The S&P 500 trimmed most of its early gains on Wednesday as a decline in the tech sector offset gains in defense industries such as utilities and consumer goods. At the same time, the US dollar hit its highest level since November 2020.
On Wednesday, Federal Reserve Chairman Jerome Powell and his colleagues at the European Central Bank, Bank of Japan, and Bank of England expressed cautious optimism that supply chain disruptions driving global inflation would ultimately prove temporary. Traders remained wary about the possibility of a market failure if officials in Washington were unable to raise the debt ceiling in time to avoid a default on US debt obligations.
"Jitters surrounding elevated levels of inflation and slowing growth are likely to remain for some time. US debt-ceiling discussions could be in focus amid a quiet economic calendar," Fiona Cincotta, senior financial markets analyst at City Index, said.
The US Treasury is likely to exhaust its ability to borrow as soon as late October, according to the Congressional Budget Office, in the latest warning to lawmakers following their failed efforts to address the debt ceiling this week.
Though most expected modest gains next year in the S&P 500 Index, price pressures and a policy reversal by the Federal Reserve are big risks, according to the survey of more than 90 pension, mutual and hedge funds this month.
A gauge of U.S. pending home sales rebounded in August to a seven-month high as prospective buyers welcomed more attractive pricing and additional inventory. The figures suggest housing activity is firming after retreating from the record-high levels seen last year.
Traders are recommended to focus on the following events this week:
- China's manufacturing and non-manufacturing PMIs to be released on Thursday;
- data on GDP and initial jobless claims in the United States to be released on Thursday;
- the consumer price index in the euro area to be released on Friday;
- Germany's manufacturing PMI to be released on Friday;
- Michigan's consumer sentiment index, the Institute for Supply Management's report on manufacturing activity, personal spending and income in the US to be released on Friday.
