What to hear this week

US stocks that come out of their best week since JuneAnd the ability of Wall Street to extend the winning streak in the coming days likely hinges on the news out of the retail sector.

Lighter inflation data rekindled investor hopes that the monetary policy shift is near, and key earnings results from retailers and the government’s October report on the sector can put that optimism to the test.

Walmart (WMT), Target (TGT), and Home Depot (HD) on top of the lengthy docket the company is scheduled to unveil its third quarter financials this week.

The Commerce Department will also publish its monthly retail sales report for October on Wednesday, with economists surveyed by Bloomberg estimating a headline increase of 1.0% after spending was flat during the previous month.

The bet is Federal Reserve policy will backfire in the pace and scale of interest rate hikes after October’s Consumer Price Index (CPI) shows easing inflation last month helped pushing the main average towards sizable gains. The S&P 500 rose 5.9% for the week, its best five-day performance since the week ending June 24, while the Dow Jones Industrial Average advanced 4.2%. The Nasdaq Composite had its best week since March, bouncing 8.1%.

The moves came after the latest CPI readings put the annual pace of inflation at 7.7% in October and 0.4% over the month, while the “core” CPI – which takes out food and energy volatile categories – slowed to 6.3% year-over-year and 0.3% over October. The figure was better than Wall Street’s call for a 7.9% year-over-year rise and a 0.5% monthly gain and was down significantly from September’s figure.

While the soft data was met with “an ovation of the equity market,” as Principal Asset Management Chief Global Strategist Seema Shah put it, strategists – and some members of the Federal Reserve himself – has stressed that the excitement is premature given that other economic data will be revealed before the Fed’s next policy-setting meeting in December.

“Chair Jay Powell has repeatedly emphasized that the Fed don’t put too much weight on a month’s data” Andy Sparks, MSCI’s head of portfolio management research, wrote in a note. “His comments after the Federal Open Market Committee meeting last week seem to still reflect the Fed’s current thinking – that a strong labor market continues to support stubborn inflation and the risk of doing little is still greater risk doing too much.”

A strong reading in retail sales can derail the market’s push higher: Bloomberg consensus economist estimate of a 1.0% jump in the main measure of the monthly report, if realized on Wednesday, will reflect spending remains strong and consumers remain resilient. Investors could interpret that strength as a signal to Fed officials that they have more room to hike.

According to Bank of America, two factors account for the jump anticipated in October’s print: another round of Amazon Prime Day and related promotions in addition to the July event, along with the deployment of one-off stimulus payments in California, which accounts for about one. -seventh national economy. A pickup in gas spending due to the high price of gasoline also contributed to the expected increase.

On the earnings front, Walmart will kick off a big week of retail reports when the retailer reports before opening on Tuesday. Analysts expect the megastore to get a boost from back-to-school shopping, along with more value spending among US consumers weighed down by rising prices. At the same time, results are expected to reflect pressures from inflation, rising interest rates, and bloated inventories that have plagued many retailers.

A man pushes a television in a shopping cart at Walmart on Black Friday, the day that kicks off the holiday shopping season, in King of Prussia, Pennsylvania, U.S., on November 29, 2019. REUTERS/Sarah Silbiger.

A man pushes a television in a shopping cart at Walmart on Black Friday, the day that kicks off the holiday shopping season, in King of Prussia, Pennsylvania, U.S., on November 29, 2019. REUTERS/Sarah Silbiger.

Last quarter, the CEO of Walmart Doug McMillon said increasing the level of food and fuel inflation is pressuring consumer spending and apparel required more dollar markdown.

Another consumer name on the earnings deck this week is Home Depot (HD), Target (TGT), TJX Company (TJX), Wholesale BJ (BJ), gap (GPS), Kohl’s (KSS), Macy’s (M), and Ross Stores (ROST), among others.

The market has been rewarded with positive earnings surprise more than the five-year average, while punishing misses too much, as the price of Wall Street is more downside risk as the fear of recession grows.

As of Friday, 91% of companies in the S&P 500 have reported third quarter earnings, with 69% reporting actual earnings per share above the mean estimate – below the five-year average of 77% that beat, per FactSet Research. Companies with better-than-expected results saw an average increase in their share price of 2.4% two days before earnings release through two days after earnings release, significantly higher than the five-year average price increase of 0.9% for reporting companies. earnings beat during the same window.

