Federal Reserve Chairman Jerome Powell gives a press conference after the two-day policy meeting of the Federal Open Market Committee (FOMC) in Washington, USA. UU., On March 20, 2019.
Jonathan Ernst | Reuters
Federal Reserve officials who speak at a policy conference may receive far more attention than usual next week, after President Donald Trump's latest tariff threat against Mexico raised expectations of interest rate cuts.
Markets will also start in June, which is often flat for the markets, with a painful monthly loss of 6.6% on the S & P 500.
Stocks lost ground in May due to concerns that the US trade war with China would hurt the world economy and affect earnings growth. They will start trading in June with new concerns that tariffs on Mexico could harm the economy and threaten a new trade agreement between the US. UU., Mexico and Canada.
Next week has a full calendar of economic data, and the highlight is the employment report on Friday in May. There are also monthly sales of automobiles and manufacturing data from the Supplies Management Institute, which expire on Monday, and international trade data are expected on Thursday.
But it is the Federal Reserve that should receive the most attention, as central bank officials meet at a highly anticipated conference organized by the Chicago Fed on Tuesday and Wednesday. Fed chairman Jerome Powell will make opening remarks at the conference, which deals with monetary policy strategy, tools and communications. For months, strategists have been waiting for the conference to provide information on how the Fed intends to tackle slow inflation.
Interest in the event is even greater after the market and the Fed's observers are increasingly convinced that the central bank will now reduce rates this year, and perhaps more than once. The futures market valued the growing expectations of two rate cuts after Trump's threat to impose tariffs on all Mexican products if the Mexican government does not stop immigration to the US. UU
After the last Fed meeting, Powell said low inflation seems to be transitory, suggesting that the Fed would not have to cut rates, but markets still anticipate a rate cut, and inflation remains below the rate. goal of 2% of the Fed.
Michael Gapen, chief economist at Barclays in the US UU. He said investors hoping to listen to Fed officials about their current policy might be disappointed. Gapen said the Fed is also about nine months away from its decision on how it will fund inflation, and the conference will deal more with academic views on the matter.
Gapen was one of several Wall Street economists who changed his mind about the Fed's rate policy. He said he now sees the Fed cut the target rate of federal funds by 75 basis points in two courts this year, and that the Federal Reserve will start at 50 basis points in September. The Fed has said it does not expect rate cuts this year, nor increases, and has stressed that it is on hold.
Gapen does not expect to hear much from Fed officials at the conference on rates, although investors will be checking every word for clues about policies.
"I do not think that's the kind of scenario in which someone would comment on monetary policy before a FOMC meeting," he said. The Fed will meet on June 18 and 19.
Gapen said he went from hoping there is not a Fed move to two rate cuts because the trade war with China has spread more than expected; Spending on manufacturing and business is weakening, and because of Trump's threat to impose tariffs on Mexico if it does not control immigrants heading to the United States through the southern border.
"It does suggest that the administration is willing to pursue multiple fronts, it lowers the level of tariffs in Europe," he said.
Interest rates continued to fall on Friday, to multi-year lows. The 2-year yield, which mostly reflects the policy of the Federal Reserve, fell sharply and stood at 1.93% in the last operations. The 10-year yield, at 2.55% at the beginning of May, was 2.13% on Friday afternoon. The S & P 500 was down 2.6% on the week, ending its worst week of the year at 2.752.
Sam Stovall, chief market strategist at the CFRA, said a "May attack generally leads to a boom in June." Returning to World War II, whenever there was a strong start to the year, the market traditionally fell in May but rose in June. In addition, this year was the third best start until April.
John Augustine, director of investments at Huntington Private Bank, said that beyond the commercial headlines, there are quite a few market catalysts in June.
"June will be very driven by events, it will be the Federal Reserve on June 19. It will be OPEC on June 25, it will be the G-20 on June 29," he said.
He added: "We are going to stay balanced and diversified because we do not know how things will turn out."
What to see
Monthly sale of cars
9:10 a.m. Vice President of the Fed, Randal, quarrel
9:45 a.m. Manufacturing of PMI
10:00 a.m. ISM Manufacturing
10:00 a.m. construction expense
12:40 p.m. President of the Richmond Fed Tom Barkin
9:45 p.m. San Francisco Fed President Mary Daly
7:00 am. Chicago Fed President Charles Evans at CNBC's "Squawk Box" before the 2-day conference on "Strategy, tools and practices of monetary policy communication (a Fed event for which listen) & # 39;
9:55 a.m. Fed Chairman Jerome Powell delivers an opening speech and answers questions at the 2-day policy conference, the Chicago Fed
10:00 a.m. Factory orders
3:45 p.m. Fed Governor Lael Brainard at the Chicago Fed conference
6:45 p.m. Robert Kaplan, president of the Dallas Fed, Chicago Fed conference
8:15 a.m. ADP
9:45 a.m. Vice President of the Fed Richard Clarida, Chicago Fed Conference
9:45 a.m. PMI services
9:45 a.m. Atlanta Fed President Raphael Bostic on housing in Atlanta
10:00 a.m. Federal Reserve Governor Michelle Bowman in the Senate Banking Committee
10:00 a.m. ISM non-manufacturing
11:15 a.m. President of the Boston Fed, Eric Rosengren, Chicago Fed conference
2:00 p.m. Beige book
7:45 a.m. decision of the ECB rate
8:30 a.m. Unemployment Claims
8:30 a.m. International Trade
8:30 a.m. Productivity
8:30 a.m. Labor costs
10:00 a.m. QSS
13:00. The president of the New York Fed, John Williams, in the CFR
8:30 a.m. job
10:00 a.m. wholesale trade
3:00 pm. Consumer credit