Inflation, Walmart, Target highlight consumer-centric week: What to watch

The stock market continues Rebounded last week, gains on Friday That pushed major U.S. stock indexes to their highest closing levels in nearly two months.

In the week ahead, investors will be faced with a slew of updates on the health of U.S. consumers as the holiday shopping season gets into full swing.

Tuesday’s consumer price index (CPI) report for October will provide investors with key inflation data after several Fed officials last week tried to leave the door open to future interest rate hikes.

Large retailers including Home Depot (HD), Target(TGT) and Walmart (WMT) will highlight the earnings of a slew of consumer-focused companies, including Macy’s (medium size), TJX Corporation (Tian Jiaxing), BJ’s Wholesale (Beijing) will also publish results. October retail sales data released Wednesday morning will also provide important data on consumer conditions.

Questions about the health of China’s economy will have consequences for Alibaba (Babe) and (JD)Observe carefully.

On Friday night there was news that Moody’s changes outlook A drop in U.S. government debt from “stable” to “negative” will also be of concern to investors, as rising interest rates raise the cost of servicing the government’s growing debt load.

Stocks rose across the board last week, with Thursday’s small moves alone snapping the S&P 500’s eight-day winning streak.

Year to date, all three major stock indexes are higher, with the Nasdaq (^IXIC) annual returns are now back above 30%, while the S&P 500 (^GSPC) rose 15%; the Dow Jones Industrial Average (^DJI Innovations) is up 3.4% this year.

Last week, Fed Chairman Jerome Powell expressed doubts about expectations that the central bank will keep interest rates steady in the coming months. Speaking at an International Monetary Fund event on Thursday“If further tightening is appropriate, we will not hesitate to do so.”

Bets on the Fed’s path to raising interest rates differ slightly from those comments.

As of Friday afternoon, markets were pricing in about a 22% chance the central bank would raise interest rates before its January meeting, up from a 9% chance a week ago. According to the CME FedWatch tool.

However, Powell reiterated that the Fed will “proceed with caution” going forward, an approach that “allows us to address the risk of being misled by several months of good data and the risk of overtightening.”

Tuesday’s consumer price index data will provide an important update on the central bank’s fight against inflation.

Economists predict that the overall CPI inflation rate in October will increase by 3.3% compared with the same period last year. down from an increase of 3.7% Prices are expected to rise 0.1% in September from the previous month, down from September’s 0.3% increase. in terms of energy prices It is expected to drive the economic slowdown to a large extent.

On a “core” basis excluding the volatile food and energy categories, CPI in October is expected to rise 4.1% year-on-year, the same as September. Monthly core price growth is expected to be 0.3%, also in line with expectations. with the previous month.

Ernst & Young chief economist said: “Slower wage and employment growth, coupled with slower demand for goods and services, easing rental inflation and reduced pricing power, should lead to further deflation and support the Fed’s policy decisions in the coming years. The federal funds rate will remain unchanged for the next three months,” Greg Daco wrote in a note previewing the release.

The coming week will also bring a closer look at consumer spending, Key trends in the economic story of 2023 The title is Consumers are more resilient than expected.

Wall Street economists believe the October retail sales report shows some cracks are forming in consumers’ willingness to spend. Economists expect retail sales to fall 0.3% in October from the previous month, which would mark the first negative reading since March, according to Bloomberg data.

Bank of America said in a research note Thursday that aggregate data from its credit and debit cards showed spending fell 0.5% in October compared with a year earlier. Still, as with the inflation data, much of it is likely to come from lower spending on energy prices, the company noted.

Walmart and Target will focus on corporate reports this week as investors look for updates on consumer conditions, retail crime, the holiday shopping season and how the resumption of student loan payments may affect spending.

The two stocks have had very different moves this year.

Walmart shares are up about 16% in 2023, outperforming the S&P 500 and benefiting from price cuts by some consumers as inflation puts pressure on household budgets, especially at grocery stores.

By comparison, Target shares are down nearly 35% as the company relies more on discretionary spending – iIn July, Goldman Sachs estimated that 60% of Target’s sales were discretionary – Challenging retailers in an environment where consumers say they feel worse about the economy than most data suggests.

The stocks’ year-to-date performance is also a reminder that they are technically in different industries, with Walmart classified as consumer staples (XLP) stocks and targets are classified as consumer discretionary (Xilin) Name.

Callie Cox, U.S. investment analyst at eToro, told Yahoo Finance: “In the consumer discretionary space, there are a variety of retailer stocks, and some of them have really thrived this year, reported very strong earnings, and been rewarded for it.” Also. There are other companies that are really struggling, you know, durable goods, big appliances, appliance manufacturers, auto parts, manufacturers and automakers. “

Cox pointed to dispersion among stocks as a reason for unusual stock reactions this earnings season, with some companies failing to report profits. Seeing their stocks drop more than usual Although positive results have been achieved Didn’t get that much reward.

“That’s why it’s important as an investor to really understand the type of risk you’re taking on, because companies are being hit hard by rising interest rates, especially smaller, speculative companies,” Cox said. “You can bet on events. Seeing this flow in earnings and management calls, the impact becomes even more apparent.”

weekly calendar

on Monday

Economic data: There was no economic news of note.

income: (Minnidi), Fisker (FSR), Tyson (TSN)


Economic data: October month-on-month consumer price index (expected +0.1%, previous +0.4%); October month-on-month core CPI (expected +0.3%, previous +0.3%); CPI, year-on-year October year-on-year (expected +3.3% , prior +3.7%); October core CPI year-on-year (+4.1% expected, prior +4.1%); Actual average hourly earnings, year-over-year, October (previously +0.5%); October NFIB Small Business Optimism Index (Previously 90.8)

income: Aramark (ARMK), Kanu (GOEV) The Home Depot (HD), Ankong Co., Ltd. (Arcana)


Economic data: Retail sales in October from last month (-0.3% expected, +0.7% previously); Retail sales excluding autos and natural gas in October (+0.2% expected, +0.6% previously); Producer Prices Index, month – October MoM (+0.1% expected, +0.5% previously); October PPI YoY (+1.5% expected; +0.8% previously); Core PPI YoY October (+0.3% expected, +0.8% previously) +0.3%); October core PPI year-over-year (previously +2.7%); November Empire State Manufacturing (-2.1 expected, previously -4.6); MBA mortgage applications, week ended November 12 10 ( +2.5% before);

income: Advanced Auto Parts (American AP Association), Cisco Systems (China Association for Science and Technology), Fiserv (FI.), (JD), Palo Alto Networks (Pan Wei), Target(TGT), TJX Corporation (Tian Jiaxing), Xpeng Motors (electric car)


Economic data: Number of initial jobless claims in the week as of November 11 (previously 217,000); October month-on-month import prices (expected -0.3%, previously +0.1%); October month-on-month export prices (+0.7) % Previous ); October Industrial Production MoM (-0.4% expected, +0.3% previously); Philadelphia Fed Business Outlook for November (-11 expected, -9 previously); NAHB Housing Market Index (40 expected, +0.3% previously); Previously -9); before 40)

income: Alibaba (Babe), Applied Materials (Amat), Dolby (DLB), gap(Global Positioning System), Macy’s Department Store (medium size), Ross Store (Rost), Wal-Mart (WMT), Warner Music Group (WMG)


Economic data: October building permits (annualized expected: 1.45 million, previously 1.47 million); new housing starts in October (annualized expected: 1.35 million, previous 1.36)

income: BJ’s Wholesale (Beijing)

Josh Schafer is a reporter for Yahoo Finance.

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