Worries about the global economy took center stage last week as oil prices skidded to multi-year lows on warning of a supply glut. U.S. crude oil futures dropped over 10% lower for the week on expectations that oil prices may suffer from declining demand, high production volume, and a warm weather forecast.[2]
Also underscoring the global weakness was the news that two of America's largest corporate behemoths - Dow Chemical [DOW.WD] and DuPont [DD] - have agreed to combine in one of the largest mergers in U.S. history.[3]
All this gloom and doom about the global economy complicates the upcoming Federal Reserve decision about raising interest rates. In August, when a surprise move by the Chinese to devalue the yuan sent shockwaves through financial markets, the Fed declined a rate hike.[4] Now, the Chinese are loosening the yuan again, raising concerns about the health of the world's second-largest economy.[5]
Will global woes derail the Fed's intent to raise rates? We'll have to see.
Official statements from the Fed have emphasized that the Fed is closely weighing the strengthening domestic economy against global concerns in their rate decisions. Currently, Wall Street odds strongly favor a December rate hike, with one firm putting the probability at 79%.[6]
In the week ahead, all eyes will be on the Fed's meeting, and investors will focus on the official announcement and Janet Yellen's press conference on Wednesday afternoon. Investors will also look carefully at manufacturing and industrial production data to see whether global woes are affecting critical domestic industries.
ECONOMIC CALENDAR: Tuesday: Consumer Price Index, Empire State Mfg. Survey, Housing Market Index, Treasury International Capital
Wednesday: Housing Starts, Industrial Production, PMI Manufacturing Index Flash, EIA Petroleum Status Report, FOMC Meeting Announcement, FOMC Forecasts, Fed Chair Press Conference
Thursday: Jobless Claims, Philadelphia Fed Business Outlook Survey
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