Headline inflation data, quarterly results from Disney (DIS), and the increasingly contentious debate over a looming national debt limit await investors next week.
For investors, the April CPI report will be the biggest release of the week, as markets look for signs of a further slowdown in consumer prices.
Wall Street expects its core CPI, which includes food and energy prices, to rise 5% year-over-year in April, which is in line with the year-over-year increase seen in March. Prices are set to rise 0.4% on a monthly basis.
On a “core” basis, which excludes food and energy prices, inflation is expected to have increased 5.5% from a year ago in April, slowing from a 5.6% increase in March. Monthly increases in core prices are expected at 0.4%.
On Tuesday, President Biden is expected to meet House Speaker Kevin McCarthy and other top congressional leaders as concerns grow that the United States will default on its June 1 deadline. .
Elsewhere in Washington, a hearing titled Federal Responses to the Recent Banking Failure It is expected on Wednesday. The hearing comes as pressure mounts on several regional banks that have seen their share prices plunge and are said to be looking for buyers.
Disney will head off another busy week in corporate earnings with Airbnb (ABNB), Rivian (RIVN) and Warren Buffett favorite Occidental Petroleum (OXY).
A rally led by strong earnings from Apple pushed the Nasdaq (^IXIC) up more than 2% on Friday and put the technology index on par for the week.
However, this rally was not enough to push the major indexes higher for the week, as the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) both fell after the Fed raised interest rates last week on Wall Street. He called it the “hawkish pause” that left open the possibility of an interest rate hike.
This week’s data on consumer and producer prices follows Friday’s April jobs report which showed that the US labor market remains more resilient than expected in the face of aggressive interest rate increases by the Federal Reserve.
Downward revisions in Friday’s report showing 149,000 fewer jobs in February and March than previously reported tempered some of the optimism about the labor market. In an email Friday, BlackRock’s Rick Ryder called the report “mixed” and said the data is “consistent with labor market slowdowns in more cyclical areas, but not weak overall.”
On inflation, economists at Wells Fargo said in a note last week that higher gas prices likely drove projected monthly growth in the core CPI for April, but said a slowdown in the economy will likely continue to drive overall price increases to decline.
“As we’ve said for some time now, we expect slowing economic activity to lead to a substantive slowdown in inflation, but the road back to 2% will be long and bumpy,” the company wrote in a note on Friday.
Democrats and Republicans are deadlocked over the debt limit ahead of Biden’s meeting with congressional leaders. Recently, markets have focused on the so-called “10th date” when the US could default on its debt.
In a note to clients last week, the Bank of America team strategist on global rates and currencies said that this data was likely for June 1, in line with Treasury Secretary Janet Yellen’s forecast. And that date keeps the sharpest market reaction about a week away, in BofA’s view.
“Past debt limit episodes indicate that broader markets do not appear to be pricing in debt limit scenarios until two weeks prior to the expected X date,” the company wrote. “We expect this [debt limit] The decision is likely to go down to the wire which means the risk of higher volatility in the broad market in late May or early June. “
On the corporate front, Disney will headline earnings reporting week as company restructuring plans and the ongoing battle with Florida Gov. Ron DeSantis were in focus ahead of the report.
The streaming giant reported its earnings just days after both Paramount Global (PARA) and Warner Bros. failed. Discovery (WBD) beat Wall Street estimates.
Overall, the S&P 500 companies are having their best earnings season relative to Street expectations since the fourth quarter of 2021, according to FactSet. Through Friday, 85% of companies in the S&P 500 reported first-quarter results, beating 79% of earnings-per-share estimates.
However, profits are actually declining. The blend earnings growth rate for the current quarter, which combines actual results with remaining estimates, was -2.2%. If actual earnings for the S&P 500 remain negative, this will be the second consecutive quarter of declining earnings for companies in the index.
Speaking Saturday at the company’s annual shareholder meeting, Berkshire Hathaway CEO Warren Buffett said many of the group’s portfolio companies expect a decline in earnings this year, adding that the current economic environment is “different” than it was six months ago.
Weekly calendar
Monday
economic data: Wholesale Inventories, MoM, March (+0.1% expected, +0.1% prior)
Earnings: Tyson Foods (TSN), Dish Networks (DISH), Devon Energy (DVN), FreshPet (FRPT), Lucid (LCID), PayPal (PYPL), Palantir (PLTR)
Tuesday
economic data: NFIB Small Business Optimism, April (89.8 predicted, 90.1 prior)
Earnings: Affirm (AFRM), Airbnb (ABNB), Celsius Holdings (CELH), Coty (COTY), Dutch Bros. (BROS), EV Go (EVGO), Fisker (FSR), Occidental Petroleum (OXY), Rivian (RIVN) Twilio (TWLO), Wynn Resorts (WYNN), Under Armor (UAA)
Wednesday
economic data: CPI, on a monthly basis, April (+0.4% expected, +0.1% prior); CPI, YoY, April (+5% forecast; +5% prior); Core CPI, MoM, April (+0.4% expected; +0.4% prior); Core CPI, YoY, April (+5.5% expected; +5.6% prior); MBA Weekly Mortgage Applications (-1.2% Previously)
Earnings: Beyond Meat (BYND), Blackstone (BX), First Citizens (FCNA), Robinhood (HOOD), Trade Desk (TTD), Disney (DIS), Wendy’s (WEN)
Thursday
economic news: Initial Jobless Claims, week ending May 6 (245,000 expected, 242,000 previously); PPI, on a monthly basis, April (+0.3% expected, -0.5% prior); PPI, YoY, April (+2.5% expected; +2.7% prior); Core PPI, MoM, April (+0.3% expected, -0.1% prior); Core PPI, YoY, April (+3.3% expected; +3.4% prior)
Earnings: Getty Images (GETY), JD.Com (JD), Krispy Kreme Donuts (DNUT), Yeti (YETI)
Friday
economic news: Import Prices, MoM, April (0.3% expected, -0.6% prior); Export Prices, MoM, April (+0.3% expected, -0.3% prior); University of Michigan Consumer Sentiment, May 1 (63.0 forecast, 63.5 prior)
Earnings: Spectrum Brands (SPB)
Josh is Yahoo Finance Correspondent.
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