After Federal Reserve Chairman Jay Powell’s comments hinting at further interest rate hikes in 2023 sent all three major indexes lower last week, investors will once again be focused on next policy measures. the Fed with inflation data, two consumer confidence checks and results from Nike (NKE) highlighting the last week of June and the first half of 2023.
The Personal Consumer Expenditure (PCE) index, the Fed’s favorite inflation gauge, released Friday morning will be the biggest economic data release of the week.
Tuesday and Friday will bring consumer checks from the Conference Board and the University of Michigan, respectively, while housing data also dots the calendar.
On the earnings side, results from Nike, Carnival (CCL), Walgreens (WBA) and Rite Aid (RAD) will be the main highlights.
Investors will be looking to end a strong month, quarter and first half of 2023 on a positive note after posting their worst week in months.
All three major averages ended the week lower, with the Nasdaq Composite (^IXIC) suffering its first weekly loss in the last eight, while the S&P 500 (^GSPC) posted a five-week winning streak. However, stocks are still largely up in June.
Going into the last week of the month, the Nasdaq is up over 7% while the S&P 500 is up nearly 5% and the Dow Jones Industrial Average (^DJI) is just over 2% higher. . In the first half of the year, the Nasdaq remains up more than 28%, with the S&P sitting on gains north of 13%.
During two days of testimony on Capitol Hill, Powell called inflation “more persistent than expected,” adding that the central bank has “a long way to go” to bring inflation down. With limited data until the Fed’s next policy announcement on July 26, Friday’s inflation data will be watched even more closely.
Last week, Powell referred to the “grassroots” PCE as particularly stubborn.
Friday’s data is expected to show “core” PCE – which excludes food and energy costs – rose 4.7% from a year earlier in May, unchanged from April. The Fed is targeting inflation of 2% on average. Over the past month, the “core” PCE is expected to rise 0.4% in May.
“Core PCE inflation in May is expected to be weaker (we expect 0.29% MoM), but we expect inflation for non-housing services to remain stubbornly elevated in the coming months,” the report wrote. Citi team of economists in a note Friday. “The resurgence of the housing market further raises the upside risks for 2024 inflation.”
Data on new home sales and the S&P CoreLogic Case-Shiller US National Home Price Index are due Tuesday. Economists forecast house prices fell 2.6% year-on-year in April.
On the earnings front, Nike’s results will headline the list of reporting companies. The country’s leading sportswear brand has made progress in offloading excess inventory in recent quarters. But while the company has already signaled that it has reached its peak in inventory bloat, some Wall Street analysts are still concerned that inventory headwinds could weigh on gross margin growth.
Nike’s report will provide a clearer picture of the state of wholesale retail inventory after Foot Locker (FL) warned of problems in its latest quarterly earnings report.
“Recent [North America] & Europe Activewear channel audits clearly show that mass activewear demand has potentially slowed, leaving a significant inventory glut in the industry that is currently being promoted…a potential headwind that could exert pressure on NKE’s revenue and margin,” Morgan Stanley Equity Analyst Alex Straton wrote in a note Tuesday.
Overall, markets could be looking for fresh catalyst as the AI-driven rally in tech stocks overtook other dynamic trades to end the week.
As Yahoo Finance’s Jared Blikre pointed out on Friday, investors appeared to be shedding some recent gainers to end the week, with semiconductors falling and Bitcoin hitting a new 52-week high.
Fundstrat’s head of research, Tom Lee, wrote in a note on Friday that last week’s withdrawal was “overdue”.
“The obvious question for everyone is whether this 2% pullback represents a local top (or even a major top) or is it a shorter-term pullback that needs to be bought,” wrote Lee.
Lee says bearish stock markets will point to more Fed rate hikes, the potential for lower second-half earnings and a 1999-like bubble in AI. But Lee remains in camp as inflation cools and thinks that will play out in the coming week with PCE and housing data.
“To us, this looks more and more like an economy sliding into expansion, not recession,” Lee wrote. “And that makes early cycle/risk positioning more appropriate.”
Weekly schedule
Monday
Economic data: Dallas Fed manufacturing activity (-20 expected, -29.1 previously)
Earnings: Carnival (CCL)
Tuesday
Economic data: New home sales, May (675,000 annualized rate expected, 683,000 previously); New home sales, month over month, May (-1.2% expected, +4.1% previously); Durable goods, May (-0.9% expected, +1.1% previously); Conference Board Consumer Confidence (104 expected, 102.3 previously); S&P CoreLogic Case-Shiller, 20-City Composite Home Price Index, month over month, April (+0.35% expected, +0.45% previously); S&P CoreLogic Case-Shiller 20-City Composite House Price Index, YoY, April (-2.6% expected, -1.15% previously)
Earnings: Jefferies Financial Group (JEF), Walgreens Boots Alliance (WBA)
Wednesday
Economic data: MBA mortgage applications, week ending June 23 (+0.5% before); Month-on-month wholesale inventories, May (-0.1% expected, -0.1% previously); Retail inventories month-over-month, May (0.2% prior)
Earnings: Blackberry (BB), General Mills (GIS), Micron (MU)
THURSDAY
Economic data: GDP for the first quarter, third estimate (+1.4% at an annualized rate expected, +1.3% previously); First quarter personal consumption, third estimate (3.8% expected, 3.8% before); Initial jobless claims, week ended June 24 (265,000 expected, 264,000 previously); Continuing UI claims, week ended June 17 (1.78 million expected, 1.76 million previously); Home sales pending month-over-month, May (-0.5% expected, 0.0% previously)
Earnings: McCormick (MKC), Nike (NKE), Rite Aid (RAD)
Friday
Economic News: Personal income, month on month, May (+0.4% expected, +0.4% previously); Personal expenses, month on month, May (+0.2% expected, +0.8% previously); PCE inflation, month on month, May (+0.1% expected, +0.4% previously); PCE inflation, year-on-year, May (+3.8% expected, +4.4% previously); PCE “Core”, month on month, May (+0.4% expected, +0.4% previously); PCE “Core”, year-on-year, May (+4.7% expected; +4.7% previously); University of Michigan Consumer Sentiment June Final Reading (63.9 expected, 63.9 previously)
Earnings: Constellation Marks (STZ)
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