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Stocks struggle again ahead of key US data

Fawad Razaqzada Fawad Razaqzada 16/09/2021
Stocks struggle again ahead of key US data Stocks struggle again ahead of key US data
Stocks struggle again ahead of key US data Fawad Razaqzada
  • Stagflation major risk facing equity markets
  • How will markets react to retail sales?
  • Jobless claims and natural gas storage also eyed
  • UoM Inflation expectations due on Friday
With US jobs growth disappointing badly in August, investors will be keen to find out whether other macro pointers also weakened in August and to what extent. Up next is US retail sales, due for release at 13:30 London time. With several unemployment-related benefits expiring, consumers are likely to splash less on non-essential items in the coming months, and this is something that might be reflected in falling retail sales.  In fact, for the month of August, economists predict retail sales are likely to have fallen another 0.7% after an unexpected 1.1% plunge the month before. Core sales are seen edging only a touch lower after declining 0.4% in the previous month. If actual data reveal even weaker numbers, then we may very well see renewed weakness in stock markets, after Wall Street managed a decent bounce off their lows on Wednesday.

Stagflation concerns are growing rapidly, and this has the potential to weigh heavily on the markets going forward. Surging oil, gas and electricity prices have intensified inflationary pressures stemming from supply bottlenecks and temporary factors. Meanwhile the recent trend of economic data from China and the US have not been great, raising fears that the economic recovery is slowing at the world’s two largest economies. Further pickup in inflation momentum will make life very difficult for central banks. They will have to tighten their policies to prevent hyperinflation risks. This will not be good news, especially for growth stocks. But it could also be bad for other sectors as rapidly rising energy prices in Europe has forced some factories to halt production. Rising input costs are going to squeeze manufacturers' margins and hurt their profits. The drop in buying power of consumers will only make things worse.

Meanwhile, we will also have a few other important macro pointers to look forward to today, including weekly jobless claims, Philly Fed Manufacturing Index and Natural Gas Storage – the latter is going to be important for natural gas prices, which have been surging to multi-year highs.

On Friday, we will find out how surveyed consumers feel about the economy and inflation, as the University of Michigan releases its closely-watched surveys. Inflation expectations have been climbing higher along with actual inflation. If consumers’ inflation expectations rise further, then this can manifest into real inflation, as workers will push for higher wages to compensate for rising prices in order to prevent their real earnings from dwindling.
 
Ahead of the upcoming data releases, Nasdaq futures have weakened after staging a nice recovery in the previous session. The index is still holding below key resistance at 15520, a level which until recently was support. The short-term bias remains bearish while the index holds below this level, despite yesterday’s recovery. If the index falls further lower and take out 15350 support, then this could trigger a sharper correction than we have so far seen for US stocks since the latest rally to new all-time highs.

NDAXSource: ThinkMarkets and TradingView.com
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
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Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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