Stocks under pressure, retail earnings continue: 2/27/2023 - 3/03/2023
Retail bellwether Target will report quarterly results, while a rush of data out of the manufacturing and housing sectors is also set for release.
Markets
Dow Jones: 32,816.92 (-1.02%) 📉
S&P 500: 3,970.04 (-1.05%) 📉
Nasdaq: 11,394.94 (-1.69%) 📉
*Stock numbers as of market close on February 24th
The 2023 stock market rally is under pressure.
Inflation data last week that topped expectations — as well as a continued drop in optimism the Federal Reserve's rate hikes will end sooner rather than later — pressured the major indexes, with the Dow logging a fourth-straight losing week and the S&P 500 and Nasdaq suffering their worst weeks of the year, losing 2.7% and 3.4%, respectively. The Dow endured its worst weekly performance since Sept. 2022.
In the week ahead, investors will remain keyed in on the retail sector, with results from Target TGT 0.00%↑ in focus after rival Walmart WMT 0.00%↑ issued a warning on the state of U.S. consumers last week.
On the economic data side, a crowded calendar of reports from the housing and manufacturing sectors — two areas of the economy that have mostly reflected the impact of policy tightening — is on tap, along with a key measure of consumer confidence.
On Friday, the Personal Consumption Expenditures (PCE) price index — the Fed's preferred assessment of how quickly prices are rising across the economy — showed prices rose 0.6% during the month of January and 5.4% over last year. On a "core" basis, which strips out volatile food and energy components, prices rose 0.6% for the month and at an annual clip of 4.7%.
The week marked a turning point in sentiment around inflation expectations and the path forward for interest rates.
The hotter-than-expected PCE index followed upside surprises to inflation this year from the Consumer Price Index (CPI) and producer prices, which showed the largest increases in several months to start the year.
"The bear market rally that began in October from reasonable prices and low expectations has morphed into a speculative frenzy based on a Fed pause/pivot that isn't coming," Morgan Stanley's top strategist Mike Wilson said to clients last week.
Wilson's forecast sees the S&P 500 bottom out at 3,000 this year. On Friday, the benchmark U.S. equity index closed at 3,970.
"Investor optimism had already been hit by a slow puncture this week, but it's deflating more rapidly as the latest data indicates that the work in taming inflation is far from over," Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Standout economic data releases in the week ahead include the S&P CoreLogic Case-Shiller Home Price Index, ISM's manufacturing PMI, and The Conference Board's consumer confidence reading for February.
On the corporate side, Target will release its fourth-quarter earnings results before the market opens on Tuesday, with results from Costco, Macy's, Dollar Tree, and Kohl's also featured on the retail side.
Last week, Walmart's CFO John David Rainey said the "consumer is still very pressured, and if you look at economic indicators, balance sheets are running thinner and savings rates are declining relative to previous periods."
"We expect Target's results will look similar to Walmart's, with better-than-expected sales, more gross margin pressure than predicted, and solid opex leverage in the store," Jefferies analyst Corey Tarlowe. Tarlowe warned, however, Target is not "immune to consumer spending trends shifting to the more needs-based items and away from higher-priced and higher-margin discretionary categories."
Elsewhere on the earnings calendar, notable reports include Occidental Petroleum, Zoom Video, AMC Entertainment, Rivian Automotive, and Dell, among others.
