What you need to know this week
The global business elite is gathering in the mountains of Davos, Switzerland this week amid a backdrop of turbulent markets and uncertain economic prospects.
For the first time in over two years, CEOs, politicians and billionaires are set to gather at the World Economic Forum after a pandemic-induced break. Russia’s war in Ukraine, the COVID-19 pandemic and concerns about economic gloom will be among the key topics discussed as the world’s top leaders face the most uncertain prospects for global cooperation for years.
A top-of-mind problem for many Davos participants will no doubt be the recent turbulence in the financial markets, as the S&P 500 has just ended its seventh consecutive week of losses, the longest in a row since 2001. The benchmark index has fallen seven weeks in a row. only twice since 1980 according to market data.
The S&P 500 slipped into bear market territory – defined as a 20% drop from recent highs – intraday on Friday, but a rally in the late afternoon prevented a closure below that line. In the coming week, traders will keep an eye on 3,837.24, with a close below this level confirming the S&P 500’s first bear market since 2020.
On the economic front, minutes from the Federal Reserve’s meeting on May 4 on Wednesday will be issued, and they are expected to give investors a better picture of where politicians see interest rates heading into 2022. Uncertainty about the pace and size of the Federal Reserve’s interest rate. the upward cycle has put pressure on stock markets, with investors preparing for an economic downturn as signs of inflation gaining ground in the economy’s pockets.
A rash of U.S. economic data will also be closely monitored by traders, especially Thursday’s second estimate of first-quarter GDP growth. The nation’s gross domestic product – the broadest measure of economic activity – fell at an annual rate of 1.4% between January and March, as persistent supply chain imbalances, inflation and war disruption in Eastern Europe weighed on growth. The updated estimate is expected to show a revised contraction of 1.3% according to Bloomberg’s estimates.
Elsewhere on the economic calendar, the Bureau of Economic Analysis is scheduled to release a fresh read on its monthly personal spending (PCE). PCE, the Federal Reserve’s preferred inflation target, will give markets the latest look at how fast prices are rising across the country. Economists expect PCE to slow down slightly, recording a 0.2% monthly increase in April, down from last month’s reading of 0.9%, according to Bloomberg data. The reading will still mark the 17th monthly increase in a row and mark a 6.2% increase in the index compared to last year.
Corporate earnings also remain in focus after major retailers Walmart (WMT) and Target (TGT) intimidated investors last week when retailers cut forecasts and told investors their stock channels had been inflated. Target erased a quarter of its market value and Walmart shares fell 20% – the biggest drop since the 1987 crash. The companies also pulled the overall retail sector down along with them – the SPDR S&P Retail ETF (XRT) fell over 9% last week.
“Investors have struggled with the three ‘Cs’ so far this year: central banks, conflict in Ukraine and China’s recurring closures,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “This past week, we had to add another ‘C’ that compresses profit margins from large retailers.”
“There was certainly a payback from the pandemic-induced profit increase that many companies experienced, but this payback may be greater than originally assumed,” Jacobsen noted. “Businesses have to deal with higher input costs, consumers pressured by high prices and changing consumption patterns.”
Reports from several retailers are underway next week, with results from names including Macy’s (M), Dick’s Sporting Goods (DKS) and Ulta Beauty (ULTA). The results are likely to provide investors with more clarity about the state of US consumers and the resilience of corporate profits in the face of persistent inflation.
“Unfortunately, there is no safe haven,” ER Shares CEO Eva Ados told Yahoo Finance Live. “When we look at the news that came out of consumers’ estimates and staples, it shows the struggles that companies have regardless of their size, and ironically, it is the sectors – groceries and consumer estimates – that are considered safe havens in a bad economy. market.”
A weak earnings season is coming to an end. S&P 500 companies reporting results for the first quarter have seen the largest negative price reaction to positive surprises in earnings per share. share since 2011, according to data from FactSet.
As of Friday, 95% of the companies in the S&P 500 have reported earnings for the first quarter, with 77% reflecting the actual earnings per. share above the average EPS estimate. However, companies that have reported positive earnings surprises have seen an average price drop of 0.5% two days before the earnings announcement to two days after the earnings announcement, per. set of facts. This percentage drop is well below the five-year average price increase of 0.8% in the same window for companies reporting positive earnings surprises.
