The recent surge in the U.Sstock market, particularly driven by technology stocks, underscores the ongoing confidence among investors regarding anticipated interest rate cuts by the Federal ReserveAs of late November, stock indices reached new heights, demonstrating resilience despite economic data that has caused little upheaval in market sentiments.

As we entered December, the Dow Jones Industrial Average was the sole index that faced a downturn, declining approximately 0.5%. In stark contrast, the Nasdaq Composite Index soared over 3%, while the S&P 500 Index enjoyed a near 1% riseThis showcases not only the strength of tech stocks but also reflects how the overall market is responding to economic indicators.

The upcoming week is critical as key economic data is set to be releasedOn Wednesday, the Consumer Price Index (CPI), a major measure of inflation in the U.S., will be published, followed by the Producer Price Index (PPI) on Thursday

These figures could provide essential insight into the inflationary trends that the Federal Reserve considers when making monetary policy decisions.

In terms of corporate focus, quarterly earnings reports from leading companies such as Broadcom, Costco, C3.ai, and GameStop will be pivotal to assessing the performance and stability of American firms amidst these economic shifts.

Amidst rising concerns about inflation, the U.SLabor Department reported on Friday that 227,000 jobs were added in November, exceeding economists' expectationsAlongside this positive job growth, the unemployment rate edged up to 4.2%. Such data has contributed to the prevailing narrative that while the labor market is cooling, it is not doing so rapidly enough to interfere with the Fed's rate-cutting agenda.

BlackRock's Chief Investment Officer for Global Fixed Income, Rick Ried, noted, “The Fed should be able to continue with a rate cut in December, but the CPI report next week will serve as another crucial signal in the calculation for policy adjustments.” This highlights the importance of the upcoming data for the Fed's strategy moving forward.

Stephen Brown, the Deputy Chief North American Economist at Capital Economics, echoed this sentiment, stating, “The CPI and PPI data will be the primary determining factors for the Fed’s interest rate decision this month.” Currently, financial markets view a 85% likelihood that the Fed will decrease interest rates by a quarter percentage point in their upcoming December 18 meeting, as indicated by the CME FedWatch tool.

Specifically, the last CPI before the Fed meeting is anticipated to be released at 8:30 AM EST on Wednesday

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Wall Street economists predict that the year-on-year inflation rate for November will rise to 2.7% from October's 2.6%. Monthly expectations also show a forecast of a 0.3% increase in prices from the previous month, reflecting slightly higher inflationary pressures than the previous month's 0.2% increase.

Stripping out food and energy prices, the Core CPI is expected to show a year-on-year rise of 3.3% for November, maintaining a consistent trend for the fourth consecutive monthThe core month-over-month inflation rates are also expected to hold at 0.3%, indicating stability in this area.

According to a weekly report from Wells Fargo's economics team led by Jay Bryson, “The momentum for disinflation in the U.Sis weakening, and new resistance factors, such as the possibility of tariffs and tax cuts, have emerged, making it increasingly difficult for inflation to revert to the Fed’s 2% target.” Such commentary points towards an ongoing challenge in managing inflationary expectations within the economy.

This week's performance of the U.S

stock market mirrored trends observed since early November, sustaining a bullish sentiment among investorsCitigroup's U.Sequity strategist Scott Chronert suggested that the S&P 500 could reach 6,100 points by year-end, indicating a belief that the current market trajectory will persist.

A notable feature of the market has been the significantly low volatility, with the CBOE Volatility Index (VIX) hovering around 13 points—the lowest observed since the market downturn in AugustThis low volatility suggests a calm market environment, but it also raises concerns about potential shifts that could occur post-Fed meeting.

In this context, Citigroup has indicated that the December Fed meeting presents a visible risk event that may hinder the market from gaining further momentum before the year concludesShould the inflation data for November fall short of expectations, concerns led by the Fed’s Jerome Powell could spark caution among investors in the lead-up to the final meeting of 2024.

John Koudounis, CEO of Calamos Investments, voiced his apprehensions regarding the year-end risks, emphasizing that “inflation data is certainly problematic.” He warned that any significant deviation in inflation outcomes would command market attention and could shift investor confidence considerably.

Nevertheless, within this complex landscape, many investors remain optimistic about the continued momentum of U.S

technology stocksKeith Lerner, Co-Chief Investment Officer at Trust Company, articulated his views, stating, “If you overlay the relative price movements of technology stocks with the relative performance trends amongst different indices, you can see they have been moving in tandem.”

Lerner further added, “In the three-year rolling view, the technology sector's growth outstrips the S&P 500 by 33%, which is drastically different from the 252% growth spike seen during the internet bubble peakThis suggests that both tech stocks and the broader bull market still have room for progression.”

"Each bull market often revolves around a major theme," he explained, asserting that “if you believe that this bull market is intact, we do as well, then this theme (technology stocks) is likely to persist until the conclusion of the bull cycleWhen tech stocks peak, it is likely to signal that the bull market as a whole is reaching its zenith.”

As we head deeper into December, the closely watched economic data and stock performance will undoubtedly shape investor strategies while highlighting the intricate interplay of inflationary trends and market valuations ahead of another pivotal Federal Reserve meeting.