Top 5 Things to Know in the Market on Friday

Here are the top five things you need to know in financial markets on Friday, Jan. 11:

1. U.S. inflation will be center of attention

Retail inflation numbers will be the focus of Friday’s economic calendar as the Labor Department releases the December consumer price index (CPI) report at 8:30 AM ET (13:30 GMT).

On average, economists expect that the CPI fell 0.1% last month. But the core CPI, which excludes volatile food and energy prices, is forecast to have risen 0.2% in December.

On an annual basis the core CPI is expected to post a rise of 2.2%, slightly above the Federal Reserve’s 2% target.

Fed speakers, especially chief Jerome Powell, have held more sway on the markets than economic indicators of late. But it’s important to note that the Fed’s “patience” will also make policymakers more data-dependent.

2. U.S. Dollar Drops as Powell Repeats Promise for Patience

The U.S. dollar pressed lower against major rivals on Friday as Powell reiterated a day earlier that the Fed would be patient and flexible on monetary policy.

Powell’s cautious tone served as another sign that the Fed is no hurry to hike rates, following a string of policymakers who indicated that they will wait to tighten policy further until they have a better handle on whether slowing global growth and financial market volatility will negatively impact the U.S. economy.

“Especially with inflation low and under control we have the ability to be patient and watch patiently and carefully as we … figure out which of these two narratives is going to be the story of 2019,” Powell said on Thursday.

3. U.S. stocks may snap 5-day winning streak amid recession worries

U.S. futures pointed to a flat open on Friday but slight losses in the S&P threatened to put an end to the S&P 500’s five-day rally, its longest since September, as odds of a recession in the U.S. hit a six-year high. At 5:57 AM ET (10:57 GMT), the blue-chip Dow futures inched up 2 points, or 0.01%, S&P 500 futures lost 2 points, or 0.08%, while the Nasdaq 100 futures traded down 11 points, or 0.16%.

Indications that the Fed will take a pause in its recent gradual policy tightening and an optimistic outlook for trade negotiations between the U.S. and China after a round of talks this week has put the global benchmark on track for a weekly rise of 2.5%

But concerns over the potential impact of the U.S. partial government shutdown, weak holiday sales from Macy’s (NYSE:M) and a global economic slowdown that has begun to impact revenue from Apple (NASDAQ:AAPL) to American Airlines (NASDAQ:AAL) gave investors a reason to become cautious ahead of the U.S. earnings season which is set to kick off next week with results from JP Morgan (NYSE:JPM).

The gloomy outlook caused economists to increase the odds for a recession in the U.S. in the next 12 months. Analysts surveyed by Bloomberg over the past week see a median 25% chance of a slump in the next year, up from 20% in the December survey.

4. Federal workers to miss first paycheck amid emergency shutdown

The partial government shutdown entered its 21st day on Friday in what will be the first day that the political impasse officially hits the pocketbooks of Federal workers.

Paychecks, scheduled for release Friday under normal circumstances, are on hold for some 800,000 federal employees that were forced to go on unpaid leave or work without pay since Dec. 22 because of the government shutdown. Most of those workers were paid on Dec. 28 in the final two-week pay period of 2018.

Powell downplayed the short-term impact of the ongoing U.S. government shutdown in his remarks on Thursday, but said an extended shutdown would lead to a less clear picture of the economy on which to base monetary policy decisions.

U.S. President Donald Trump is locked in a spat with Democrats over his insistence that a reopening of the government include billions of dollars to pay for a wall on the U.S.-Mexico border.

Trump threatened on Thursday to use emergency powers to bypass Congress, using military funds to complete the project which was one of his major 2016 presidential campaign promises.

5. Brent oil heads for record winning streak

Oil rose for a 10th consecutive day in London, heading for its longest run of gains on record, while West Texas Intermediate oil was on track to chalk up its biggest weekly gain, 9.5%, in nearly two years as Saudi Arabia pledged that OPEC and its allies will keep the market in balance with promised production cuts.

U.S. crude oil futures gained 46 cents, or 0.87%, to $53.05 by 6:05 AM ET (11:05 GMT), while Brent oil traded up cents, or 0.0.63%, to $62.07.

But prices are still about 30% lower than their highs in October even after a rebound since Christmas Eve thrust crude back into a bull market.

Investors will also keep a close eye on U.S. oil output when Baker Hughes releases its weekly rig count data at 1:00 PM ET (17:00 GMT). The U.S. rig count, an early indicator of future output, fell by 8 to 885 last week./

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