Traders work on the floor of the New York Stock Exchange (NYSE) on March 28, 2022 in New York City.
Spencer Platt | fake images
A rough April for Wall Street has seen the S&P 500 drop for three straight weeks, and investors will now grapple with a loaded list of earnings reports and key inflation data.
Rising interest rates and stubbornly high inflation have weighed on stocks and raised concerns about an economic slowdown. The coming days will bring new looks at some of the world’s largest companies, as well as economic growth.
big tech profits
Next week features big reports from almost every industry, but tech stocks will be a main focus.
Microsoft and Alphabet will report their latest results after the bell on Tuesday, followed by Facebook parent Meta Platforms on Wednesday and Apple and Amazon on Thursday.
Earnings season has delivered strong results so far, with higher rates largely in line with recent quarters, though earnings expectations had dimmed in recent months as Wall Street analysts surveyed the choppy economy.
“The market has done a pretty good job of lowering expectations since the beginning of the year,” said Shawn Cruz, chief trading strategist at TD Ameritrade.
However, there have certainly been negative reporters, and perhaps none as much as Netflix. Shares of the video streaming giant fell 35% on Wednesday after revealing a surprise loss of subscribers. The drop appeared to hit not only other streaming stocks like Warner Bros. Discovery, but also other more speculative names like solar energy works, which fell on a broadly strong trading day.
With the size of tech companies reporting next week, investors should be aware of expanding business potential. Cruz said she was watching to see if there were signs that economic pressures were hurting subscription businesses in general, such as software and cybersecurity stocks, rather than just a streaming video story.
“The market was rewarding those companies, those companies that went out and signed contracts … but now that can almost become a double-edged sword,” Cruz said.
“When you’re a growing company, and you go from not only flat growth to moderate growth, but also user saturation, you’re really going to take a hit,” he added.
Inflation will also be in the spotlight for investors in the coming week, with the personal consumer spending index, the Fed’s preferred measure of inflation, due out on Friday before the bell. The core PCE jumped 5.4% in February.
The core reading strips out volatile food and energy prices, but these have risen so high in recent months that they are taking a heavy toll on consumers’ wallets.
“Rising inflation would not be a problem if it were driven entirely by supply-side constraints, related to food and energy, but central banks cannot sit back and wait for it to normalize,” said Steven Major. , global head of fixed income research at HSBC, said in a note to clients on Friday.
Traders have been pricing in an increasingly hawkish Federal Reserve in recent weeks. As of Friday, the Fed futures market implied a 50 basis point increase in May and a further 75 basis point increase in June.
Fed Chairman Jerome Powell told an International Monetary Fund panel Thursday that the Fed could not be complacent about some estimates showing inflation has peaked and said the “initial burden” of policy more stringent may be appropriate. He said it was “absolutely essential” to achieve price stability.
“The actual peak may have been in March, but we don’t know, so we’re not going to count on that,” Powell said.
Fed officials have been a bit contradictory on the way forward in recent weeks, with some pushing for an aggressive stance and a possible 75 basis point hike, while others take a more wait-and-see approach.
Ultimately, it may be that the inflation data will force the Fed to raise rates.
“In our view, given the dovishness of this group, the Fed will only deliberately risk a recession if inflation stalls above 3%. So instead of looking forward to the next Fed speaker, we “We focus on one question: Is the economy on a path to acceptable or unacceptable inflation? Anything else is hot air,” Ethan Harris, global economist at Bank of America, said in a note to clients on Friday.
Other economic data
The PCE release will follow various other important economic news throughout the week.
On Tuesday, the S&P/Case-Shiller home price index and new home sales data will provide an updated view of the US housing market. Tuesday’s earnings from DR Horton will also complement that picture.
And on Thursday, the preliminary first-quarter GDP reading will be closely watched as investors look for signs of an economic slowdown.
week ahead calendar
Profits: Coca-Cola, Activision-Blizzard, Otis, Whirlpool, Zions Bancorp
Profits: Microsoft, Alphabet, Visa, PepsiCo, UPS, Canadian National Railway, Texas Instruments, General Electric, Mondelez, General Motors, Chipotle, DR Horton, Capital One, Warner Bros. Discovery
8:00 am Building Permits, Durable Goods Orders
9:00 am S&P/Case-Shiller Home Price Index
10:00 am Consumer Confidence, New Home Sales
Profits: Meta, T-Mobile, Amgen, Qualcomm, Boeing, Canadian Pacific, PayPal, Norfolk Southern, Ford, Humana, Kraft Heinz, Discover Financial, O’Reilly Automotive
8:30 a.m. Bulk Orders
10:00 am Pending Home Sales
Profits: Apple, Amazon, Mastercard, Eli Lilly, Merck, Thermo Fisher, Comcast, Intel, McDonald’s, Caterpillar, Northrop Grumman, Keurig Dr. Pepper, Twitter, KLA Corp. Altria, Robinhood
8:30 a.m. Jobless Claims, Q1 GDP
11:00 am Kansas City Fed Manufacturing Index
Profits: Exxon, Chevron, AbbVie, AstraZeneca, Bristol-Myers Squibb, Honeywell, Charter, Colgate-Palmolive, Phillips 66, LyondellBasell, Bloomin’ Brands, TAL Education
8:30 am PCE, personal entry
9:45 a.m. Chicago PMI
10:00 a.m. Consumer Sentiment from the University of Michigan
— CNBC’s Michael Bloom contributed to this report.