What you should know this week

What you should know this week

US shares have had their best week since June and the ability of Wall Street to continue the winning streak in the coming days depends on news from the retail sector.

Investors hope that it was hopeful that a change of money was imminent and the most important winning results of the retailers and the government’s October report on the sector could put this optimism to the test.

Walmart (WMT), Target (TGT) and Home Depot (HD) head a long list of companies due to release their third-quarter financial results this week.

The Ministry of Commerce will also publish its monthly retail sales report for October on Wednesday, whereby economists surveyed by Bloomberg estimate an overall increase of 1.0 % after the expenses remained unchanged in the previous month.

Betting that the decision-makers of the US Federal Reserve will withdraw the pace and scope of the interest rate increases after the consumer price index (VPI) from October last month showed a declining inflation, contributed to the fact that the large average values ​​achieved considerable profits. The S&P 500 rose by 5.9 % this week, the best five-day performance since the week on June 24, while the Dow Jones Industrial Average added 4.2 %. The Nasdaq Composite had its best week since March and rose by 8.1 %.

The movements were carried out after the recent VPI value estimated the annual inflation pace in October to 7.7 % and in the month of 0.4 %, while the “Kern” CPI-which excludes the volatile food and energy categories-itself in the annual comparison slowed down to 6.3 %. year and 0.3% in October. The numbers were better than Wall Street’s demands after an increase of 7.9 % in the year comparison and a monthly profit of 0.5 % and significantly lower than the figures from September.

While the softer data was met with “an equity market ovation,” as Seema Shah, principal asset management chief global strategist, put it, strategists — and some Federal Reserve members themselves — have argued that excitement is premature as other economic data is will be announced ahead of the Fed’s next policy-making meeting in December.

“The chairman Jay Powell has repeatedly emphasized that the Fed does not give too much weight to the data of a single month,” wrote Andy Sparks, Head of Portfolio Management Research at MSCI. “His comments after the meeting of the Federal Open Market Committee in the past week probably still reflect the current way of thinking of the Fed – that a strong labor market continues to support a stubborn inflation and that the risk of doing too little is still the risk overdoing too much.”

A strong Retail Sales reading could derail the market’s uptrend: Bloomberg’s consensus economist estimate of a 1.0% rise in the monthly report’s main metric, if realized on Wednesday, would reflect that spending remains strong and consumers remain resilient. Investors could interpret this strength as a signal to Fed officials that they have more room to hike rates.

According to Bank of America, two factors are driving the expected surge in October: another round of Amazon Prime Day and related promotions on top of the July event, along with the deployment of one-time stimulus payments in California, accounting for about one-seventh of the National economy. An increase in gas spending due to higher gasoline prices also contributed to the expected increase.

At the earnings front, Walmart will initiate a big week with retail reports if the retailer reports before the opening on Tuesday. Analysts expect the megastore to receive a thrust through the beginning of school, together with higher value expenditure of US consumers, which are burdened by increasing prices. At the same time, the results are expected to show pressure from inflation, rising interest rates and bloated stocks that many retailers have plagued.

A man pushes a television to a shopping cart in Walmart in King of Prussia, Pennsylvania, USA, on November 29, 2019.  REUTERS/Sarah Silbiger.

A man pushes a television into a shopping cart at Walmart on Black Friday, a day that kicks off the holiday shopping season, in King of Prussia, Pennsylvania, the United States, November 29, 2019. REUTERS/Sarah Silbiger.

In the past quarter, Walmart CEO Doug McMillon said that increasing food and fuel inflation requires consumer expenses under pressure and clothing requires more discounts.

Other consumer names on the earnings deck this week are Home Depot (HD), Target (TGT), TJX Companies (TJX), BJ’s Whholesale (BJ), GAP (GPS), Kohl’s (KSS), Macy’s (M) and Ross Stores (Rost ), among other things.

The market has rewarded positive profit surprises more than in the five -year average, while faults are also punished more, since Wall Street prices a higher down risk in view of the growing fear of recession.

As of Friday, 91% of companies in the S&P 500 have reported earnings for the third quarter, with 69% reporting actual earnings per share above the median estimate — below the five-year average of 77%, which was beaten by FactSet Research. Companies whose results came in better than feared saw their stock price rise 2.4% on average two days before earnings release to two days after earnings release, well above the five-year average price increase of 0.9% for reporting companies during earnings hits of the same window.

