacturer Deere & Company (DE) will close out the week before the opening bell Friday.