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Financial calendar
Monday: Chicago Fed National Activity Index, April (0.44 in the previous month)
Tuesday: S&P Global US Manufacturing PMI, preliminary May (57.8 expected, 59.2 in the previous month); S&P Global US Services PMI, preliminary May (55.5 expected, 55.6 in previous month); S&P Global US Composite PMI, preliminary May (55.5 expected, 56.0 in previous month); Richmond Fed Manufacturing Index, May (12 expected, 14 in previous month); Sale of new homes, April (750,000 expected, 763,000 during the previous month); Sale of new homes, month-over-month, April (-1.7%, -8.6% in the previous month)
Wednesday: MBA loan applications, week ending May 20 (-11.0% in previous week); Commodities for durable goods, provisional April (0.6% expected, 1.1% in previous month); Durable goods excluding transport, provisional April (0.6% expected, 1.4% in previous month); Non-defense capital goods orders excluding aircraft, provisional April (0.5% expected, 1.3% during the previous month) Non-defense capital goods shipments excluding aircraft, provisional April (0.5% expected, 0.4% during the previous month); FOMC Minutes, 4 May
Thursday: GDP Annualized, quarter-over-quarter, 1st quarter second (-1.3% expected, -1.4% earlier); Personal consumption, quarter-over-quarter, 1st quarter second (2.8% expected, 2.7% previously); GDP price index, quarter-over-quarter, 1st quarter second (8.0% expected, 8.0% earlier); Core PCE, quarter-over-quarter, 1st quarter second (5.2% expected, 5.2% earlier); Initial unemployment claim, week ended May 21 (210,000 expected, 218,000 during previous week); Current requirements, week ended 14 May (1,310 million expected, 1,317 million in previous week); Pending home sales, month-over-month, April (-1.9% expected, -1.2% in previous month); Pending Home Sale NSA, Year-on-Year, April (-8.9% in Previous Month); Kansas City Fed Manufacturing Index, May (20 Expected, 25 in the Previous Month)
Friday: Advance Goods Trade Balance, April (USD -114.8 billion expected, -125.3 billion during the previous month, revised to -127.1 billion); Wholesale stocks, month-over-month, preliminary April (2.0% expected, 2.3% in previous month), personal income, month-over-month, April (0.5% expected, 0.5% in the previous month); Personal consumption, month-over-month, April (0.6% expected, 1.1% in previous month); Actual personal consumption, month-over-month, April (0.5% expected, 0.2% in previous month); Retail stocks, month-over-month, April (2.0% in previous month); PCE deflator, month-over-month, April (0.2% expected, 0.9% in previous month); PCE deflator, year-on-year, April (6.2% expected, 6.6% in previous month); PCE Core Deflator, month-over-month, April (0.3% expected, 0.3% in previous month); PCE core deflator, year-on-year, April (4.9% expected, 5.2% in previous month); University of Michigan Sentiment, May Finals (59.1 expected, 59.1 in previous month); University of Michigan Current Conditions, May Finals (63.6 in the previous month); University of Michigan Expectations, May Finals (56.3 in the previous month); University of Michigan 1-year inflation, May final (5.4% over the previous month); University of Michigan 5-10-year inflation, May final (3.0% in the previous month)
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Earnings calendar
Monday
Before the market opens: No notable reports are scheduled for release.
After Market Closing: Zoom Video Communications (ZM), Advance Auto Parts (AAP), Nordson (NDSN)
Tuesday
Before the market opens: Autozone (AZO), Best Buy (BBY), Abercrombie and Fitch (ANF), Ralph Lauren (RL), Petco (WOOF)
After market closure: Nordstrom (JWN), Agilent Technologies (A), Toll Brothers (TOL)
Wednesday
Before the market opens: Dick’s Sporting Goods (DKS), Express (EXPR), Bank of Montreal (BMO)
After market close: Nvidia (NDA), Box (BOX), Nutanix (NTNX)
Thursday
Before the market opens: Macy’s (M), Dollar Tree (DLTR), Dollar General (DG), Ulta Beauty (ULTA), Lions Gate (LGF), VMware (VMW), Alibaba (BABA), Burlington Stores (BURL), Jack in the Box (JACK), Buckle (BKE)
After Market Closing: Costco (COST), Dell Technologies (DELL), Gap (GPS), Autodesk (ADSK), Workday (WDAY), Sumo Logic (SUMO), American Eagle Outfitters (AEO)
Friday
Before the market opens: Big Lots (BIG), Pinduodo (PDD)
After market closure: No notable reports are scheduled for release.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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