Back To Work: Jobs And OPEC Take Center Stage As Market Returns From Holiday

With Thanksgiving feasts and “Black Friday” out of the way for another year, investors face another data-packed week, highlighted by employment on Friday. An OPEC meeting could also help set the tone after a three-week winning streak for equities.

The employment report tends to be a big driver, but this coming Friday’s reading isn’t certain to have the same kind of impact as in the recent past. Why not? Because for one thing, a Fed rate hike in December is pretty much a foregone conclusion, judging by the futures markets, which put the odds at 93.5%. Fed speakers are on the calendar in the coming days, so we’ll see if they provide any additional color ahead of the Fed’s December meeting.

In addition, there’s a new regime coming into Washington in January, meaning the potential for different economic policies. Decisions in D.C. over the first few months of the new administration could help determine the economy’s path going forward, so unless the job report delivers a big hit or a big miss, the market may not put so much weight on it.

It’s often said that rallies tend to be driven by strong financial sector performance, and the current “Trump Bump” could serve as more evidence of that. Though financials traded mostly flat on Friday, the sector is up nearly 14% over the last month, compared with about a 3% rise for the S&P 500 Index (SPX). That’s by far the best performance of any sector during that stretch, though industrials have risen 9%, and materials are up nearly 5%.

This type of performance from these particular sectors seems to indicate that investors believe the president-elect can deliver on his plans to boost infrastructure spending and loosen federal regulations. If this sort of optimism continues, it could give the current rally more legs. And as good feelings about the economy keep percolating, bonds have staggered, with 10-year Treasury yields rising above 2.38% by midday Friday. The dollar also continues to soar. But gold took another dive early Friday, falling to around $1,180 an ounce as the market seems less prone to risk fears.

Crude oil, which can often pump up or deflate the stock market, went into the weekend on a down note, hurt by the strong dollar and by hints that OPEC may not have everything mapped out for a production cut agreement going into its meeting on Wednesday. There were news reports Friday that Saudi Arabia had decided not to attend a pre-OPEC meeting with non-OPEC producers, as well as continued reports of squabbling about which OPEC producers would cut and by how much. The oil futures market could bear watching in the coming days as the meeting draws near.

Let’s Talk GDP: Though jobs on Friday may be the biggest report of the week, Tuesday’s Gross Domestic Product (GDP) data also looms large, potentially providing investors more insight into how the economic currents are flowing. Last time out, the government estimated GDP at a relatively healthy 2.9%, a much higher rate than we saw in the sluggish Q1 and Q2, when growth stagnated at around 1%. GDP estimates are backwards looking, by nature, but if growth was stronger in Q3, it may indicate improving consumer health that seems by some measures to be carrying through into the current quarter. The Atlanta Fed estimates Q4 GDP growth at a robust 3.6%.

Data Keep Coming in Strong: Economic data continue to underpin stocks, with durable goods orders rising 4.8%, in October and U.S. consumer sentiment climbing 6.6 points in November. Early media reports appear to indicate that Black Friday was coming along nicely for retailers, though there was also word that some online outlets didn’t do as well as expected. Monday is “Cyber Monday,” a chance for online retailers, as well as traditional stores with strong online presence, to shine. This coming week also brings consumer confidence on Tuesday; and personal spending, Core PCE price data, and Chicago PMI on Wednesday. The Fed’s Beige Book, due later Wednesday, could give more insight into how U.S. regional economies have been doing. Construction spending and the ISM Manufacturing index are due Thursday.

What Impact From OPEC? If the OPEC nations can come together this coming week around a production cut, the agreement would cut about 500,000 barrels a day from their output. And it would be the first coordinated effort by OPEC to limit production in the two years since the cartel decided to let market events determine the price, a move that helped contribute to oil’s lowest prices in more than a decade by early this year. Whether a production cut now would make a difference in oil prices is up for debate, as OPEC recently reached record production levels. The $46 a barrel mark remains a technical support level for crude. Meanwhile, economists at Goldman Sachs predict U.S. crude oil prices to rise from an average of $45 a barrel in Q1 2017 to $60 a barrel by Q4. But the energy sector came under pressure Friday on concerns oil might fall further if an OPEC deal can’t be reached.