US corporate earnings season is coming to an end as more than +90% of S&P 500 companies have already reported Q1 results.

Somewhat surprising to many, 78% of the companies that have reported have beaten Wall Street estimates.

Investors this week will be focused on the latest updates on consumer spending, a slew of Federal Reserve speakers - including Fed Chair Jerome Powell - and Washington's debt ceiling talks.

Retail Sales for April are due out Tuesday, with economists expecting a gain of around +0.7% following a decline of -1.0% in March. That will coincide with earnings from major retailers Home Depot on Tuesday; Target, and TJX on Tuesday; and Walmart on Thursday.

Earnings commentary by executives will be of particular interest as investors look for more real-time updates on the health of consumers as inflation continues to run hot. Consumer Sentiment on Friday showed a big dip in current sentiment as well as expectations, while both the year-ahead and five-year expectations for inflations bumped up.

US household spending recently rose, but many argue that growth is slowing, and that higher prices might be starting to take more of a toll.

Consumer confidence tumbled -9% in May from April. On the surface those reads do not bode well for consumer spending. Typically, rising inflation expectations are problematic for the Fed, which does watch that measure closely.

Currently, the Fed's inflation fight would likely benefit from the US consumer pulling back. Most on Wall Street still think the Fed will pause at the June 13-14 meeting with the CME Fed Watch Tool giving it nearly 85% odds of "no change".

Traders have also raised the odds of a rate cut at the September meeting to nearly 50%. Expectations that a rate cut could happen in July have come back down to around 30%.

Stock bears continue to argue that with inflation still running more than double the Fed's target rate and the labor market continuing to witness robust wage gains, the chance of a July cut is realistically closer to zero. In fact, most bears don't believe rate cuts are likely at any point this year outside of the economy taking a pretty dramatic turn for the worse.

Keep in mind, the Fed in March estimated that unemployment in 2023 would rise to 4.5% while interest rates would peak at +5.1%.

The Fed's benchmark rate is now in that peak target range but the unemployment rate is at just 3.4%, which means we have an even stronger jobs market which matches a 54-year low set back in January. Meaning the Fed is comfortable keeping rates at current levels even if some -1.5 million jobs are lost.

So in that respect, the Fed itself has set a pretty high bar for making rate cuts and the job market doesn't seem to be anywhere close to hitting it. Investors hope to gain some more insight from Fed officials this week with at least a dozen speaking events scheduled. The highlight will be Fed Chair Powell, who will be joined by former Fed Chair Ben Bernanke, as the two participate in a panel discussion on Friday.

The only economic data today is Empire State Manufacturing. As for the debt ceiling battle in Washington, the White House said some progress was made in talks over the weekend. Congressional party leaders are supposed to meet with President Biden this week but a date has not yet been announced. Investors don’t necessarily believe that Congress will allow the US to default on its debt but many are keen to avoid the volatility that could rise as the deadline gets closer.

Keep a close eye on the war in Ukraine, as there are rumors that things are intensifying. Also keep a close eye on Turkey, where the world will be awaiting the results of one of the most crucial elections in their country’s history. Erdogan, the longtime Turkey leader has towered over Turkish politics for two decades, tightening his grip over the country and eroding democratic institutions. Now, he faces a run-off election in a couple of weeks against his opponent, Kemal Kilicdaroglu. If Erdogan's rule comes to an end it could have far-reaching geopolitical consequences.

Fund Managers Continue to Cut Stockholdings: The stress of lingering inflation, higher interest rates, and a slowing economy have driven fund managers to cut their stockholdings to their lowest levels relative to bonds since 2009. Institutions have pulled a net $333.9 billion from stocks over the past 12 months, according to S&P Global Market Intelligence data, while individual investors have yanked another $28 billion. Billions have flowed into cash equivalents, driving total assets in money markets to a record $5.3 trillion as of May 10, according to the Investment Company Institute. Source WSJ

US Credit-Card Debt Jumps Nearly 20%: U.S. credit-card debt hit $917 billion in the first three months of the year as consumers tried to cope with higher prices, according to data from TransUnion, a rise of nearly 20% year on year. Balances for unsecured personal loans also smashed records at $225 billion, rising about 26% in the first quarter from a year ago. Source Marketwatch

