It’s the week everyone’s been waiting for. With the release a key measure of inflation, the Federal Reserve interest-rate decision and Chair Jerome Powell’s comments afterward, investors are hoping to finally have a clear view of what’s ahead for a beaten-down stock market and economy in 2023.
But after a tumultuous year that has the S&P 500 Index looking at its biggest annual loss since 2008, equity traders are prepared for one sure thing over the coming sessions: more volatility.
Inflation reports have been rocking equities all year, leaving markets to gauge the central bank’s likely policy path amid relentlessly surging prices. This week’s consumer price index reading is crucial, as signs of ebbing inflation could buoy shares into year-end by tempering expectations for further Fed hikes.
Over the past six months, the S&P 500 has seen an average move of about 3% in either direction on the day CPI has been released, according to data compiled by Bloomberg. That’s the highest since 2009. The S&P 500 has fallen on seven of the 11 CPI reporting days this year.
The US central bank is widely expected to deliver a half-point hike at the close of its meeting on Dec. 14. So equity investors are more focused on what Powell has to say at his press conference afterward, looking for any hints on the path forward for interest rates. The Fed’s outlook for the US economy will also be a focus, along with any changes in central bankers’ rate projections.
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