3 big things we’re watching in the stock market in the week ahead
The SpaceX IPO is behind us. The earnings calendar is mostly quiet. Taking center stage is the state of play between the U.S. and Iran and the first Federal Reserve meeting with Chairman Kevin Warsh in charge. Here’s a closer look at what we’re watching in the holiday-shortened trading week ahead. 1. Iran war: Are we finally getting a peace deal to end the fighting and reopen the vital Strait of Hormuz? It’s become hard to follow all the back-and-forth on negotiations between the U.S. and Iran. One day, reports suggest Washington and Tehran are making progress on a resolution. The next day, we’re hearing about a fresh round of strikes. Sometimes, the tenor changes within a matter of hours — as it did Thursday. Before the opening bell, President Donald Trump said the U.S. was going to hit Iran “very hard tonight,” with plans to soon seize Iranian oil infrastructure. That muted some of the stock market’s gains in morning trading. By the afternoon, Trump had called off the upcoming attack and claimed a settlement with Iran was just awaiting the “finalization of documents.” Oil prices tumbled, and the stock market ripped higher into the close. Friday brought another batch of encouraging headlines, and on Saturday, Trump said an agreement will be signed Sunday. However, Iranian state media cast doubt on the timing, though it said one could be reached in the coming days. Our ultimate conclusion: Day trading the Iran war remains a fool’s errand because it’s impossible to really predict what the next headline will be. The latest headline can be used to make a move, such as trimming a stock that soared on optimism about a resolution or adding to a position unfairly dinged by negative news. We just can’t know for sure what will happen next. At the same time, we cannot leave the market because a big move higher could be around the corner if an agreement materializes that results in the Strait of Hormuz reopening to maritime traffic. That should bring relief to oil prices and, by extension, ease some of the inflationary pressures hitting the U.S. economy since the war broke out Feb. 28. The point is, the market will be influenced by the apparent status of negotiations. We’re hopeful a deal materializes, but recent history tells us we must brace for fits and starts. 2. Fed meeting: The Warsh era is upon us. With inflation way above the Fed’s 2% target and the labor market solid , the central bank is widely expected to keep interest rates unchanged on Wednesday afternoon. This is one of the four Fed meetings each year when the central bank releases its Summary of Economic Projections (SEP) — home to the so-called dot plot of rate expectations and projections for GDP growth, unemployment, and inflation. In a note to clients Friday, Bank of America economists wrote, “The SEP should show higher inflation, a lower [unemployment] rate, and no cuts this year. A few policymakers will likely project hikes. We don’t think Warsh will submit forecasts.” These outlooks are only a snapshot in time, and we generally don’t read too much into them. That’s arguably even more true now, considering the unpredictable war and oil prices will heavily influence the Fed’s moves in the coming months. The main event comes at 2:30 p.m. ET Wednesday, when Warsh, who succeeded Jerome Powell on May 22 , holds his first post-meeting press conference. CNBC’s longtime Fed correspondent Steve Liesman summed up all the intrigue perfectly in a story Friday morning : Markets head into the first Fed meeting run by new Chair Kevin Warsh with almost no idea what he thinks about the recent surge in job growth, the acceleration in inflation or the path of interest rates. And that may be by design. Warsh has pledged to lead “a reform-oriented Federal Reserve,” which may include changes to the way the Fed communicates with markets. At his Senate confirmation hearing in April, Warsh didn’t commit to maintaining the Powell standard of holding a news conference after each of the eight policy meetings each year. That’s the context for Warsh taking questions from the press on Wednesday afternoon. This is the market’s real first chance to hear from Warsh at the helm, and it’s possible they will be less frequent going forward. Does Warsh believe the oil-driven spike in inflation warrants tighter policy from the Fed, or is it worth looking through as essentially a one-off supply shock? As Jim Cramer said last week, the spike in inflation is, in some sense, “artificial” and a resolution to the war should help turn the tide — a view that would support holding off on any hikes. To be sure, the European Central Bank raised rates last week , the first major central bank to do so in response to the war. Warsh may also field questions on whether he’s seeing any impact of artificial intelligence on the labor market and the economy overall. In the past, he’s said he believes AI will be a disinflationary force. 