Blue-Collar Jobs Continue to Gain Strength: Data shows that if you want security, blue-collar service jobs are the way to go. For decades before the pandemic, employment in manufacturing had been tumbling from the highs last seen in the 1970's. The government has poured billions into projects devoted to bringing manufacturing jobs back stateside and so far, it seems to be working. The labor market has been "shockingly resilient," keeping the country afloat and helping avert a recession. Construction last month added +15,000 jobs, as that sector's employment sits near historic highs, while manufacturing added +11,000 jobs, part of a steady uptick since 2020. Source Business Insider

Hertz Seems to be Going All-In on Electric: Hertz, the world’s third-biggest car-rental firm is pushing to have a quarter of its fleet be electric by the end of next year. The company plans to have 25% of its 500,000 vehicle fleet be electric by the end of 2024, up from 10 percent now, as it accelerates purchases under its deals to buy 330,000 vehicles from Tesla, Polestar, and General Motors. These deals began to roll out last year, after Hertz’s first Teslas hit the road in 2021 and experiments with rental EVs extended back over the past decade. GM vehicles are beginning to arrive in quantity now, Hertz CEO Stephen Scherr said on the company’s earnings call. Scherr added that he thinks the drop in price on EVs is an encouraging proposition for Hertz. Source CNBC

Hot Demand is Pushing Up Overseas Travel Prices: It’s going to be an expensive summer for those vacationing overseas. International travel demand is booming, but so are airfares and hotel room rates. While that’s going to hit the wallets of consumers, it should bolster some travel stocks in the months ahead. Airfares to Europe and Asia this summer are at their highest in more than five years, according to data from online travel agency Hopper. The average price of a round trip to Europe is now $1,167, or 36% higher than at the same time in 2019. Among major U.S. carriers, United Airlines stands out for its exposure to international travel. The airline is expanding its overseas capacity by 25% to meet demand. Pent-up demand means that the season should be good for hotel operators. The signs are already there. First-quarter earnings revealed surging room rates, improving occupancy, and strong revenue per available room, or RevPAR—a closely watched industry metric. Source Barrons

Conferences Are Back, Boosting City Economies: Convention halls across the country are filling up again, restoring a vital source of economic fuel that had been cut off during the pandemic and was slow to recover in many cities. The Events Industry Council, a federation of meeting-industry trade groups, said its indexes that track conference and hotel demand in North America surpassed 2019 levels in the fourth quarter. Attendance at in-person business conferences was higher in the first three months of this year compared with the same time frame in 2019 at gatherings across the country that use Cvent Holding’s event-planning software, according to the company. Cvent said 100,000 event planners use its platform. Some cities are betting on the postpandemic comeback of business events. Craig Davis, chief executive of Visit Dallas, a nonprofit that promotes travel to the city, said convention center business is close to prepandemic levels so far this year. Mr. Davis added that after the Sept. 11 terrorist attacks in 2001 and the 2008 financial crisis some people said that business travel and conferences wouldn’t recover. “They have been calling for our death many, many times,” he said. Source WSJ

America's Five-Year Sports Betting Cash Chase: Five years ago the Supreme Court overturned the Professional and Amateur Sports Protection Act, launching what has become a massive legal sports betting industry. Since the bill was overturned, Americans have legally wagered over $220 billion on sports, generating over $17 billion in revenue for sportsbooks and $3 billion in state and local taxes. 33 states (plus Washington, D.C.) have live, legal markets, four states have legalized betting but haven't begun operations, and another 10 have active legislation or ballot initiatives. Every major league has official betting partners, and 11 different pro stadiums have or are planning in-venue sportsbooks. The three most populous states in the nation — California, Texas and Florida — still don't have legal sports betting markets. Those three states are home to 32 of the 124 (26%) teams in the major North American leagues. Texas has a pair of active bills, but little support in the state Senate. California saw a pair of costly propositions fail last fall. Florida is engaged in legal battles with the Seminole tribe, which claims to have exclusive rights to gaming in the state. Source Axios

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