What to know this week

Earnings from retail giants Walmart (WMT) and Home Depot (HD) this week, along with the latest update on the Federal Reserve’s preferred inflation measure and minutes from the Fed’s latest policy meeting, will be highlights in the brief holiday week ahead of us. is.

The US stock and bond markets are closed Monday for President’s Day.

Walmart and Home Depot results, both due ahead of market open on Tuesday, will provide further updates on the health of the US consumer, which remains resilient despite stubbornly high inflation, as recent January retail sales data showed. last year. week.

MIAMI, FLORIDA – JANUARY 24: A worker stocks the shelves at a Walmart store on January 24, 2023 in Miami, Florida. (Photo by Joe Raedle/Getty Images)

On the economic data side, all eyes will be on the Personal Consumption Expenditures (PCE) price index – the Fed’s most viewed assessment of how fast prices are rising in the economy – due to be released Wednesday morning.

According to data from Bloomberg, prices in January likely rose 0.5% from the previous month, as measured by the PCE index. in December, PCE inflation increased by only 0.1% month-on-month. On an annual basis, PCE inflation is expected to reach 5% in January, no improvement from the annual rate reported at the end of 2022.

Core PCE, which takes out the volatile food and energy components, is expected to post a 0.4% increase over the previous month – up slightly from 0.3% in December – and a slightly slower rise of 4.3% over the year, down from 4.4% in the last month of 2022.

If realized, these figures would support recent indications that inflation is not falling at the pace and extent investors hoped for, even as prices have stabilized from the peaks of the current cycle.

The consumer price index (CPI) released last week showed that inflation picked up in January, while only cooling slightly over the course of the year to 6.4%. And producer prices shot up in January by the largest amount in seven months.

US Federal Reserve Chairman Jerome Powell speaks to attendees of a meeting of The Economic Club of Washington, at the Renaissance Hotel in Washington, DC, US, Feb. 7, 2023. REUTERS/Amanda Andrade-Rhoades

US Federal Reserve Chairman Jerome Powell speaks to attendees of a meeting of The Economic Club of Washington DC, US, February 7, 2023. REUTERS/Amanda Andrade-Rhoades

This view has thwarted the market’s recent momentum.

On Friday, the Dow Jones Industrial Average posted its third straight week of losses for the first time since September, closing 0.1% for the five-day trading period. T

The S&P 500 fell 0.3% this week, its second consecutive week in the red, while the Nasdaq was an outlier, gaining 0.6% weekly.

The bumpier-than-expected road to restoring price stability and strong economic data to start the year – nonfarm payrolls rose by 517,000 in January while retail sales rose 3% – have prompted Wall Street banks to raise their expectations. for upcoming rate hikes by the Federal Reserve. To book.

Teams at Goldman Sachs and Bank of America said this week they estimate three more rate hikes this year; Prior to the February rate hike, some market participants had seen that this move may have marked the end of the Fed’s rate hike cycle.

Economists at Goldman Sachs and BofA each added an additional 25 basis point rate hikes to their forecasts in June, pushing both banks’ projected estimates for the peak of the federal funds rate in this cycle to a new range of 5.25%-5, 5% arrived.

Bank of America also indicated strong indications of a potential 0.50% increase at the next Federal Reserve meeting in March.

“In our view, several forces should work together to ensure the Fed returns to a larger 50 basis point rate hike,” a team of strategists led by Michael Gapen said in a Friday note.

Minutes from the Federal Open Market Committee (FOMC) meeting from January 31 to February. 1 out Wednesday afternoon will provide insight into the rationale behind the 25 basis point increase of civil servants earlier this month.

Cleveland Fed President Loretta Mester said in a speech Thursday that she would have preferred to raise interest rates by 0.50%.

“The FOMC has come in a remarkable way in moving policy from a very accommodative to a restrictive stance, but I believe we have more work to do,” Mester said at a Global Interdependence Center conference at the University of South Africa. Florida Sarasota-Manatee College of Affairs.

“I don’t want to surprise the markets,” said Mester. “It’s better if we explain. In that meeting there was an economic case for it [a 50 basis point increase] in my eyes, but the market had not counted on that. That plays into my beliefs about the right thing to do in a meeting.”

On the earnings side, Walmart kicks off a busy week on Tuesday with quarterly reports from Corporate America.

Arun Sundaram, senior equity analyst at CFRA Research, predicts the supermarket giant will see continued buyout benefits from inflation, particularly from higher-income customers, which is expected to boost its Walmart+ membership program.

However, macroeconomic uncertainty does pose some downside risks to the company. Those potential headwinds include weaker consumer spending from lower-income consumers given high inflation and rising interest rates, larger inventory write-downs and continued pressure on products, wages and transportation costs.

