This week in the US Market, we anticipate earnings reports from companies such as Tencent Music Entertainment Group (NYSE: TME), Home Depot Inc (NYSE: HD), Alibaba Group Holding Ltd (NYSE:BABA), Cisco Systems Inc (NASDAQ:CSCO), Walmart Inc (NYSE: WMT), and Applied Materials Inc (NASDAQ:AMAT).
During the current earnings season, large-cap companies have shown slightly better performance than usual, while mid and small-cap companies have performed as expected, with no significant deviations from the norm. The technology, energy and financials sectors have experienced upward revisions in earnings expectations, whereas the healthcare sector has seen a material decrease in earnings. Notably, utilities have shown tremendous outperformance this quarter, likely due to a narrative surrounding the benefits of AI in meeting electricity needs.
The most significant economic indicator to monitor this week is the US Inflation and Core Inflation Rate for April, set to be released. The consensus is for the core consumer price index (Core CPI), which excludes volatile items such as food and energy, to increase by 3.7% annually and 0.3% monthly. This would be a slight decrease from the March reading, where core CPI rose by 3.8% annually and 0.4% month-on-month (m-o-m).
Additionally, US retail sales data for April are expected to show a 0.4% m-o-m increase. In March 2024, retail sales in the US rose 0.7% m-o-m. The retail sales report in the US provides an aggregated measure of sales of retail goods and services over a month.
Both the inflation and retail sales data will have implications for equity markets. In general, softer data is favorable for equities and bonds. Any data suggesting an overheating economy is likely to push yields back towards early April levels and lower equities.
Federal Reserve Chair Jerome Powell’s Speech this week will offer hints on monetary policy and inflation targets. Powell has previously stated that he does not foresee a hike as likely and believes that the current policy is sufficiently restrictive to achieve the 2% inflation target. The Federal Reserve kept the federal funds rate unchanged at 5.25% to 5.50% during its May meeting for the sixth consecutive time.
US Producer Price Index (PPI) for April will provide insight into changes in selling prices received by domestic producers for their output. Producer prices in the US were up 0.2% m-o-m and 2.1% year-on-year in March 2024. The PPI measures changes in the price for commodities sold for personal consumption, capital investment, government, and export.
In summary, this week’s focus in the US market lies on earnings reports, inflation data, retail sales figures, and the PPI, all of which will shape investor sentiment and market direction.
Disclaimer: ProsperUs Manager of Content Hailey Chung doesn’t own shares of any mentioned companies.
Reference
US Equity Research (May 12, 2024) | CGS International – Raymond James
