Monthly retail sales and quarterly results from the likes of Walmart (WMT) and Target (TGT) will provide a detailed update on the consumer situation next week as investors closely monitor debt ceiling developments outside of Washington.
Home Depot (HD) quarterly retail sales and earnings on Tuesday morning will set the tone for a busy week of updates on consumer spending trends.
After declining 1% month over month in March, retail sales are expected to grow 0.8% in April, according to Bloomberg data. A busy week for retail earnings will also include results from Target and TJX (TJX) on Wednesday, with Walmart and Alibaba (BABA) posting on Thursday.
Outside of retail numbers and housing data which is led by existing home sales and homebuilder sentiment, it will be a relatively quiet week on the economic data front.
In Washington, D.C., debt ceiling deliberations between President Joe Biden and House Speaker Kevin McCarthy are expected to continue early in the week as the government approaches the so-called “tenth date” when the government’s borrowing capacity runs out.
Elsewhere in Washington, former top executives of Silicon Valley Bank and Signature Bank are expected to testify before the Senate on Tuesday.
The S&P 500 (^GSPC) ended the week lower despite inflation rising at its slowest annual rate in two years. Weak consumer sentiment and persistent banking concerns sent stocks lower for the weekend.
Year-to-date, the Nasdaq is up more than 17%, the S&P 500 is up 7% and the Dow Jones Industrial Average is clinging to gains of just under 0.5% over the year.
Lower trade from higher-income consumers, inventory levels, and trends for the current quarter will be the focus for investors during this week’s retail earnings reports. At Target, analysts expect same-store sales to rise 1.25% during the first quarter; At Walmart, same-store sales are expected to rise 5%, according to data from Bloomberg.
Foot traffic across supermarkets fell in March and April, according to data from Placer.ai, and Wall Street analysts expect that to show in this week’s results.
“As we head towards earnings, we believe WMT is one of the best spots in our coverage and our data checks support our view,” Jefferies analysts wrote in a note to clients. “For TGT, we are downgrading comp for the first quarter and fiscal year [estimates] We also see some potential weakness.”
Investors will be focused not only on how the companies start the year but also on what management teams say about consumer trends in the current quarter, especially after the nation’s largest online retailer has already warned of a slowdown.
“The uncertain economic environment and ongoing inflationary pressures continue to be a factor and we believe it continues to drive cautious spending across consumers,” Amazon Chief Financial Officer Brian Olsavsky said on the company’s earnings call last month. “This means our customers are looking to stretch their budgets further, and they are focused on value.”
Data from Bank of America last week also indicated a slowdown, as total retail sales excluding auto spending fell 2.3% year over year according to the company’s credit card data.
“We expect a benefit from lower trade this year as inflationary pressures persist, especially given higher unemployment rates,” Bank of America’s data analytics team wrote in a note to clients on Friday.
Overall, first-quarter earnings for S&P 500 companies beat expectations at the highest rate since the third quarter of 2021, according to FactSet. But investors were in no rush to reward these reports.
On average, companies that reported earnings that beat expectations saw their shares increase by an average of 0.3% in the period covering the two days before and two days after the earnings report. That’s well below the five-year average price increase of 1% for stocks of companies that beat estimates over the same period.
Since the start of the first-quarter earnings season, the S&P 500 has been largely unchanged — the index entered bank earnings at 4,146 and closed at 4,124 on Friday.
“There’s a lot to unpack right now,” Jack Manley, global market analyst at JPMorgan Asset Management, told Yahoo Finance Live last week.
“There is a lot to take in right now. And without any kind of real clarity on these things, it’s hard for the markets to move up or down meaningfully, right? All the markets really want at the end of the day, is news. And no news is Bad News “.
Weekly calendar
Monday
economic data: Empire State Manufacturing, May (-4 expected, 10.8 previously)
Earnings: Rumble (RUM), Tower Semiconductor (TSEM)
Tuesday
economic data: Retail Sales MoM, April (+0.8% expected, -1% prior); Retail Sales Excluding Automotive and Gas, MoM, April (+0.2% expected, -0.3% prior); Industrial Production, on a monthly basis, April (0% expected, +0.4% prior); Homebuilding Sentiment, May (45 expected, 45 previously)
Earnings: Home Depot (HD), On Holding AG (ONON) Tencent Music (TME)
Wednesday
economic data: MBA Mortgage Applications (+6.3% over the previous week); Housing Starts, MoM, April (-1.4% expected, -0.8% prior); Building Permits, MoM, April (0.0% expected, -8.8% prior)
Earnings: Bowlero (BOWL), Boot Barn (BOOT), Cisco Systems (CSCO), Jack in the Box (JACK), Target (TGT), TJX Companies (TJX), Take-Two Interactive (TTWO)
Thursday
economic data: Initial Weekly Jobless Claims (252,000 expected, 264,000 previously); continuing claims (1.82 million expected, 1.81 million previously); Existing Home Sales, April (-3.2% expected, -2.4% prior)
Earnings: Alibaba (BABA), Apple Materials (AMAT), Bath & Body Works (BBWI), Canada Goose (GOOS) Farfetch (FTCH), Ross Stores (ROST), Walmart (WMT)
Friday
There are no notable economic reports.
earnings: Deere & Company (DE), Foot Locker (FL)
Josh is Yahoo Finance Correspondent.
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