Why December 16 to 18 Could Be Big Days for the S&P 500 Index

Economic Data Release - The government plans to release several important economic data points between December 16 and December 18, which were delayed due to the government shutdown [2][5] - Key metrics include non-farm payrolls, retail sales, and the Consumer Price Index (CPI), which are critical for assessing the economy's performance and the Federal Reserve's potential actions regarding interest rates [5][7] Market Performance and Sentiment - The stock market has increased over 17.5% as of December 11, indicating a strong performance for the third consecutive year despite volatility [3] - Investors are facing uncertainty due to potential headwinds such as high inflation, recession risks, and stagflation concerns [3] Labor Market Insights - Non-farm payrolls data for October and November is expected to show a slump in October due to the government shutdown, with a rebound anticipated in November; the unemployment rate is projected to remain at 4.4% [6][7] - The labor market's condition is a primary concern for the Federal Reserve, influencing its decisions on interest rate adjustments [6][9] Retail Sales and Consumer Spending - Retail sales data is crucial as it reflects consumer demand, which is vital for an economy heavily reliant on consumer spending; stronger retail sales are expected during the holiday season [8] - The CPI is forecasted to increase by 0.3% month-over-month and 3% year-over-year, serving as a key inflation gauge [8] Federal Reserve's Interest Rate Strategy - The Federal Reserve is likely to continue cutting interest rates if the labor market shows weakness and inflation remains subdued, as lower rates can stimulate economic growth [9][10] - The Fed aims to avoid stagflation, where high inflation coincides with rising unemployment, complicating its ability to support the labor market [10]