The market rewarded a positive EPS surprise in Q3 more than average for S&P 500 companies. (Source: FactSet Research)

The market rewarded a positive EPS surprise in Q3 more than average for S&P 500 companies. (Source: FactSet Research)

Elsewhere in economic data, the Producer Price Index (PPI), a reading on inflation from the production side of the economy, was out on Tuesday. The PPI, which measures changes in prices paid to US producers of goods and services, was expected to cool last month. Sunday will also be jam-packed with housing data, including readings on housing starts, building permits, and existing home sales.

Economic calendar

Monday: No notable economic data is scheduled for release.

Tuesday: Manufacturing EmpireNovember (-5.5 expected, -9.1 during the previous month); PPI Final Requestmonth-over-month, October (0.5% expected, 0.4% during the previous month); PPI Excludes Food and Energymonth-over-month, October (0.4% expected, 0.3% during the previous month); PPI Excludes Food, Energy, and Trademonth-over-month, October (0.2% expected, 0.4% during the previous month); PPI Final Requestyear-over-year, October (8.4% expected, 8.5% during the previous month); PPI Excludes Food and Energyyear-over-year, October (7.2% expected, 7.2% during the previous month); PPI Excludes Food, Energy, and Tradeyear-over-year, October (5.5% expected, 5.6% during the previous month); Bloomberg Nov. United States Economic Survey

Wednesday: MBA mortgage applicationweek ended Nov 11 (-0.1% during the previous week); Advance retail salesmonth-over-month, October (1.0% expected, 0.0% during the previous month); Retail Sales Exclude Carsmonth-over-month, October (0.5% expected, 0.1% during the previous month); Retail Sales Exclude Cars and Gasmonth-over-month, October (0.3% expected, 0.3% during the previous month); Retail Sales Control GroupOctober (0.3% expected, 0.4% during the previous month); Import Price Indexmonth-over-month, October (-0.5% expected, -1.2% during the previous month); Import Price Index Excludes Petroleummonth-over-month, October (-0.8% expected, -0.5% during the previous month); Import Price Indexyear-over-year, October (4.0% expected, 6.0% during the previous month); Export Price Indexmonth-over-month, October (-0.2% expected, -0.8% during the previous month); Export Price Indexyear-over-year, October (9.5% during the previous month); Industrial Productionmonth-over-month, October (0.1% expected, 0.4% during the previous month); Capacity UtilizationOctober (80.4% expected, 80.3% during the previous month); Manufacturing (SIC) ProductionOctober (0.2% expected, 0.4% during the previous month); Business Inventory, September (0.5% expected, 0.8% during the previous month); NAHB Housing Market Index, November (36 expected, 38 during previous month); Net Long Term TIC FlowSeptember ($197.9 billion), Total Net TIC FlowSeptember ($275.6 billion)

Thursday: Housing BeginsOctober (1.412 million expected, 1.439 during the previous month); Building PermitOctober (1.515 million expected, 1.564 million during the previous month, upwardly revised to 1.696 million); Housing Beginsmonth-over-month, October (-1.9% expected, -8.1% during the previous month); Building Permitmonth-over-month, October (-3.1% expected, -1.4% during the previous month); Philadelphia Fed Business Outlook IndexNovember (-6.0 expected, -8.7 during the previous month); Initial Unemployment Claimweek ended November 12 (221,000 estimated, 225,000 during the previous week); Proceed with the Claimweek ended Nov 5 (1,493 during the previous week); Kansas City Fed Manufacturing ActivityNovember (-7 expected, -7 during the previous month)

Friday: Existing Home SalesOctober (4.37 million estimated, 4.71 million during the previous month); Existing Home Salesmonth-over-month, October (-7.3% expected, -1.5% during the previous month); Leading indexOctober (-0.4% expected, -0.4% in the previous month)

Income calendar

Monday: J&J Snack Foods (JJSF), Oatly Group (rubber), Tower Semiconductor (sour), Weber (Webring)

Tuesday: Home Depot (HD), Walmart (WMT), Advanced Auto Parts (AAP), Energizer (ENR), Krispy Kreme (GNU), Tencent Music (TME)

Wednesday: Cisco Systems (CSCO), Bath & Body Works (BWI), Helmerich & Payne (Hp), Lowe’s (low), Manchester United (that), Nvidia (NVDA), Sonos (I), Target (TGT), TJX Company (TJX), Victoria’s Secret (VSCO), Williams-Sonoma (WSM)

Thursday: Alibaba Group (father), Wholesale BJ (BJ), Dole (DOLE), Farfetch (FTCH), gap (GPS), Kohl’s (KSS), Macy’s (M), Palo Alto Networks (PED), Ross Store (ROST), Children’s Place (PLC)

Friday: foot locker (FL), JD.com (JD)

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

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