Other notable earnings results in the coming week will come from Home Depot, Alibaba (BABA), Keurig Dr Pepper (KDP), Live Nation (LYV), Moderna (MRNA), PG&E (PCG), and Warner Bros. Discovery (WBD). ), among other things.

Beat-up names like Coinbase (COIN) and Carvana (CVNA) will also report numbers following a junk rally that has boosted shares this year.

Economic calendar

Monday: Markets closed for President’s Day. No notable reports scheduled for release.

Tuesday: Philadelphia Fed Non-Manufacturing Activity IndexFebruary (-6.5% in previous month); S&P Global US Manufacturing PMIPreliminary February (47.2 expected, 46.9 in previous month); S&P Global US Services PMIFebruary tentative (47.3 expected, 46.8 in last month); S&P Global US Composite PMIFebruary tentative (47.5 expected, 46.8 last month); Existing home salesJanuary (expected 4.10 million, last month 4.02 million); Existing home salesmonth-on-month, January (-2.0% expected, -1.5% last month)

Wednesday: MBA Mortgage Applicationsweek ended February 17 (-7.7% in previous week); FOMC meeting minutesFebruary 1

Thursday: Chicago Fed National Activity IndexSeptember (-0.49 in previous month); GDP on an annual basisquarter-on-quarter, Q2 4 estimate (2.9% expected, 2.9% earlier); Personal consumptionquarter-on-quarter, Q2 4 estimate (2.0% expected, 2.1% earlier); GDP price indexquarter-over-quarter, second quarter estimate (3.5% expected, 3.5% earlier); Core PCEquarter-over-quarter, Q4 2 estimate (3.9% expected, 3.9% earlier); Initial unemployment claimsweek ended Feb 18 (220,000 expected, 194,000 in previous week); Ongoing Claimsweek ended February 11 (1.696 million in previous week); Kansas City Fed manufacturing activityFebruary (-2 expected, -1 in the previous month)

Friday: Personal incomemonth-over-month, January (0.9% expected, 0.2% last month); Personal expensesmonth-on-month, January (1.3% expected, -0.2% last month); Real personal expensesmonth-on-month, January (1.1% expected, -0.3% last month); PCE deflatormonth-over-month, January (0.5% expected, 0.1% last month); PCE deflatoryear-over-year, January (5.0% expected, 5.0% last month); PCE core deflatormonth-over-month, January (0.4% expected, 0.3% last month); PCE core deflatoryear-over-year, January (4.3% expected, 4.4% in previous month); New home salesJanuary (620,000 expected, 616,000 last month); New home salesmonth-over-month, January (0.7% expected, 2.3% last month); Consumer Confidence from the University of MichiganFebruary final (66.4 expected, 66.4 earlier); Kansas City Fed Services activityFebruary (-11 during previous month)

Earnings calendar

Monday: Markets closed for President’s Day. No notable reports scheduled for release.

Tuesday: Coinbase Global (COIN), Cracker Barrel (CBRL), Home Depot (HD), Hostess Brands (TWNK), La-Z-Boy (LZB), Palo Alto Networks (PANW), Tanger Factory Outlet Centers (SKT), Toll Brothers (TOL), Walmart (WMT), ZipRecruiter (ZIP)

Wednesday: Allbirds (BIRD), Altice USA (ATUS), Baidu (BIDU), Bath & Body Works (BBWI), Bumble (BMBL), Cheesecake Factory (CAKE), eBay (EBAY), Etsy (ETSY), Fidelity National (FNF) , Lemonade (LMND), Lucid Group (LCID), Marriott Vacations (VAC), Overstock.com (OSTK), Rent-A-Center (RCII), Teladoc (TDOC), TJX (TJX), United Therapeutics (UTHR), Wingstop (WING), Wolverine World Wide (WWW)

Thursday: Alibaba Group Holding (BABA), Autodesk (ADSK), Beyond Meat (BYND), Block (SQ), Booking Holdings (BKNG), Cars.com (CARS), Carvana (CVNA), CubeSmart (CUBE), Dillard’s (DDS) , DISH Network (DISH), Domino’s Pizza (DPZ), Farfetch (FTCH), Intuit (INTU), Keurig Dr Pepper (KDP), Live Nation (LYV), Moderna (MRNA), Nikola (NKLA), Papa John’s (PZZA ), PG&E (PCG), Planet Fitness (PLNT), Steven Madden (SHOO), Warner Bros. Discovery (WBD), Wayfair (W), YETI Holdings (YETI)

Friday: Carters (CRI), E. W. Scripps (SSSP)

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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