Preview: US employment, CPI, and index rebalancing will all come into play, with liquidity becoming the focus this week

This week, market risks are high, with a series of delayed economic data releases combined with a full market index rebalance, which may trigger market volatility. The U.S. will release the November employment report and key inflation readings this week, which could support or challenge the Federal Reserve's interest rate outlook for the new year. Federal Reserve officials cut rates for the third consecutive time last week while suggesting an open stance for another rate cut next year as rates approach neutral levels.

The U.S. will also release the November Consumer Price Index (CPI) report this week. Economists surveyed by the WSJ expect the index to rise 3.1% year-over-year. Farzin Azarm, Managing Director of U.S. Equity Trading at Mizuho Securities, stated that the most important market event this week is what he describes as "one of the largest annual clearing events."

Specifically, the quarterly index rebalance for the S&P 500 and Nasdaq 100 indices will take place on Friday, during which index providers will adjust the components and weights of their benchmark indices to ensure they continue to represent the tracked markets. The U.S. stock market saw a significant decline last Friday. According to FactSet data, the S&P 500 fell 0.6% last week, the Nasdaq Composite dropped 1.6%, while the Dow Jones Industrial Average rose by 1.1%.