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Stock investors have a busy week ahead that includes key inflation data and earnings results from several top consumer brands.
Wall Street will be digesting a lot of housing data in the first part of the week, an area of the economy that is still creating a lot of debate in regard to which direction inflation is heading.
For what it’s worth, the May Consumer Price Index (CPI) earlier this month showed prices were rising at an annual rate of +3.3%, which marked a slowdown from April but is still far above the Federal Reserve’s +2.0% target rate. However, the so-called “supercore” rate, which strips out food, energy, and shelter costs, shows prices were rising at a rate of only +1.9%. Most of that difference came from shelter costs, which were up +5.4% from a year ago.
The Federal Reserve prefers to track the PCE “Core” Prices gauge, which strips out food and energy. Notably, shelter costs don’t count for as large a share of the PCE Prices gauge as CPI so tends to show inflation is running cooler than what CPI does
The May read for PCE Prices is due out on Friday.
There is no economic data on the calendar today.
Turning to earnings, we are still a few weeks away from Q2 2024 earnings season (starts July 17) but the calendar this week does include several notable releases.
On the tech stock front, Wall Street is highly anxious to hear results from Micron Technology after the market close on Wednesday. Analysts are predicting a whopping +78% jump in revenue, fueled by the growing demand for memory chips in artificial intelligence. A big miss from Micron could do some serious damage to the extreme optimism surrounding artificial intelligence.
Investors are also anxious to see earnings this week from several big household names, including FedEx and Carnival on Tuesday, General Mills and Levi Strauss on Wednesday, and Nike and Walgreens Boots Alliance on Thursday. Results from these brands will all provide some insights into the health of US consumers and the wider economy.
There are no big names on the earnings calendar today.
It’s also worth noting that the Fed on Wednesday will release bank “stress test” results. The Fed uses the tests to determine the amount of capital buffers banks must set aside to protect against shocks, which can impact profits.
They can also impact banks’ dividend and stock buyback plans. There is a wave of Fed speakers scheduled to speak this week.
Most on Wall Street are looking for the Fed to make two -25 basis-point interest rate cuts in 2024. It will be interesting to see if the Fed's commentary this week does anything to change that expectation. |
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Stock Market Has Its Longest Stretch Without -2% Sell-Off Since Financial Crisis: Wall Street’s climb to record highs has come with conspicuously little volatility. The S&P 500 has gone 377 days without a 2.05% sell-off. That’s the longest stretch for the benchmark since the great financial crisis, according to FactSet data compiled by CNBC. The index hasn’t experienced a gain of at least 2.15% in that time either. At a high level, the clouds of macro uncertainty have parted over the last 12 months as receding inflation provided much-needed clarity into the future path of monetary policy, said Adam Turnquist, chief technical strategist at LPL Financial. The changing narrative from rate hikes to rate cuts and recessions to economic resilience helped drag the VIX down to multiyear lows, ultimately shifting the backdrop for stocks to a low volatility from high volatility regime, he added. Many investors consider the CBOE Volatility Index the de facto fear gauge on the Street. Last month, it hit its lowest level going back to November 2020. On Friday, it traded around 13, near historically low levels. Source CNBC
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If a Company Says It’s Ethical, Investors Might Want to Be Skeptical: Certain words that many companies use in their annual reports—words like ethical, integrity and responsibility—are meant to convey trustworthiness. But new research suggests that companies that use such words in annual filings known as 10-Ks are associated with a variety of negative outcomes. Use of the words in annual statements, for instance, was correlated with a decreased interest in the stock of the company in question, the study found. Basing their findings on 21 words that seek to evoke a sense of trustworthiness, the authors also found that companies whose annual filings included the words tended to pay about $100,000 more in auditing fees than firms eschewing the words. Academic researchers often track auditing fees as a way to better understand corporate risk, where higher auditing fees often suggest more risk. Companies using trust words were also about 15% more likely to receive a comment letter from the Securities and Exchange Commission asking them to clarify information on their annual report than companies that didn’t use trust words. The takeaway, according to Myo Jung Cho, a professor of accounting at Pace University’s Lubin School of Business and the paper’s other co-author, is that rather than convey a company’s virtue, trust words may instead act as a red flag, highlighting potential pitfalls for investors and regulations. Source WSJ
