Benzinga's Main Street Monitor: Will Inflation Save The Market After Powell's Hawkish Stance And Strong Jobs Data?

The financial markets have been swaying to each piece of incoming economic data, given the Fed Reserve’s data dependence in its current rate-tightening cycle. The upcoming week will have more than its fair share of data that could create further volatility in the market, especially as the next Fed meeting is scheduled for the week after (March 21-22).

A Look Back: Fed chair Jerome Powell headed to Capitol Hill this week and testified before the Senate Banking Committee and the House Financial Services Committee.

On the first day of his testimony, the S&P 500 shed 1.53%. The chairman signaled that the central bank will keep on raising rates while inflation remained high and that the rate increases could accelerate. This prepared the market for the inevitable and on the second day of his testimony, the broader market equity gauge even posted a modest gain despite Powell orchestrating the same message.

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The February non-farm payrolls disappointed to the upside, with the economy adding much more than the 200,000+ jobs most economists were modeling. The jobless rate, however, edged up to 3.6%.

What To Expect In The Week Ahead: The Fed’s relentless inflation fight makes next week’s consumer price inflation data the most sought-after among the slew of first-tier economic reports lined up for the week.

On Tuesday, the Bureau of Labor Statistics will release the consumer price inflation report for February at 8:30 a.m. EST. The headline consumer price index is expected to rise 0.4% month-over-month, down from the 0.5% increase in the previous month. Core consumer prices may have risen 0.4%, the same pace of increase as in January.

The annual consumer price inflation is expected at 6%, slowing from the 6.4% rate in January, and the core annual CPI inflation may have ticked down from 5.6% to 5.5%.

On Wednesday, BLS will release the producer price inflation report for February at 8:30 a.m. EST. Economists, on average, expect a 0.3% month-over-month and 5.5% year-over-year increase in producer prices. The monthly and annual rates of PPI inflation came in at 0.5% and 6%, respectively, in January.

The Commerce Department is due to release its retail sales report for February at 8:30 a.m. EST on Wednesday. After a 3% month-over-month increase in January, retail sales may have edged down 0.1% in February.

The National Association of Home Builders will release the housing market index for March at 10 a.m. EST on Wednesday. The consensus call for the index to remain flat with the previous month’s depressed levels of 42.

The first glimpse into regional manufacturing activity in March could be gleaned from separate survey results from the New York and the Philadelphia Feds. These two reports are due on Wednesday and Thursday, respectively. The headline indices measuring manufacturing activity in the regions are expected to show continued contraction.

Among the other key economic data for the week include the housing starts report for February, due on Thursday, the Fed’s industrial production report for February, due on Friday, and the results of the University of Michigan’s preliminary consumer sentiment survey for March, The latter data is due on Friday.

Fed funds futures have priced in a 55.7% probability of a 50 basis point increment in rates to 5-5.25% compared with a 44.3% probability of a 25 basis point increment.

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