Investors will see if stocks maintain their newfound momentum over the coming week as major retailers like Walmart and Home Depot report earnings and housing data dominate the calendar.
The Federal Reserve can play a role as well. The minutes of the last meeting will be released on Wednesday and after the above-expected consumer and producer inflation in April, market pros will be watching this closely.
Central bank officials are also scheduled to provide comments, including Fed vice chairman Richard Clarida, who will speak next Monday.
Stocks were volatile. The rally on Thursday and Friday could not undo the heavy losses of the week. Defensive consumer staples, financials and materials were on the right track in major sectors for a positive week. The worst results came in consumer staples, down about 3.7% for the week, and technology, down 2.2%.
Technology stocks were among the top performers on Friday’s rally, up around 2.1%. Energy was the best performer with a plus of more than 3%.
“Watch it with a degree of fear,” said Art Hogan, chief marketing strategist at National Securities. “It’s not that the things that terrified us this week like inflation are going away … I think the fact that we recovered at the end of the week is constructive.” He added that he still expects the market to move forward with seizures and starts.
The Fed minutes should basically be a repeat of the last central bank meeting. However, it did so before the consumer price index rose a whopping 4.2% yoy in April.
That final meeting also came before the April employment report, which employed just 266,000 people, a quarter of what was expected.
“I think the Fed is ready to look through these weird data points. They think a data point is not a trend,” said Joseph Song, senior US economist at Bank of America.
However, markets have focused on whether data will help clarify when the Fed might be talking about winding up its bond purchase. This would be a precursor to the slow end of the $ 120 billion monthly asset purchase program and a signal that it is one step closer to the rate hike.
Hogan said when the weak employment report was released, market views had turned away from the idea that the Fed might discuss reducing its bond purchases when it holds its Jackson Hole Economic Symposium in late summer.
But the market returned to that view when the hot CPI report was released on Wednesday.
“We saw a hot CPI and a hot PPI,” said Hogan, referring to the producer price index. “That tells us the Fed could be behind the curve.”
The Fed has announced that it is expecting a temporary rate of inflation, but fears it may not be a temporary spike in the market. However, according to Hogan, investors consoled themselves with a decline in iron ore and copper, which fell nearly 2% over the week.
Retail income and housing
Large retailers report quarterly profits during the week. Walmart and Home Depot will report on Tuesday. Target, TJX and Lowes release results on Wednesday and BJ’s Wholesale and Kohl’s on Thursday.
Another disappointing data point was Friday retail sales in April, which was flat with March. But they are still at a high level. Based on the sales report, Hogan said retailers should have done well.
“You will likely hear the usual suspects outperforming. It used to be Walmart, Target, Home Depot and Lowe’s,” Hogan said. He said now others like TJX and Gap have joined the list and should do well.
In addition to income, there is housing data. The National Association of Home Builders Sentiment Index will be released on Monday, and construction starts will be released on Tuesday. Existing home sales will be issued on Friday.
Hogan said depending on the data, it could help builders who have fallen hard over the past week. He noted that DR Horton and Hovnanian had both been down for the week.
“The housing index was down 5% for the week, even though it was up 1%. [Friday]. This is a brand new sector that has a lot of implications, “he said.” What is good for home sales is good for auto sales too. It’s good for Home Depot and Lowe’s. “
Home builders were part of a broad market that rebounded on Friday.
Scott Redler, chief strategist at T3Live.com, said by the end of the week that some of the growth and tech names were doing better, like Facebook and Alphabet.
“The S&P 500 held the 50-day moving average, which is constructive,” he said.
The S&P 500 reached its 50-day period within about a dozen points, which is the average price of the last 50 closes. It is often a level that acts as a support, but when broken it can signal a negative trend.
The S&P 500 fell 1.5% for the week to 4,173.85. The Nasdaq ended the week at 13,429.98, down 2.3% from the week.
“The tech sector under pressure held its annual uptrend earlier in the week. Today it felt a little better than the rest of the week,” Redler said on Friday. “That doesn’t mean you can get into everything, but you can say that traders are buying better-trading stocks at these prices.”
Calendar for the week ahead
Merits: Hostess Brands, Lordstown Motors, Tencent
8:30 am Raphael Bostic, Atlanta Fed President, on CNBC
8:30 a.m. Empire production
10:00 am NAHB index
10:25 am Richard Clarida, vice chairman of the Fed, at the Fed conference in Atlanta
4:00 p.m. TIC data
6:00 p.m. Rob Kaplan, President of the Dallas Fed
Merits: Walmart, Home Depot, Macys, Baidu, Take-Two Interactive, Trip.com, NetEase
8:30 a.m. Housing construction begins
11:05 am Rob Kaplan, President of the Dallas Fed
Merits: Target, Lowe’s, JD.Com, Cisco, Schuhkarneval, TJX, Eagle Materials, Analog Devices, L Brands
10:00 am James Bullard, St. Louis Fed President, on economics and monetary policy
2 p.m. FOMC minutes
Merits: BJ’s Wholesale, Kohl’s, Petco, Ralph Lauren, Applied Materials, Ross Stores, Deckers Outdoor, Hormel Foods, Palo Alto Networks
8:30 am Initial jobless claims
8:30 a.m. Philadelphia Fed
10:00 a.m. leading indicators
10:00 a.m. St. Louis Fed’s Bullard
10:30 a.m. Dallas Fed Chaplain
Merits: Deere, Foot Locker, Buckle, VF Corp, Booz Allen Hamilton
9:45 am Markit Manufacturing PMI
9:45 a.m. Markit Services PMI
10:00 am Existing home sales
12:15 p.m. Dallas Fed Chaplain, Atlanta Fed Bostic, and Richmond Fed President Thomas Barkin in a panel
1:30 p.m. Mary Daly, San Francisco Fed President