July 4 Holiday Expected to See Record Number of Travelers: AAA projects 70.9 million travelers will head 50 miles or more from home over the Independence Day holiday travel period. For the first time, AAA looked at the entire July 4th week, plus the Saturday before and the Sunday after the holiday. This year’s projected number of travelers for that time period is a +5% increase compared to 2023 and an +8% increase over 2019. AAA projects a record 60.6 million people will travel by car over Independence Day week – that’s an additional 2.8 million travelers compared to last year. This year’s number also surpasses 2019 when 55.3 million people traveled by car over July 4th week. AAA car rental partner Hertz says Dallas, Denver, Salt Lake City, Los Angeles, and San Francisco are the cities displaying the highest rental demand during the holiday week. Gas prices are lower than last year when the national average was $3.53. Pump prices will likely continue going down leading up to Independence Day. At that point, they will likely level off and remain relatively stable until after Labor Day, similar to last year. An important caveat is hurricane season – underway now – which could affect gas prices should a storm negatively impact Gulf Coast oil production and refining centers. The number of air travelers is also expected to set a new record. AAA projects 5.74 million people will fly to their July 4th destinations. That’s an increase of nearly +7% compared to last year and a +12% increase over 2019. AAA booking data shows domestic airfare is -2% cheaper this Independence Day week compared to last year. Source AAA
Iowa Floods Require Helicopter Evacuations After Extreme Rainfall: Residents in a small town in northern Iowa were evacuated by helicopter on Saturday as rising floodwaters inundated streets and homes, flooding wells and making drinking water unusable, as torrential rain showers swept through the Midwest. Rock Valley officials said rescue workers also used boats and a dive team for the evacuation, adding floodwaters are too deep for trucks and tractors to effectively assist the evacuation effort. The National Weather Service issued a flood watch throughout northeast Iowa, including the city of Cedar Rapids, Iowa’s second-largest city, while a flood warning is in effect in the northwestern part of the state and along the Missouri River on the border of Nebraska. That flood watch remains in effect through Wednesday afternoon, as forecasters warn incoming rain showers and thunderstorms could pass through the area, bringing up to two inches of rain. Source Forbes
Some Parents Struggle to Stop Keeping Tabs on Grown Kids: Parents' unprecedented ability to keep tabs on their kids might be threatening some of the normal, healthy parts of young adulthood. Location-sharing tools can help give parents peace of mind and ease the logistical burdens of raising a family. But some parents want to keep that data flowing even after their children head off to college — a tight virtual leash at a stage that's traditionally been about independence. 84% of U.S. parents use some form of tracking to monitor their kids, according to a survey from Malwarebytes, a cybersecurity company. What starts as parents holding onto teens’ location for peace of mind can devolve into parents scolding them for staying out late on a Saturday or calling them every morning to wake them up for class. “You’re providing your child with training wheels,” says Pamela Rutledge, director of the Media Psychology Research Center, an independent research organization.. “They’re going to have to come off.” Source Axios
Home Furnishings Retailers Struggle As Fewer Houses Sell: Home furnishings retailers have yet to rebound from the post-pandemic slump, with major players from low- to high-end markets reporting drops in first-quarter sales—as rising mortgage rates and a related slump in home sales continue to weigh on demand for big-ticket furniture and home improvement projects. Sales for furniture and home furnishings in May were down -6.8% year-over-year, the biggest drop among all retail sectors analyzed, according to a monthly retail report released Tuesday by the Department of Commerce. Monthly sales of furniture and home furnishings stores in the U.S. soared by more than +200% year-over-year in April 2021, and kept increasing until the end of the pandemic, peaking in January 2023, according to Census Bureau data. The housing market slowdown after the post-pandemic home buying boom has further compounded these challenges, as fewer home purchases mean fewer large-scale furnishing projects. Major players in the industry, ranging from high-end to mass-market home furnishings retailers, have felt the brunt of this shift. The soft demand has especially impacted bigger-ticket items or home projects. The trend is highlighted in major retailers’ first-quarter earnings calls. Home Depot’s transactions for items over $1,000 decreased by 6.5% from the previous year, while average-ticket transactions dropped by 1.3%. Lowe’s reported a 7.6% annual decline in sales for items over $500, and Williams-Sonoma’s high-end brand, Pottery Barn, also saw a continued softness in higher-ticket furniture sales. Source Forbes
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