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It's the final week before the Federal Reserve's September meeting and each piece of economic data and speech from a central bank official will be under heavy scrutiny for signs of a green light on an interest rate hike.
Monday is laden with Fed speak with a number of members' speeches likely to reiterate recent hawkishness. Atlanta Fed President Dennis Lockhart will make a speech to the NABE conference in Atlanta Monday morning, and Minneapolis Fed President Neel Kashkari will make a speech followed by a Q&A in Saint Paul, Minn., in the afternoon. Fed Gov. Lael Brainard, a more cautious voting member, will discuss the U.S. economic outlook at The Chicago Council on Global Affairs in Chicago Monday afternoon.
Speculation over interest rate hikes from the Fed has roiled markets in recent weeks. A number of weak data points, including a slowdown in services activity and a weaker-than-expected August jobs report, have undermined confidence in the economic recovery. However, central bank members continue to signal a hawkish tone, suggesting that the U.S. economy is near or at the levels that warrant another rate hike.
A boost in rates in September currently has a 27% likelihood, according to CME Group fed funds futures. The majority of investors are banking on a December rate hike. Chances of a move during the Fed's final meeting of the year sit at 46%.
Volatility that plagued Friday's session could continue to rock markets in coming days as investors try to guess the Fed's next move. Wall Street ended Friday with a massive selloff as worries peaked over the Fed and increased interest rates, including comments from two Fed members that appeared to show a conflicted central bank.
Boston Fed President Eric Rosengren on Friday was the latest member to back a rate hike sooner rather than later. Rosengren, a voting member of the Federal Open Market Committee, said that the risks to the U.S. economy have diminished and that there are concerns of "growing imbalances in some asset classes" if the Fed does not step in to normalize rates.
The S&P 500 fell 2.45% on Friday, its biggest daily decline since the Brexit decision in late June. The Dow Jones Industrial Average declined 2.13%, and the Nasdaq was lower by 2.54%. Benchmark indexes closed with their first move of more than 1% since July 8.
The back half of the week is filled with key economic data likely to influence the Fed's trigger finger when members meet on Sept. 20-21. Retail sales data, out Thursday, is among the most important of the releases, providing an insight into consumer behavior in August. Retail sales are expected to come in flat for August, while core sales, which excludes automobiles, likely climbed 0.4% over the month.
"Sales will be scrutinized for rebounds in the core figures which, if realized, would provide further backing for a robust pace in third-quarter consumer spending," TD Securities analysts wrote in a note. "Strong spending figures would add comfort to FOMC participants' near-term growth and inflation expectations, though are unlikely to sway the decision toward a rate hike as soon as September."
Consumer prices for August will be released on Friday. TD Securities analysts anticipate the headline number to have increased 0.9% year over year, while core consumer prices likely will have risen 2.2%.
Other critical data in the coming week includes producer prices for August, the Philadelphia Fed Business Outlook Survey for September, the Empire State Manufacturing Survey for September, and industrial production for August, each to be released on Thursday.
Trading could become more volatile on Friday during the quadruple-witching session, one of four days of the year in which futures and options contracts expire at once.
It's very quiet on the earnings calendar in the coming week with Oracle (ORCL) the only company of note set to report. Oracle will release its quarterly performance on Thursday.