3. Economic data: There are a few notable economic reports to keep an eye on. On the consumer front, the May retail sales report is out on Wednesday. With private consumption representing about two-thirds of U.S. GDP, consumer health is crucial to the economy. The May nonfarm payrolls report told us that folks are still working and collecting paychecks. The retail sales report will indicate consumers’ willingness to spend their paychecks and how they’re allocating their dollars. While a strong report would certainly be a welcome sign for our own retail holdings — namely, TJX Companies , Amazon , and Costco — a weak report would not automatically be a bad sign for these particular companies. We own their stocks because they have the scale and business models that enable them to offer compelling value to consumers. So, when consumers feel the burden of rising prices, overall retail spending may soften, but it tends to concentrate on names that offer the best value. As of Friday, economists are looking for a 0.5% month-over-month gain, according ot FactSet. The housing market will also be in the spotlight this week. We’re big believers that housing punches well above its weight in the U.S. economy, given all the associated goods and services that come with purchasing a home. For the Club specifically, the housing market is also a key factor in determining the outcome of our investment in Home Depot . We’ll get May housing starts on Tuesday and May pending home sales on Wednesday. These are important reports to watch because any signs of increased market supply will provide some relief for list prices; however, until mortgage rates come down, it will be hard to generate sustained momentum in the housing market. The war-related spike in inflation has increased bond yields, which ultimately impact mortgage rates. On homebuilder Lennar ‘s earnings call on Friday, CEO Stuart Miller effectively summarized what makes the housing market such a tough nut to crack right now. It’s worth reading at length: “The macro economy has grown more complex since the first quarter earnings call… First, mortgage interest rates have remained stubbornly elevated in the mid-to-upper 6% range throughout our second quarter. The 30-year fixed rate sits between 6.4% and 6.5% today, modestly better than a year ago, where rates were closer to 7%, but still at a level that keeps affordability challenged. At 6.5%, the buyer at the median family income is spending above 30% of gross income on their housing needs. Buyers are stretching and our incentives are enabling purchase… The inflation picture has also become more complicated. The May CPI report released recently showed headline inflation at 4.2% year-over-year, up from 3.8% in April and the highest reading since early 2023. The primary driver was energy as gasoline prices increased 7% in May and are up over 40% year-over-year, driven by disruptions to oil supply tied to the Iran conflict. While this is possibly just an energy-driven spike as core CPI came in at 2.9% and actually decelerated on a monthly basis, higher energy prices touch every part of the American household budget and tend to depress consumer confidence. When families see gasoline at the pump and electricity bills climb, their willingness to make major financial commitments, including purchasing a home, moderates even when their underlying desire to own has not changed. This inflation backdrop most likely has taken the Federal Reserve off the table as a near-term source of relief… On the employment side, the economy remains solid on the surface, but consumer psychology is being affected by anxieties about the long-term security of jobs at a time of rapid technology change. The advance of artificial intelligence is raising questions about the future of employment across a wide range of the workforce. We see this in buyer behavior. Traffic is inconsistent, intent is high, but urgency to close is still measured and deliberate rather than confident and energized.” The takeaway: As much as we’re watching this week’s housing reports, those selling homes make it clear that the real indicators will be energy prices and the resulting impact on interest rates. Lastly, we’ll get an update on the state of the manufacturing economy Monday morning, with the release of the May industrial production and capacity utilization report. As of Friday, economists polled by FactSet are looking for a modest 0.2% monthly increase in industrial production, with capacity utilization at 76.2%, suggesting the industrial sector is operating at a decent pace. Week ahead Monday, June 15 Industrial production and capacity utilization at 9:15 a.m. ET Before the bell: Canopy Growth (CGC) After the bell: Dave & Buster’s (PLAY) Tuesday, June 16 Housing starts at 8:30 a.m. ET Before the bell: No reports of note After the bell: La-Z-Boy (LZB) Wednesday, June 17 Retail sales at 8:30 a.m. ET Pending home sales at 10 a.m. ET Investing Club Monthly Meeting at noon ET Fed decision at 2 p.m. ET Chair Kevin Warsh press conference at 2:30 p.m. ET Before the bell: Progressive (PGR), Jabil (JBL), CarMax (KMX) After the bell: No reports of note Thursday, June 18 Initial jobless claims at 8:30 a.m. ET Before the bell: Kroger (KR), Accenture (ACN) After the bell: No reports of note Friday, June 19 The U.S. stock market is closed for the Juneteenth holiday (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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