Stock markets continued their rebound last week after Friday’s gains, with major U.S. indexes closing at their highest levels in nearly two months.
Over the coming week, investors will be faced with a packed schedule of updates on the health of U.S. consumers as the holiday season gets into full swing.
The October Consumer Price Index (CPI) report to be released on Tuesday comes after several Federal Reserve officials sought last week to leave the door open to future interest rate hikes. This will provide an important indicator of inflation.
Major retailers such as Home Depot (HD), Target (TGT), and Walmart (WMT) are consumer-focused, such as Macy’s (M), TJX Companies (TJX), and BJ’s Wholesale (BJ). will emphasize corporate profits. ) is also set to release results. October retail sales figures, released Wednesday morning, will also provide important information on consumer health.
Due to questions surrounding the health of China’s economy, the results of Alibaba (BABA) and JD (JD) will be closely watched.
News late Friday that Moody’s changed its outlook for U.S. government debt from “stable” to “negative” will also attract investors’ attention as rising interest rates raise the cost of servicing the growing mountain of government debt. .
Stocks were up across the board last week, with Thursday’s hiccup only breaking the S&P 500’s eight-day winning streak.
Year-to-date, all three major indexes are up, with the Nasdaq (^IXIC) now back to over 30% annual gain and the S&P 500 (^GSPC) up 15%. The Dow Jones Industrial Average (^DJI) is up 3.4% this year.
Last week, Federal Reserve Chairman Jerome Powell cast some doubt on the prospect that the central bank would be content to keep interest rates on hold for the coming months, saying at an IMF event on Thursday that “it is not appropriate to tighten policy further.” “If that happens, we have no intention of keeping interest rates unchanged.” I hesitate to do so. ā
Our view on the Fed’s rate hike path diverged slightly from these comments.
As of Friday afternoon, the market was pricing in a roughly 22% chance that the central bank would raise rates by the end of its January meeting, up from the 9% chance the market was seeing just a week ago, according to the CME Fedwatch tool. did.
Still, Powell reiterated that the Fed will “move cautiously” going forward, saying this approach “manages both the risk of being fooled by a few months of good data and the risk of overtightening.”
Tuesday’s CPI data will provide an important update on the central bank’s fight against inflation.
Economists expect headline CPI inflation to rise 3.3% year-on-year in October, slowing from September’s 3.7% rise. Prices are expected to rise 0.1% month-on-month, slowing from a 0.3% rise in September. The decline in energy prices is expected to be a major factor in the economic slowdown.
On a “core” basis, which excludes the volatile food and energy categories, CPI is expected to rise 4.1% year-on-year in October, unchanged from September. Monthly core price growth is expected to be 0.3%, similar to the previous month.
EY’s chief economist said, “Slower wage and employment growth, weaker demand for goods and services, easing rent inflation and reduced pricing power will lead to further disinflation, and the Fed will continue to lower the federal funds rate in the coming months.” “The argument will be in favor of keeping it constant.” Greg Daco writes a note previewing the release.
Next week, we’ll also take a closer look at consumer spending, a key trend in the 2023 economic story that’s been dominated by more resilient consumers than expected.
Wall Street economists say October’s retail sales report signals a crack in consumers’ willingness to spend. Economists expect retail sales to fall 0.3% in October from the previous month, the first negative decline since March, according to Bloomberg data.
Bank of America said in a research note Thursday that aggregated credit and debit card data showed spending was down 0.5% in October from a year earlier. However, as with inflation printing, much of that could be due to lower energy prices, the company noted.
Walmart and Target focus on company reports this week as investors seek updates on consumer trends, retail crime, the holiday season, how student loan payments will impact spending, and more I plan to guess.
These two stocks are at a crossroads this year.
Walmart stock has risen about 16% in 2023, outperforming the S&P 500 and also benefiting from lower prices for some consumers as inflation squeezes household budgets, especially grocery stores.
Target, by contrast, is more reliant on discretionary spending, its stock price is down nearly 35%, and Goldman Sachs estimated in July that 60% of Target’s sales are in discretionary goods. is challenging retailers in an environment where consumers say they don’t feel good about the economy. than most data indicate.
The performance of these stocks so far this year is a reminder that they are technically in different sectors, with Walmart classified as a consumer staples (XLP) stock and Target classified as a consumer discretionary (XLY) stock. There are also things.
“There’s a very wide range of retail stocks in consumer discretionary, and there are some stocks that have done particularly well this year, reporting sizable profits and reaping the rewards,” Carey Cox, investment analyst at eToro US, told Yahoo Finance. There are,” he said. āAnd there are some companies that are really struggling, like durable goods, large appliances, appliance manufacturers, auto parts, manufacturers, automakers.ā
Cox said the dispersion among stocks has led to the unusual reaction of stock prices this fiscal year, with companies that miss out on profits seeing their stock prices fall more than usual, while strong earnings are not rewarded as much.
“Companies, especially smaller speculative companies, are being hit hard by these rising interest rates, so it’s important that you understand what risks you’re taking on as an investor,” Cox said. Stated. “The flow becomes clear at events such as financial results announcements and management conferences, and the effects become clearer.”
weekly calendar
Monday
Economic data: There is no notable economic news.
Revenue: Monday.com (MNDY), Fisker (FSR), Tyson (TSN)
Tuesday
economic data: Consumer price index for October, month-on-month change (forecast +0.1%, previous +0.4%). October core CPI, month-over-month (forecast +0.3%, previous +0.3%). October CPI, year-on-year change (forecast +3.3%, previous +3.7%). Core CPI in October compared to the same month last year (forecast +4.1%, previous +4.1%). Actual average hourly wage in October, compared to the same month last year (previous increase of 0.5%). NFIB Small Business Optimism, October (previously 90.8)
Revenue: Aramark (ARMK), Canoo (GOEV) Home Depot (HD), On Holding AG (ONON)
Wednesday
economic data: October retail sales, month-over-month (forecast -0.3%, previous +0.7%). Retail sales (excluding autos and gasoline), October (+0.2% expected, +0.6% previously). Producer price index for October, month-over-month (forecast +0.1%, previous +0.5%). His PPI in October, YoY (expected +1.5%, last +0.8%). October core PPI, month-on-month (forecast +0.3%, previous +0.3%). Core PPI, compared to the same month last year, October (previous increase of 2.7%). Empire State Manufacturing, November (-2.1 expected, -4.6 previously). MBA home loan applications, week ending November 10 (previously up 2.5%).
Revenue: Advance Auto Parts (AAP), Cisco Systems (CSCO), Fiserv (FI), JD.com (JD), Palo Alto Networks (PANW), Target (TGT), TJX Companies (TJX), Xpeng (XPEV)
Thursday
economic data: Number of new unemployment insurance claims for the week ending November 11 (previously 217,000). Import prices in October compared to the previous month (forecast -0.3%, previous +0.1%). Export prices in October compared to the previous month (previously +0.7%). Industrial production in October compared to the previous month (-0.4% forecast, +0.3% previously). Philadelphia Fed’s economic outlook for November (forecast was minus 11, previous forecast was minus 9). NAHB Housing Market Index (expected 40, previous 40)
Revenue: Alibaba (BABA), Applied Materials (AMAT), Dolby (DLB), Gap (GPS), Macy’s (M), Ross Stores (ROST), Walmart (WMT), Warner Music Group (WMG)
Friday
Economic data: Building permits, October (estimated annual rate of 1.45 million, previously 1.47 million). Number of housing starts in October (annual rate forecast 1.35 million, previous 1.36)
Revenue: BJ’s Wholesale (BJ)
Josh Schafer is a reporter for Yahoo Finance.
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