Last week, shares of AI darling Nvidia (NVDA) hit record highs following an explosive earnings report. New inflation data will test the rally in the coming days.
The S&P 500 (^GSPC) and Dow Jones (^DJI) ended the week up about 1%, and the Nasdaq Composite Index (^IXIC) rose about 0.6%. The S&P and Dow closed at record highs on Friday.
The biggest challenge for markets over the coming week is likely to come from Thursday's latest reading of the personal consumption expenditures (PCE) index, the Federal Reserve's preferred measure of inflation. This week, attention will also be focused on trends in consumer confidence and the latest information on the manufacturing industry.
Quarterly reports are also available for Salesforce (CRM), Lowe's (LOW), Macy's (M), Okta (OKTA), and Best Buy (BBY).
price check
The last time an inflation report was released before the opening bell, a better-than-expected Consumer Price Index (CPI) report spooked markets and caused stocks to fall.
It might happen again. Latest figures on inflation are expected to be released on Thursday. Economists believe that the annual “core” PCE, which excludes the volatile categories of food and energy, In January, it was 2.4%. Economists expect last month's “core” PCE to be 0.4%.
Last month's price increase of 0.4% would be a notable increase from the previous month's 0.2%, underscoring growing concerns that inflation may prove more robust than initially expected. ing. Notably, Bank of America's economic team said this would bring six- and three-month annualized inflation rates back above 2%, from below the Fed's 2% target. Thing.
Ellen Zentner, chief U.S. economist at Morgan Stanley, said higher monthly price increases would set in motion a “bumpy” inflation situation over the coming months. Markets are now pricing in three rate cuts in 2024, consistent with the Fed's latest forecast and up from the previous consensus of six rate cuts seen in December, according to Bloomberg data. has been revised downward.
Consumers are the focus
Although the fourth quarter earnings season has slowed, a number of companies, including many in the retail sector, are still scheduled to make announcements. The coming week will give us a closer look at consumers, with results from Macy's, Best Buy, TJX (TJX) and more.
Simeon Siegel, senior retail analyst at BMO Capital Markets, said a key question remains whether consumer spending is losing momentum. For now, he told Yahoo Finance Live, quarterly results show Americans are still spending on discretionary goods.
“Because of inflation, [consumer] “People are not buying necessities of their own free will,” Siegel said. “But we don't see that in the results.”
Have we reached market “euphoria”?
and With the average share price of all three major stocks trading near all-time highs and AI powerhouse Nvidia's earnings pushing the entire sector into upward mode, perhaps the biggest question for investors is: I wonder if the market has reached its peak.
Citi's U.S. equity strategy team says no.
“Now is not the time to panic as emotions have not yet reached euphoria,” Citi Managing Director Scott Kronert said in a weekly note to clients.
Kronert's team uses a metric called the Levkovich index, which considers factors such as investors' short positions and leverage to determine market sentiment. The current reading is 0.33, below 0.38, which indicates the market has entered a euphoric, or overextended, peak. As seen in the graph below, previous periods where the market expanded into euphoric territory are often followed by market drawdowns.
Kronert said strong market momentum could push the S&P 500 above his company's year-end target of 5,100 in the short term, but in the longer term more tailwinds will be needed to maintain upward pressure on the market. Admitted.
“To realize a sustainable society, we may need further profit upside and macro tailwinds such as lower interest rates in the long term.” [S&P 500] The index is on the upswing,” Kronert wrote.
weekly calendar
Monday
economic data:Dallas Fed Manufacturing Activity, February (previously -27.4). New home sales, January (expected annual rate of 684,000 units, previous estimate of 664,000 units). New home sales in January compared to the previous month (expected to be 3% higher, previously 8% higher)
revenue: Domino's Pizza (DPZ), Fresh Pet (FRPT), Hims & Hers (HIMS), iRobot (IRBT), Workday (WDAY), Zoom (ZM)
Tuesday
economic data: Conference Board Consumer Confidence, February (expected 114.8, previous 114.8). S&P CoreLogic Case Shiller, 20 City Composite Home Price Index, m/m, December (previously +0.15%). S&P CoreLogic Case Shiller 20 City Composite Housing Price Index, YoY, December (previously +5.4%)
revenue: AutoZone (AZO), Beyond Meat (BYND), Cava (CAVA), Cracker Barrel (CBRL), Devon Energy (DVN), First Solar (FSLR), Lowe's (LOW), Macy's (M), Norwegian Cruise Line ( NCLH) )
Wednesday
economic data: MBA home loan applications, week ending February 23 (-10.6% last year). January wholesale inventory month-on-month change (previously increased by 0.4%). 4th quarter GDP, 2nd forecast (annual forecast +3.3%, previous +3.3%). 4th quarter personal consumption, 2nd period forecast (annual rate forecast +2.7%, previous +2.8%)
revenue: Advance Auto Parts (AAP), AMC (AMC), Baidu (BIDU), C3.ai (AI), Icahn Enterprises (IEP), TJX Companies (TJX), Marathon Digital Holdings (MARA), Novavax (NVAX), Okta (OKTA), Paramount Global (PARA), Salesforce (CRM), Snowflake (SNOW), Weight Watchers (WW)
Thursday
economic data: Number of new unemployment insurance claims for the week ending February 24 (previously 201,000). January personal income, month-on-month change (forecast +0.5%, previous +0.3%). Personal spending in January compared to the previous month (expected +0.2%, previous +0.7%). His PCE inflation rate in January, month-over-month (expected + 0.3%, last time + 0.2%). PCE inflation rate in January, year-over-year (expected +2.4%, previously +2.6%). “Core” PCE for January compared to the previous month (expected +0.4%, previous +0.2%). January “Core” PCE, YoY (+2.8% expected, +2.9% previously)
revenue: Anheuser-Busch (BUD), Bath & Body Works (BBWI), Best Buy (BBY), Birkenstock (BIRK), Celsius (CELH), Dell (DELL), Fisker (FSR), Hewlett Packard Enterprise (HPE), Six Flags (SIX), SoundHound (SOUN), Zscaler (ZS)
Friday
economic news: S&P Global US Manufacturing PMI, final value for February (previously 51.5). ISM Manufacturing, February (expected 49.2, previous 49.1). ISM price paid in February (previously 52.9). University of Michigan Consumer Sentiment, February final value (expected 79.6, prior value 79.6)
revenue: Fubo TV (FUBO), Plug Power (PLUG)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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