Noreen Burke

Investing.com — With U.S. stocks on the threshold of a bear market investors will be looking to Wednesday’s Federal Reserve meeting minutes for more insights on the central bank’s policy response to soaring inflation. Following disappointing earnings from large retailers last week markets were already feeling the effects of rising inflation and geopolitical uncertainty from the conflict in Ukraine, as well as worries about retail earnings. U.S. data on personal income and spending – which contains the Fed’s favored measure of inflation – will be the highlight of the economic calendar, while PMI data out of the Eurozone and UK will also be closely watched. Here’s what you need to know to start your week.

1. Minutes from the Fed

Investors will be hoping that Wednesday’s Fed can offer some clues about whether the U.S. central bank can curb the most aggressive in four decades without tipping the economy into recession.

Fed Chair Jerome Powell is confident the central bank can achieve a “soft landing”, but Wall Street isn’t convinced the Fed can pull it off, with warnings over the prospect of a recession piling up.

Goldman Sachs economists predict that there will be a 35% chance for the U.S. to enter recession over the next two-years, and Wells Fargo analysts forecast a mild recession towards the end of 2022/early 2023.

Since March, the Fed already increased interest rates by 75 basispoints. Markets currently price in at 50 basis points for June and July.

Powell has pledged that he will raise interest rates as high necessary to curb inflation. These minutes will reveal how stubborn policymakers believe inflation to remain and whether or not the economy can withstand tighter monetary policies.

2. Earnings from retail

Investors can expect earnings reports from Costco, Dollar General (NYSE) and other companies. Best Buy The stock market will be impacted by disappointing performance from major retailers over the past week, which has exacerbated fears about the future outlook.

Walmart (NYSE:), is the country’s biggest retailer. Target According to (NYSE:), while there was strong store traffic, inflation is starting to reduce the buying power of U.S. citizens.

Wall Street brokerages had expected profits to plummet due to rising fuel prices, but analysts claimed they were surprised by rapid consumer retrenchment and shifts towards lower-margin basic merchandise over more lucrative general merchandise.

Analysts also noted that shock was caused by the retailers’ heavy discounts and inventory buildup.

3. What is the bear market?

U.S. stocks are on the threshold of a bear market – considered as a drop of at least 20% from a closing high.

Friday closed down 19% from January 3, its record-setting closing high. The is also down over a quarter of a November 20,21 peak.

The Fed’s hawkish stance and concerns about rising inflation have put pressure on markets, pushing them lower. The war in Ukraine has exacerbated the selling. This has led to a spike in commodity and oil prices.

Investors have looked at various metrics to determine when markets will turn higher, including the , also known as Wall Street’s fear gauge. The index has been elevated relative to its long-term average but is still well below the levels seen in major selloffs.

4. Data on economics

On Friday, the U.S. will release its April data. The report also contains the Fed’s primary gauge of inflation, the . Economists expect the report to reveal that spending was steady last month, despite rising inflation.

A report on the economy is also included on the calendar. Economists believe that will remain stable, while data and revised figures are available for quarter 1. These numbers can be expected to have slight revisions.

Data on could indicate a cooling of the housing market, as consumers become more careful and mortgage rates rise.

5. Data on PMI

Both the U.K. (and Eurozone) will soon release this week’s closely watched PMI data.

Eurozone PMI data showed a surprise positive reading in April. This was due to services being boosted by Omicron wave. Data for May will provide more insight into consumers’ willingness and ability to continue spending as the price rises.

Meanwhile, Germany’s for May, due out on Monday is expected to show a decline.

The U.K. PMI data will indicate a decrease in sector demand this month. The Bank of England Governor is scheduled to address Monday.

This was contributed by Reuters