The week ahead will be a busy one on multiple fronts.
While the partial government shutdown has been alleviated through Feb. 15, there’s still much work to be done by Democrats and Republicans. Also on the agenda are the trade talks between the U.S. and China, but whether anything can be accomplished yet is debatable. And overseas, there’s likely another battle looming over plans for Britain’s withdrawal from the European Union.
For many vendors, the attention shifts to Sears Holdings Corp. at the end of the week. A bankruptcy court could decide Sears’ fate, but the hearing could get contentious if unsecured creditors get their way. They’re hoping to block the sale of the company to its chairman, Edward S. Lampert. Earlier this month, the unsecured creditors sought permission to file a lawsuit against Lampert and his hedge fund. This past Wednesday, they filed a document that was more than 130 pages detailing what they alleged to be years of asset-stripping.
Brexit: The U.K. Parliament on Tuesday is slated to discuss and vote on British Prime Minister Theresa May’s Plan B in connection with Britain’s exit from the European Union. Critics this past week said the plan resembled the defeated Plan A from earlier this month. Barbara Teixeira Araujo, an economist in the Prague office of financial intelligence firm Moody’s Analytics, on Friday said she doesn’t expect members of Parliament to reach any consensus.
Government Shutdown: As of mid-afternoon Friday, word surfaced that a deal was reached to reopen the government through Feb. 15. While that’s good for 800,000 furloughed federal workers who will now be given their back pay, the reopening is only good for three weeks. That gives Democrats and Republicans a bit of breathing room–but only 21 days–to put together a border security package. The concern is that if they don’t, President Donald Trump will likely say he intends to invoke a national emergency.
Trade Wars: The U.S. and China will hold top-level trade discussions in Washington for two days, starting Jan. 30. Those talks will be with China’s trade negotiator, vice-premier Liu He. Representing the U.S. in the talks will be treasury secretary Steven Mnuchin and trade representative Robert Lighthizer. A key issue on the agenda will be intellectual property matters. The U.S. has alleged IP theft on the part of China, which the Asian country has publicly denied. Tariffs on goods coming in from China have been used as a form of leverage to move the talks along. Currently, there’s a hold off until March 1 of a potential tariff hike to 25 percent from 10 percent already in place on $200 billion worth of Chinese goods.
Federal Open Market Committee: The monetary policy-setting arm of U.S.’s Federal Reserve is slated to have a meeting Tuesday through Wednesday. Morgan Stanley economists on Friday said they expect the FOMC to end the meeting with a statement from Jerome H. Powell, the Fed chairman, that uses “patience” instead of “gradual” to describe the cadence of further policy normalization. They expect the federal funds rate target to remain at 2.25 percent to 2.50 percent.
That’s good for businesses and consumers. The fed funds rate is what banks and credit unions charge when they lend to each other. When financial institutions pay more to borrow, they in turn raise the borrowing costs for money they lend out to business owners and consumers. Currently, the expectation is just two rate hikes for 2019, now expected in June and December.
The Morgan Stanley economists also expect the statement to avoid any reference to the government shutdown, and instead reference the momentum entering 2019, a strong labor market, and “healthy consumer spending alongside softer business sentiment.”
Consumer Confidence: The Conference Board will post its Consumer Confidence Index for January on Tuesday, which provides a read on consumers’ assessment of current conditions and their expectations six months out.
Earnings: Unifi Inc. is expected to report second-quarter earnings on Wednesday for the period ended Dec. 30.
Sears Bankruptcy: A hearing is scheduled for Friday before a bankruptcy court in White Plains on the accepted $5.2 billion going-concern offer for the company by Sears chairman Edward S. Lampert and his hedge fund, ESL Investments. Creditors are opposing the bid, and have previously filed legal papers asking the bankruptcy court for permission to sue Lampert and ESL.