Events Calendar
Monday, February 27
Durable Goods Orders, January Preliminary (-3.8% expected, 5.6% during the prior month)
Durables Excluding Transportation, January Preliminary (0.1% expected, -0.2% during the prior month)
Non-defense Capital Goods Orders Excluding Aircraft, January Preliminary (0.0% expected, -0.1% during the prior month)
Non-defense Capital Goods Shipments Excluding Aircraft, January Preliminary (-0.6% during the prior month)
Pending Home Sales, month-over-month, January (1.0% expected, 2.5% during prior month)
Pending Home Sales NSA, year-over-year, January (-34.3% during prior month)
Dallas Fed Manufacturing Activity, February (-9.10 expected, -8.4 during the prior month)
Groupon GRPN 0.00%↑, LendingTree TREE 0.00%↑, Li Auto LI 0.00%↑, Lordstown Motors RIDE 0.00%↑, Oak Street Health OSH 0.00%↑, Occidental Petroleum OXY 0.00%↑, Workday WDAY 0.00%↑, Zoom Video ZM 0.00%↑
Tuesday, February 28
Advance Goods Trade Balance, January (-$91.0 billion expected, -$90.3 billion during the prior month, revised to -$89.7 billion)
Wholesale Inventories, month-over-month, January Preliminary (0.1% expected, 0.1% during previous month)
Retail Inventories, month-over-month, January (0.5% during the prior month)
House Price Purchase Index, quarter-over-quarter, Q4 (0.1% during prior quarter)
FHFA Housing Pricing Index, December (-0.1% during the prior month)
S&P CoreLogic Case-Shiller 20-City Composite, month-over-month, December (-0.54% during prior month)
S&P CoreLogic Case-Shiller 20-City Composite, year-over-year, December (6.77% during the prior month)
S&P CoreLogic Case-Shiller U.S. National Home Price Index, year-over-year, December (7.69% during prior month)
MNI Chicago PMI, February (44.3 during the prior month)
Richmond Fed Manufacturing Index, February (-11 during the prior month)
Conference Board Consumer Confidence, February (108.5 expected, 107.1 during the prior month)
Richmond Fed Business Conditions, February (-10 during the prior month)
Dallas Fed Services Activity, February (-15.0 during the prior month)
AMC Entertainment AMC 0.00%↑, AutoZone AZO 0.00%↑, Cracker Barrel CBRL 0.00%↑, Compass COMP 0.00%↑, Duolingo DUOL 0.00%↑, GoodRx GDRX 0.00%↑, HP HP 0.00%↑, J.M. Smucker SJM 0.00%↑, Manchester United MANU 0.00%↑, Monster Beverage MNST 0.00%↑, Norwegian Cruise Line NCLH 0.00%↑, Rivian Automotive RIVN 0.00%↑, Ross Stores ROST 0.00%↑, SeaWorld Entertainment SEAS 0.00%↑, Urban Outfitters URBN 0.00%↑, Virgin Galactic SPCE 0.00%↑, Warby Parker WRBY 0.00%↑
Wednesday, March 1
MBA Mortgage Applications, the week ended Feb. 24 (-13.3% during the prior week)
S&P Global U.S. Manufacturing PMI, February Final (47.8 prior)
Construction Spending, month-over-month, January (0.4% expected, -0.4% during prior month)
ISM Manufacturing, February (47.9 expected, 47.4 during the prior month)
ISM Prices Paid, February (44.5 during the prior month)
ISM Employment, February (50.6 during the prior month)
ISM New Orders, February (42.5 during the prior month)
Wards Total Vehicle Sales, February (15.00 million, 15.74 million during the prior month)
Abercrombie & Fitch ANF 0.00%↑, Dollar Tree DLTR 0.00%↑, Jack In The Box JACK 0.00%↑, Kohl's KSS 0.00%↑, Lowe's LOW 0.00%↑, Nio NIO 0.00%↑, Okta OKTA 0.00%↑, Royal Bank of Canada RY 0.00%↑, Salesforce CRM 0.00%↑, Snowflake SNOW 0.00%↑, Tupperware TUP 0.00%↑, Wendy's WEN 0.00%↑
Thursday, March 2
Unit Labor Costs, Q4 Final (2.5% expected, 3.0% during prior quarter)
Nonfarm Productivity, Q4 Final (1.5% expected, 1.1% during prior quarter)
Initial Jobless Claims, the week ended Feb. 24 (TK expected, 192,000 during the prior week)
Continuing Claims, the week ended Feb. 18 (1.654 million during the prior week)
Best Buy BBY 0.00%↑, Big Lots BIG 0.00%↑, Costco Wholesale COST 0.00%↑, Dell DELL 0.00%↑, Hewlett Packard Enterprise HPE 0.00%↑, Hormel Foods HRL 0.00%↑, Kroger KR 0.00%↑, Macy's M 0.00%↑, Marvell Technology MRVL 0.00%↑, Nordstrom JWN 0.00%↑, Six Flags SIX 0.00%↑, Utz Brands UTZ 0.00%↑, Victoria's Secret VSCO 0.00%↑, VMware VMW 0.00%↑
Friday, March 3
S&P Global U.S. Services PMI, February Final (50.5 during the prior month)
S&P Global U.S. Services Composite PMI, February Final (50.2 during the prior month)
ISM Services Index, February (54.5 expected, 55.2 during the prior month)
Hibbett HIBB 0.00%↑
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That pesky transitional inflation just seems to keep lingering on for some strange reason.
Well summarized as per usual! Great stuff.