A rough April for Wall Street has seen the S&P 500 slide for three straight weeks, and now investors will grapple with a loaded slate of earnings reports and key inflation data.
Rising interest rates and persistently high inflation have weighed on stocks and created concerns about an economic slowdown. The coming days will bring fresh looks at some the world’s biggest companies, as well as economic growth.
Big Tech earnings
The week ahead features big reports from nearly every industry, but tech stocks will be a main focus.
So far, the earnings season has delivered solid results, with beat rates largely in line with recent quarters, though expectations for earnings had declined in recent months as Wall Street analysts surveyed the choppy economy.
“The market did a pretty sufficient job of trimming down expectations since the year started,” said Shawn Cruz, head trading strategist at TD Ameritrade.
There have certainly been negative reporters, however, and maybe none as much as Netflix. Shares of the streaming video giant dropped 35% on Wednesday after revealing a surprise subscriber loss. The drop appeared to weigh on not just other streaming stocks such as Warner Bros. Discovery but also some other more speculative names, like solar energy plays, which declined on a broadly strong market day.
With the size of the tech firms reporting next week, that spreading trading potential should be something investors are aware of. Cruz said he was watching to see if there were signs that economic pressures were hurting subscription businesses more broadly, such as software and cybersecurity stocks, as opposed to just being a streaming video story.
“The market was rewarding those companies those companies that were going out there and getting contracts signed … but now that can almost turn into a double-edged sword where,” Cruz said.
“When you’re a growth company, and you go from not just flat to moderating growth but user saturation, you’re really going to get hit hard,” he added.
Inflation will also be in focus for investors in the week ahead, with the personal consumer expenditures index — the Fed’s preferred measure of inflation — set for release Friday before the bell. The core PCE jumped 5.4% in February.
The core reading strips out volatile food and energy prices, but those have been driven so high in recent months that they are taking a serious bite out of consumers’ wallets.
“The surge in inflation would not be a problem if it was entirely generated by supply constraints, related to food and energy, but central banks cannot just sit back and wait for it to normalise,” 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 aggressive Federal Reserve in recent weeks. As of Friday, the Fed futures market implied a 50 basis point hike in May and an additional 75 basis point hike in June.
Fed Chair Jerome Powell said at an International Monetary Fund panel on Thursday that the Fed couldn’t be complacent with some estimates showing that inflation has peaked and said that “front-end loading” the tighter policy may be appropriate. He said it was “absolutely essential” to achieve price stability.
“It may be that the actual peak was in March, but we don’t know that, so we’re not going to count on it,” Powell said.
Fed officials have been a bit contradictory on the path forward in recent weeks, with some pushing for an aggressive stance and a possible 75 basis point hike while others are espousing a more of a wait-and-see approach.
Ultimately, it may be that the inflation data forces the Fed’s hand on rate hikes.
“In our view, given the dovishness of this group, the Fed will only deliberately risk a recession if inflation gets stuck above 3%. Hence, rather than wait with baited breath for the next Fed speaker, we are focused on one question: is the economy on a path toward acceptable or unacceptable inflation. All the rest is talk,” Ethan Harris, global economist at Bank of America, said in a note to clients on Friday.
Other econ data
The PCE release will follow several other major pieces of economic news throughout the week.
On Tuesday, the S&P/Case-Shiller home price index and data on new home sales will provide an updated view of the U.S. housing market. D.R. Horton earnings on Tuesday will also supplement that picture.
And on Thursday, the preliminary read of first-quarter GDP will be closely watched as investors look for hints of an economic slowdown.
Week ahead calendar
Earnings: Coca-Cola, Activision-Blizzard, Otis, Whirlpool, Zions Bancorp
Earnings: Microsoft, Alphabet, Visa, PepsiCo, UPS, Canadian National Railway, Texas Instruments, General Electric, Mondelez, General Motors, Chipotle, D.R. Horton, Capital One, Warner Bros. Discovery
8:00 a.m. Building permits, Durable goods orders
9:00 a.m. S&P/Case-Shiller Home Price Index
10:00 a.m. Consumer confidence, New Home Sales
Earnings: Meta, T-Mobile, Amgen, Qualcomm, Boeing, Canadian Pacific, PayPal, Norfolk Southern, Ford, Humana, Kraft Heinz, Discover Financial, O’Reilly Automotive
8:30 a.m. Wholesale orders
10:00 a.m. Pending home sales
Earnings: 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, First-quarter GDP
11:00 a.m. Kansas City Fed Manufacturing Index
Earnings: Exxon, Chevron, AbbVie, AstraZeneca, Bristol-Myers Squibb, Honeywell, Charter, Colgate-Palmolive, Phillips 66, LyondellBasell, Bloomin’ Brands, TAL Education
8:30 a.m. PCE, personal income
9:45 a.m. Chicago PMI
10:00 a.m. University of Michigan consumer sentiment
— CNBC’s Michael Bloom contributed to this report.