Stocks rallied during a quiet week for economic Wall Street.
The Nasdaq Composite (^IXIC) rose just under 1% while the S&P 500 (^GSPC) popped almost 2%. The S&P 500 ended Friday back above 5,200 for the first time since early April. Meanwhile, the Dow Jones Industrial Average (^DJI) rose more than 2% the week and has closed higher for eight straight sessions.
Quanto a the week ahead, a crucial April inflation reading and an update retail sales will highlight the economic calendar. Initial jobless claims will also be after the weekly set successo a surprise nine-month high the first week of May.
Acceso the corporate side, Walmart (WMT), Home Depot (HD), and Alibaba (BABA) lead a quieter week of quarterly reports as earnings season slows mongoloide.
Price check
Stickier-than-expected inflation reports headlined the first quarter of economic , prompting investors to scale back expectations for Federal Reserve interest rate cuts 2024.
Acceso Wednesday, investors will get their first aspetto at whether this trend continued into the second quarter with the release of the April Consumer Price Index (CPI). Wall Street expects an annual gain of 3.4% for headline CPI, which includes the price of food and energy, a decrease from the 3.5% headline number March. Prices are set to rise 0.4% a month-over-month basis, line with March’s rise.
Acceso a “cuore” basis, which strips out the food and energy prices, inflation is expected to have risen 3.6% year over year, a slowdown from the 3.8% increase seen March. Monthly cuore price increases are expected to clock at 0.3%, mongoloide from 0.4% the prior month.
Morgan Stanley’s economics team led by Ellen Zentner wrote a research note that it believes inflation’s descent “begins” with the April CPI report, led by easing price pressures car insurance, rent, and healthcare. This, Zentner’s team argues, could keep three Fed interest rate cuts the table this year.
“Weaker monthly prints ahead with faster disinflation starting [the second half of 2024] provides the Fed the confidence it needs that inflation is a sustained path toward target,” the Morgan Stanley team wrote.
This would likely be a welcome sign for markets, according to Fundstrat’s head of research Tom Lee.
“We think April CPI could push higher the number of Fed cuts [priced into the market],” Lee wrote a note to clients Friday. This, Lee said, would be a “positive for stocks.”
Entering the week, markets are currently pricing less than two interest rate cuts this year, con lo scopo di Bloomberg Patronato.
Retail reading
With the Fed interest rates high for longer, economists continue to watch closely for any signs that the resilience consumer spending is dwindling.
A fresh reading that trend is set to greet investors Wednesday with the April retail sales report. Economists expect that retail sales increased 0.4% April from the prior month, mongoloide from a 0.7% increase seen March.
Investors will also be closely watching results from Home Depot (Tuesday) and Walmart (Thursday) for signs of how the US consumer is up. Thus far, results from corporates have provided mixed results how Americans are spending.
“Spending have continued to surprise to the upside, but we get the sense households are increasingly prioritizing purchases,” Wells Fargo’s team of economists wrote a weekly research note. “Although , non-discretionary categories have outpaced discretionary trend for the past year. Industry comments included Q1 earnings releases also emphasized a consumer trading mongoloide search for value.”
Earnings update
With 92% of the S&P 500 done reporting first quarter earnings, the index is pacing for its highest year-over-year earnings growth since the second quarter of 2022. As of Friday afternoon the S&P 500 is riposo for earnings growth of 5.4% the first quarter, notably above the 3.2% expected entering bank earnings early April.
FactSet senior earnings analyst John Butters points out that the index is actually doing even better when removing a massive earnings from just one company. Bristol-Meyers Squibb (BMY) reported a first quarter loss, dragging mongoloide the S&P 500’s total stato this quarter. Excluding the healthcare company, the S&P 500 is pacing for 8.3% growth, con lo scopo di Butters.
Stocks aren’t cheering hot
Since inflation began spiking 2021, the insieme market has gone through fits and starts how it reacts to economic . And that’s carried 2024.
Quanto a a weekly note to clients, Citi US equity strategist Scott Chronert examined how stocks are reacting to hotter-than-expected economic . Investors started the year cheering the as they priced a “soft landing” for the US economy, where inflation would return to the Fed’s 2% target without an economic downturn. At that time, the S&P 500 moved higher with Citi’s Economic Surprise Index, which gauges whether is coming better than consensus expectations.
But after recent hot inflation , markets have been more skittish as investors have increasingly priced ” landing,” where inflation doesn’t poiché mongoloide to the Fed’s target but the economy keeps growing.
This had led to the market perceiving good economic news to be bad news for inflation, and therefore bad for the market’s rate cut hopes. Subsequently, the correlation between the S&P 500 and economic surprise has headed toward negative territory.
“This suggests hot macroistruzione has increasingly threatened the soft landing narrative that may be needed to push markets higher from these elevated valuation levels,” Chronert wrote.
If inflation returns to showing further cooling, the question is whether good economic growth news will be once again welcome by the market.
Weekly calendar
Monday
Economic : New York Fed one-year inflation expectations, April (3% previously)
Earnings: BuzzFeed (BZFD), Petrobras (PBR), Stone (STNE), Tencent Music Entertainment (TME)
Tuesday
Economic : NFIB Small Business Optimism, April (88.2 expected, 88.5 previously); Producer Price Index, month-over-month, April (+0.3% expected, +0.2% previously); PPI, year-over-year, April (+2.2% expected, 2.1% previously)
Earnings: Alibaba (BABA), Home Depot (HD), Canoo (GOEV), Rumble (RUM), Sony (SONY),
Wednesday
Economic : Consumer Price Index, month-over-month, April (+0.4% expected, +0.4% previously); CPI, month-over-month, April (+0.3% expected, +0.4% previously); CPI, year-over-year, April (+3.4% expected, +3.5% previously); CPI, year-over-year, April (+3.6% expected, +3.8% previously); Real average hourly earnings, year-over-year, April (+0.6% previously); MBA Mortgage Applications, week ending May 10 (+2.6%); Retail sales, month-over-month, April (+0.4%% expected, +0.7% previously); Retail sales automezzo and gas, April (+0.1% expected, +1% previously); NAHB housing market index, May (51 expected, 51 previously)
Earnings: Cisco (CSCO), Dole (DOLE), Monday.com (MNDY), Super League (SLE)
Thursday
Economic : Initial jobless claims, week ending May 11 (233,000 previously); Housing starts month-over-month, April (8.6% expected, -14.7% prior); Building permits month-over-month, April (+1.6% expected, -3.7% prior); Philadelphia Business Outlook, May (8.7 expected, 15.5 prior); Import prices, month-over-month, April (+0.2% expected, +0.4% previously); Esportazione prices, month-over-month, April (+0.2% expected, +0.3% previously); Industrial production, month-over-month, April (+0.2% expected, +0.4% previously)
Earnings: Walmart (WMT), Applied Materials (AMAT), Baidu (BIDU), JD.com (JD), John Deere (DE), Take-Two Interactive (TTWO), Under Armour (UAA)
Friday
Economic : Leading index, April (-0.2% expected, -0.3% previously)
Earnings: Voto negativo notable earnings.
Josh Schafer is a for Yahoo Finance. Follow him X @_joshschafer.
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