Inflation and jobs data on tap as Fed's path remains in focus: What to know this week
After Federal Reserve chair Jerome Powell ended the week noting the central bank is "prepared to raise rates further," the economic calendar will bring two of the Fed's key data points into focus in the week ahead: a labor report and an updated look at inflation.
The Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation indicator, is scheduled for Thursday morning while the August jobs report is expected Friday at 8:30 a.m. ET.
Investors will track weekly jobless claims data and the monthly read on private payrolls from ADP, both due out Thursday. The monthly look at job openings on Tuesday will also garner investor attention as will fresh data on housing prices and manufacturing prices.
On the corporate side of things, Best Buy (BBY), Lululemon (LULU) and Salesforce (CRM) highlight the earnings calendar as quarterly reporting season winds down.
Stocks have lagged for the month of August, but found some reprieve last week as investors piled into the tech-heavy Nasdaq ahead of what proved to be a blowout quarterly report for artificial intelligence stalwart Nvidia (NVDA).
Entering the final week of August, the Nasdaq, S&P 500, and Dow Jones Industrial were all in the red over the last month.
After a summer full of stronger-than-expected data, Powell acknowledged the Federal Reserve is taking notice during a speech on Friday.
"We are attentive to signs that the economy may not be cooling as expected," Powell said Friday at the Jackson Hole Economic Symposium in Jackson Hole, Wyo.
Powell called out the strong economy as part of his message about the further tightening that might be required if inflation doesn't continue on its downward trajectory. The week ahead will bring the next test on those numbers for the economy.
Data on Thursday is expected to show "core" PCE — which strips out the costs of food and energy — rose 4.2% over the prior year in July, up from 4.1% in June. The Fed targets 2% inflation, on average. Over the prior month, "core" PCE is expected to rise 0.2% in July.
Meanwhile, Friday will bring a look at what some economists say could drive the upside risk to keeping inflation higher: the labor market. Economists expect the US economy added 168,000 jobs last month with the unemployment rate remaining flat at 3.7%. The numbers would be a continuation of the moderate slowdown that's been underway in the labor market.
"Evidence that the tightness in the labor market is no longer easing could also call for a monetary policy response," Powell said.
Some on Wall Street think this month's report could start to show the impact of the some of the labor strikes happening across industries.
"We expect the report to show a moderating trend for job growth, with strikes also working to push the headline jobs figure lower," JPMorgan's chief US economist wrote in a note on Friday.
As of Saturday morning, investors have priced in a 47% chance of an additional Federal Reserve rate hike by the end of the November meeting, up 14 percentage points from a week ago, per the CME FedWatch tool.
In the past several weeks, retail earnings have painted a picture of a cautious consumer with retailers like Dick's Sporting Goods (DKS) and Foot Locker (FL) struggling while the likes of Abercrombie & Fitch (ANF) soared. Crime at stores has affected an increasing number of chains and will be another focus point through out the week.
This week, Best Buy and Lululemon will provide another look at the sector. Lululemon has been considered a relatively bulletproof retailer and any signs of a slowdown could flash warnings about the high-end consumer.
"If LULU shows its China and North America sales growth rates remain robust, it would likely shift sentiment more bullishly," UBS analyst Jay Sole wrote in a note on Aug. 22. "We believe this will happen."
On the tech side of things, Salesforce (CRM), Okta (OKTA), and CrowdStrike (CRWD) will report in the wake of Nvidia's earnings, which sent shockwaves throughout the tech sector. Salesforce has positioned itself as an AI play, which could draw intriguing market reaction as many companies have seen muted reactions to touting AI this quarter.
Nvidia posted revenue growth of more than 100% compared to the same period last year and beat the street's expectations for revenue by nearly 30%. The stock moved up just. 0.1% in the next day of trading. Wall Street's AI favorites, such as C3.ai and AMD, closed lower, leading some to believe the AI hype cycle may have entered a new phase.
After driving S&P 500 year-end target boosts this year, Citigroup’s Scott Chronert told Yahoo Finance that the AI hype has entered the "show me" stage.
“I don’t think the AI trend and the influence it can have on S&P 500 earnings longer term is at risk here,” Chronert told Yahoo Finance Live. “I think it’s still an important part of the narrative going forward. But expectations ... we just have to give them room to adjust as previous events have unfolded and now we're looking at new incremental information."
Weekly calendar
Monday
Economic data: Dallas Fed Manufacturing Activity (-19 expected, -20 previously)
Earnings: No notable earnings.
Tuesday
Economic data: S&P CoreLogic Case-Shiller, 20-City Composite home price index, month-over-month, June (+0.80% expected, +0.99% previously); S&P CoreLogic Case-Shiller 20-City Composite home price index, year-over-year, June (-1.65% expected, -1.70% previously); Conference Board Consumer Confidence, August (116.2 expected, 117 previously); JOLTS job openings, July (9.45 million expected, 9.58 million previously); Dallas Fed services activity, August (-4.2 previously)
Earnings: Best Buy (BBY), Big Lots (BIG), BMO (BMO), Box (BOX), Hewlett Packard Enterprise (HPE), HP (HPQ), NIO (NIO), Scotiabank (BNS)
Wednesday
Economic data: MBA Mortgage Applications, week ending, Aug. 25 (-4.2% prior); Wholesale inventories month-over-month, July (-0.3% expected, -0.5% previously); Retail inventories month-over-month, July (0.5% expected, 0.7% previously); Second quarter GDP, second estimate (+2.4% annualized rate expected, +2.4% previously); Second quarter personal consumption, second estimate (1.8% expected, 1.6% prior); Pending home sales month-over-month, July (-1.0% expected, 0.3% previously)
Earnings: Chewy (CHWY), Crowdstrike (CRWD), Express (EXPR), Five Below (FIVE), Okta (OKTA), Salesforce (CRM)
Thursday
Economic data: Personal income, month-over-month, July (+0.3% expected, +0.3% previously); Personal spending, month-over-month, July (+0.7% expected, +0.5% previously); PCE inflation, month-over-month, July (+0.2% expected,+ 0.2% previously); PCE inflation, year-over-year, July (+3.3% expected, +3.0% previously); "Core" PCE, month-over-month, July (+0.2% expected, +0.2% previously); "Core" PCE, year-over-year, July (+4.2% expected; +4.1% previously); Initial jobless claims, week ended August 26 (235,000 expected, 230,000 previously); Challenger Job Cuts year-over-year, August (-8.2% prior)
Earnings: Academy Sports + Outdoors (ASO), Broadcom (AVGO), Campbell's (CPB), Dell (DELL), Dollar General (DG), Lululemon (LULU), MongoDB (MDB), Nutanix (NTNX), Polestar (PSNY), UBS (UBS)
Friday
Economic data: Nonfarm payrolls, August (+168,000 expected, +187,000 previously); Unemployment rate, August (3.5% expected, 3.5% previously); Average hourly earnings, month-over-month, August (+0.3% expected, +0.4% previously); Average hourly earnings, year-over-year, August (+4.3% expected, +4.4% previously); Average weekly hours worked, August (34.4 expected, 34.4 previously); Labor force participation rate, August (62.6% expected, 62.6% previously); S&P Global US Manufacturing PMI, August final (47 expected, 47 previously); Construction spending month-over-month, August (+0.5% expected, +0.5 previously); ISM Manufacturing, August (47.0 expected, 46.4 previously)
Earnings: No notable earnings.
Josh Schafer is a reporter for Yahoo Finance.
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