Superstore earnings and retail sales
Retail sales and earnings are expected to provide investors more information on the state of the consumer after a six-month low in consumer confidence sent stocks lower on Friday.
Markets
Dow Jones: 33,300.62 (-0.027%) 📉
S&P 500: 4,124.08 (-0.16%) 📉
Nasdaq: 12,284.74 (-0.35%) 📉
Russell: 1,740.85 (-0.22%) 📉
VIX: 15.78 (+0.59%) 📈
*Stock numbers as of market close on May 12th
Monthly retail sales and quarterly results from the likes of Walmart WMT 0.00%↑ and Target TGT 0.00%↑ will provide a detailed update on the state of the consumer in the week ahead as investors also keep a close watch on debt ceiling developments out of Washington.
Retail sales and quarterly earnings from Home Depot HD 0.00%↑ Tuesday morning will set the tone for a crowded week of updates on consumer spending trends.
After falling 1% on a monthly basis in March, retail sales are expected to grow by 0.8% in April, per Bloomberg data. The busy week of retail earnings will also include results from Target and TJX TJX 0.00%↑ on Wednesday, with Walmart and Alibaba BABA 0.00%↑ reporting Thursday.
Outside retail numbers and housing data headlined by existing home sales and homebuilder sentiment, the week will be relatively quiet on the economic data front.
In Washington, D.C., debt ceiling deliberations between President Joe Biden and House Speaker Kevin McCarthy are expected to continue early in the week as the government approaches the so-called "X-date" when the government would run out of borrowing capacity.
Elsewhere in Washington, former top executives at Silicon Valley Bank and Signature Bank are expected to testify before the Senate on Tuesday.
Trade downs from higher-income consumers, inventory levels, and current-quarter trends will be the focus for investors during retail earnings reports this week. At Target, analysts are projecting same-store sales rose 1.25% during the first quarter; at Walmart, same-store sales are expected to have risen 5%, according to data from Bloomberg.
Foot traffic was down across superstores in March and April, according to data from Placer.ai, and Wall Street analysts expect that to show up in this week's results.
"As we head into earnings, we believe WMT is one of the best positioned in our coverage, and our data checks support our view," analysts at Jefferies wrote in a note to clients. "For TGT, we are lowering our Q1 and FY comp estimates as we see some potential weakness."
Investors will be focused not only on how companies began the year but also on what management teams say about consumer trends in the current quarter, particularly after the nation's largest online retailer already warned of a slowdown.
"The uncertain economic environment and ongoing inflationary pressures continue to be a factor and we believe, is continuing to drive cautious spending across consumers," Amazon CFO Brian Olsavsky said on the company's earnings call last month. "This means our customers are looking to stretch their budgets further, and are focused on value."
Data from Bank of America last week also signaled a slowdown, with total retail excluding auto spending down 2.3% on a yearly basis, according to the firm's credit card data.
"We expect a benefit from trade-down will occur this year as inflationary pressures persist, especially given rising unemployment among the higher-income cohort," Bank of America's data analytics team wrote in a note to clients on Friday.
Broadly, first-quarter earnings for S&P 500 companies are beating expectations at their highest rate since the third quarter of 2021, according to FactSet. But investors have not been quick to reward these reports.
On average, companies that report earnings that beat expectations have seen their stock increase an average of 0.3% in the period covering the two days before and two days after an earnings report. That’s well below the five-year average price increase of 1% for shares of companies that beat estimates over the same period.
Since the start of the first-quarter earnings season, the S&P 500 is largely unchanged — the index entered bank earnings at 4,146 and closed at 4,124 on Friday.
"There's a lot to unpack right now," Jack Manley, global market strategist at J.P.Morgan Asset Management.
"There's a lot to digest right now. And without any sort of real clarity on these things, it's hard for markets to meaningfully move higher or lower, right? It's all markets really want at the end of the day, is news. And no news is bad news."
Events Calendar
Monday
Economic data: Empire State manufacturing, May (-4 expected, 10.8 previously)
Tuesday
Economic Data: Retail sales month-over-month, April (+0.8% expected, -1% previously); Retail sales excluding autos and gas, month-over-month, April (+0.2% expected, -0.3% previously); Industrial production, month-over-month, April (0% expected, +0.4% previously); Homebuilder sentiment, May (45 expected, 45 previously)
Wednesday
Economic data: MBA Mortgage Applications (+6.3% during the prior week); Housing starts, month-over-month, April (-1.4% expected, -0.8% previously); Building permits, month-over-month, April (0.0% expected, -8.8% previously)
Thursday
Economic data: Weekly initial jobless claims (252,000 expected, 264,000 previously); Continuing claims (1.82 million expected, 1.81 million previously); Existing Home Sales, April (-3.2% expected, -2.4% previously)
Friday
No notable economic reports.
