Debt ceiling deliberations, rising retail earnings and the minutes from the Federal Reserve’s latest meeting await investors as highlights for the week ahead.
House Speaker Kevin McCarthy (R-California) said on Saturday that talks on the debt ceiling would not resume until President Biden returns from his trip to Japan for a G-7 meeting. On Sunday, before leaving the G-7, Biden called the GOP’s debt ceiling position “unacceptable,” adding that it was “time for the other side to leave its extreme positions.” This as Treasury Secretary Janet Yellen’s “X date” of June 1 looms.
The two sides suspended talks on Friday, raising doubts about the near-term potential of a deal and sending markets lower.
However, all three major indexes still ended the week with gains, notably the Nasdaq, which rose more than 3%.
The Nasdaq and S&P 500 had their best week since March and their highest weekly close since August 2022. Year-to-date, the Nasdaq is up more than 20%, while the S&P 500 has risen more than 9%; the Dow Jones Industrial Average is barely hanging on to the year’s gains.
Stocks were buoyed last week after retail sector profits set a cautious tone for consumer spending for the year, but did not yet sound the alarm of an all-out recession.
In the coming week, results from Dollar General (DG), Costco (COST) and BJ’s (BJ) will offer additional consumer health insights. Results from Walmart (WMT) hinted at benefits for some retailers from wealthier consumers who are bargaining to save money as inflation pressures household budgets.
“We’ve seen deals at Walmart, at Target, at TJX, at Ross positive year over year, suggesting there’s a decline in trade going into the value side of the equation as some of those traditional consumers are making different choices,” Bernstein Friday, retail analyst Aneesha Sherman told Yahoo Finance Live. “And that’s what some of the new data shows was not the case last year. So for value retail, I think that’s a bright spot.”
On the tech front, Nvidia (NVDA), which has seen its stock soar more than 100% this year, is expected to report results on Wednesday.
On the economic data front, investors will be looking for further clues about the Fed’s path forward as they prepare for the end of the central bank’s most aggressive rate hike campaign in years. 80.
Thursday’s second estimate of first-quarter GDP will offer a look at first-quarter growth and another check on the central bank’s favorite inflation indicator, the personal consumption expenditure (PCE) price index. for the first trimester.
Economists expect “core” PCE – which excludes the more volatile food and energy costs – rose 4.9% on an annual basis in the first quarter, unchanged from the first reading; Core PCE is expected to have risen 0.3% in April, an unchanged monthly increase from March.
But the debt ceiling will remain the most important factor for investors until a resolution on the ongoing negotiations can be found.
Traditionally, markets have been more volatile closer to “Date X” – or the date on which the US would default – with the possibility of a default weighing most heavily on markets within two weeks. preceding this date.
“If date X is passed without formal default, we see the second quarter decline deepen a further 5% to 3750, but prove temporary,” the global economics and strategy team wrote on Friday. UBS in a note to clients.
“A one-week period with no coupon payments and defaults would cause stocks to drop up to 20% toward 3,400, and keep them at those lows through Q3 before partially recovering toward 3,800 by the end of the year. The very unlikely scenario of a non-payment of a coupon for a month would not only lead to an immediate drop of up to 30% in shares, but would also lead to a very weak recovery.
The S&P 500 closed at 4,191 on Friday.
Discussions of the debt ceiling will also feature more prominently in the conversation with investors going forward, as this week wraps up earnings season.
Entering Friday, 94% of the S&P 500 had reported earnings. On average, companies beat estimates by 6.5%, per Evercore ISI, while reporting lower profits for the second straight quarter.
Still, stocks have been rising since the start of the first quarter earnings season and the much-talked about impending recession has yet to impact markets.
“In thinking about the time of a recession, the consumer remains key,” wrote Julian Emmanuel, who leads Evercore ISI’s equity and portfolio strategy, in a note to clients on Friday.
“A resilient consumer was largely the theme of first quarter results, although banks and retailers noted some deceleration later in the quarter. A slowdown in momentum could put further pressure on estimates, in line with historical revision trends.”
Weekly schedule
Monday
Economic data : No notable economic data to publish.
Earnings: Ryanair (RYAAY), Zoom (ZM)
Tuesday
Economic data : S&P Global US Manufacturing PMI, May, preliminary reading (50.0 expected, 50.2 previously); S&P Global US Services PMI, May, preliminary reading (53.6 previously); New Home Sales, April (annualized rate of 660,000 expected, 683,000 previously); Sales of new homes, month on month, April (-3.4% expected, +9.6% previously);
Earnings: Autozone (AZO), BJ’s Wholesale Club (BJ), Dick’s Sporting Goods (DKS), Intuit (INTU), Lowe’s (L), Willams & Sonoma (WSM), Palo Alto Networks (PANW), Toll Brothers (TOL), Urban Outfitters (URBN)
Wednesday
Economic data : MBA mortgage applications (-5.7% previously); FOMC Minutes
Earnings: Abercrombie & Fitch (ANF), BMO (BMO), elf Beauty (ELF), Kohl’s (KSS), Nvidia (NVDA), Petco (WOOF), Red Robin (RRGB), Snowflake (SNOW)
THURSDAY
Economic data : Initial jobless claims (250,000 expected, 242,000 prior); Q1 GDP, second estimate (+1.1% at an annualized rate expected, +1.1% previously)
Earnings: Autodesk (ADSK), Best Buy (BBY), Burlington (BURL), Build-A-Bear (BLDR), Costco (COST), Deckers Outdoor (DECK), Dollar Tree (DLTR), Gap (GPS), Marvell (MRVL ), Medtronic (MDT), Ralph Lauren (RL), RH (RH), Ulta Beauty (ULTA), TD Bank (TD), Workday (WDAY)
Friday
Economic data : Personal income, month-over-month, April (+0.4% expected, +0.3% previously); Personal expenses, month after month, April (+0.4% expected, 0% previously); PCE Deflator, month on month, April (+0.3% expected, +0.1% previously); PCE Deflator, year-on-year, April (+4.6% expected, 4.6% previously); University of Michigan Consumer Sentiment May Final Reading (58.0 expected, 57.7 previously)
Earnings: Large lots (BIG)
Josh is a reporter for Yahoo Finance.
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