Market rewards positive Q3 EPS surprises above average for S&P 500 companies.  (Source: FactSet Research)

The market rewards positive EPS surprises in Q3 above average for S&P 500 companies. (Source: FactSet Research)

Elsewhere in the business data, the producer price index (PPI), a measurement of inflation on the production page of the economy, is due on Tuesday. The PPI, which measures the change in prices that are paid to US manufacturers of goods and services, may have cooled down last month. The week will also be crammed with apartment data, including measured values ​​for building residents, building permits and sales of existing homes.

economic calendar

Monday: No significant economic data planned for publication.

Tuesday: Empire manufactureNovember (-5.5 expected, -9.1 last month); Final PPI demandMoM, October (0.5% expected, 0.4% mom); PPI without food and energyin the month comparison, October (0.4 % expected, 0.3 % in the previous month); PPI excluding food, energy and tradein the month comparison, October (0.2 % expected, 0.4 % in the previous month); Final PPI demandin the year comparison, October (8.4 % expected, 8.5 % in the previous month); PPI without food and energyin the year comparison, October (7.2 % expected, 7.2 % in the previous month); PPI excluding food, energy and tradein the year comparison, October (5.5 % expected, 5.6 % in the previous month); Bloomberg Nov. United States Business Survey

Wednesday: MBA Mortgage ApplicationsWeek on November 11 (-0.1 % in the previous week); Sales advance in retailMoM, October (1.0% expected, 0.0% mom); Retail sales without carsMoM, October (0.5% expected, 0.1% mom); Retail sales excluding cars and gasolinemom, October (0.3% exp., 0.3% mom); Retail sales groupOctober (0.3% expected, 0.4% mom); import price indexMoM, October (-0.5% exp., -1.2% MoM); Non-oil import price indexMoM, October (-0.8% exp., -0.5% mom); import price indexYoY, October (4.0% expected, 6.0% mom); export price indexMoM, October (-0.2% exp., -0.8% mom); export price indexin the year comparison, October (9.5 % in the previous month); industrial productionMoM, October (0.1% exp., 0.4% mom); capacity utilizationOctober (80.4 % expected, 80.3 % in the previous month); Manufacturing (sic) productionOctober (0.2% expected, 0.4% mom); business supplies, September (0.5 % expected, 0.8 % in the previous month); Nahb Housing Market Index, November (36 expected, 38 in the previous month); Long-term TIC-NettoFlusenSeptember ($197.9 billion), Total Netto-Tic riversSeptember ($ 275.6 billion)

Thursday: living beginsOctober (1.412 million expected, 1.439 in previous month); building permitOctober (1.515 million expected, 1.564 million in the previous month, revised up to 1.696 million); living beginsMoM, October (-1.9% exp., -8.1% MoM); building permitMoM, October (-3.1% exp., -1.4% MoM); Philadelphia Fed Business Outlook IndexNovember (-6.0 expected, -8.7 in the previous month); Arrangements on unemployment welfareWeek ended on November 12 (221,000 expected, 225,000 in the previous week); Ongoing ClaimsWeek on November 5 (1.493 in the previous week); Manufacturing activity of the Kansas City FedNovember (-7 expected, -7 in the previous month)

Friday: Sale of existing homesOctober (4.37 million expected, 4.71 million in the previous month); Sale of existing homesin the month comparison, October (-7.3 % expected, -1.5 % in the previous month); Leading indexOctober (-0.4 % expected, -0.4 % in the previous month)

Result calendar

Monday: J & J Snack Foods (JJSF), Oatly Group (Otly), Tower Semiconductor (TSEM), Weber (WebR)

Tuesday: Home Depot (HD), Walmart (WMT), Advance Auto Parts (AAP), Energizer (ENR), Krispy Kreme (Dnut), Tencent Music (TME)

Wednesday: Cisco Systems (CSCO), Bath & Body Works (BBWI), Helmerich & Payne (HP), Lowe’s (Low), Manchester United (Manu), Nvidia (NVDA), Sonos (Sono), Target (TGT), TJX Companies ( TJX), Victoria’s Secret (VSCO), Williams-sesoma (WSM)

Thursday: Alibaba Group (Baba), BJ’s Wholesale (BJ), Dole (Dole), Farfetch (FTCH), GAP (GPS), Kohl’s (KSS), Macy’s (M), Palo Alto Networks (Panw), Ross Stores (rust), The children’s place (Plce)

Friday: Foot loose (fl), jd.com (jd)

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @Alexandraandnyc

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