What to know this week

Stocks are coming off their best week since June, and Wall Street’s ability to extend that winning streak in days ahead likely hinges on news from the retail sector.

Lighter inflation data rekindled investor hopes that a monetary policy shift is imminent, and key earnings results from retailers and the government’s October report on the sector could put that optimism to the test.

Walmart ( WMT ), Target ( TGT ) and The Home Depot ( HD ) top a long docket of companies scheduled to unveil third-quarter financials this week.

The Commerce Department will also release its monthly retail sales report for October on Wednesday, with economists surveyed by Bloomberg estimating a headline increase of 1.0% after spending was flat in the previous month.

Bets that Federal Reserve policymakers will pull back the pace and balance of interest rate hikes after October’s Consumer Price Index (CPI) showed easing inflation last month helped push the major averages to sizable gains. The S&P 500 rose 5.9% for the week, its best five-day performance since the week ending June 24, while the Dow Jones Industrial Average advanced 4.2%. The Nasdaq Composite had its best week since March, bouncing 8.1%.

The moves came after the latest CPI reading put the annual pace of inflation at 7.7% in October and 0.4% over the month, while “core” CPI – which excludes the volatile food and energy categories – slowed to 6.3% year-over-year – year and 0.3% over October. The figures are better than Wall Street’s call for a 7.9% year-over-year rise and 0.5% monthly gain and down meaningfully from September’s numbers.

While the softer data was met with “an equity market ovation,” as Principal Asset Management Chief Global Strategist Seema Shah put it, strategists — and some members of the Federal Reserve itself — said excitement was premature as other economic data will be. Revealed ahead of the Fed’s next policy-setting meeting in December.

“Chair Jay Powell has repeatedly emphasized that the Fed does not put too much weight on a single month’s data,” Andy Sparks, MSCI’s head of portfolio management research, wrote in a note. “His comments after last week’s Federal Open Market Committee meeting likely still reflect current Fed thinking — that a strong labor market continues to support stubbornly high inflation and that the risk of doing too little still outweighs the risk of Doing too much.”

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A strong reading on retail sales could derail the market’s push higher: Bloomberg’s consensus economist estimate of a 1.0% jump in the main measure of the monthly report, if realized on Wednesday, would reflect spending remains strong and consumers remain resilient. Investors may interpret this strength as a signal to Fed officials that they have more room for hikes.

According to Bank of America, two factors account for the anticipated jump in October’s print: another round of Amazon Prime Day and related promotions in addition to July’s event, along with the deployment of one-off stimulus payments in California, which accounts for About one. -Seventh of the national economy. A pickup in gas spending due to higher prices on gasoline also contributed to the expected increase.

On the earnings front, Walmart will kick off a big week of retail reports when the retailer reports ahead of the opening on Tuesday. Analysts expect the megastore to get a boost from back-to-school shopping, along with more value spending among U.S. consumers. it. Consumers weighed down by rising prices. At the same time, results are expected to show pressure from inflation, rising interest rates, and bloated inventories that have plagued many retailers.

A man pushes a television into a shopping cart at Walmart on Black Friday, a day that kicks off the holiday shopping season, in King of Prussia, Pennsylvania, US.  US, on November 29, 2019. REUTERS/Sarah Silbiger.

A man pushes a television into a shopping cart at Walmart on Black Friday, a day that kicks off the holiday shopping season, in King of Prussia, Pennsylvania, US. US, on November 29, 2019. REUTERS/Sarah Silbiger.

Last quarter, Walmart CEO Doug McMillon said that increasing levels of food and fuel inflation pressured consumer spending and apparel required more markdown dollars.

Other consumer names on the earnings deck this week are The Home Depot ( HD ), Target ( TGT ), TJX Companies ( TJX ), BJ’s Wholesale ( BJ ), Gap ( GPS ), Kohl’s ( KSS ), Macy’s ( M ), and Ross Stores (ROST), among others.

The market has rewarded positive earnings surprises more than the five-year average, while penalties are missing more as well, as Wall Street prices in more downside risk as recession fears grow.

As of Friday, 91% of companies in the S&P 500 had reported third-quarter earnings, with 69% reporting actual earnings per share above the average estimate — below the five-year average of 77% that beat, per FactSet research. Companies whose results came in better than expected saw an average increase in their stock price of 2.4% two days before the earnings release through two days after the earnings release, meaningfully higher than the five-year average price increase of 0.9% for companies reporting earnings beats during the same window.

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The market is rewarding positive EPS surprises in Q3 more than average for S&P 500 companies.  (Source: FactSet Research)

The market is rewarding positive EPS surprises in Q3 more than average for S&P 500 companies. (Source: FactSet Research)

Elsewhere in economic data, the producer price index (PPI), a reading on inflation from the production side of the economy, is due on Tuesday. PPI, which measures the change in prices paid to US it. Producers of goods and services, is expected to have cooled last month. This week will also be full of housing data, including readings on housing starts, building permits and existing home sales.

Economic calendar

Monday: No notable economic data scheduled for release.

Tuesday: Empire ManufacturingNovember (-5.5 expected, -9.1 during previous month); PPI final requirementMonth-over-month, October (0.5% expected, 0.4% during previous month); PPI excluding food and energyMonth-over-month, October (0.4% expected, 0.3% during previous month); PPI excluding food, energy and tradeMonth-over-month, October (0.2% expected, 0.4% during previous month); PPI final requirementYear-over-year, October (8.4% expected, 8.5% during previous month); PPI excluding food and energyYear-over-year, October (7.2% expected, 7.2% during previous month); PPI excluding food, energy and tradeYear-over-year, October (5.5% expected, 5.6% during previous month); Bloomberg November United States Economic Survey

Wednesday: MBA Mortgage ApplicationsWeek ended November 11 (-0.1% during previous week); Retail sales advanceMonth-over-month, October (1.0% expected, 0.0% during previous month); Retail sales excluding autosMonth-over-month, October (0.5% expected, 0.1% during previous month); Retail sales excluding autos and gasMonth-over-month, October (0.3% expected, 0.3% during previous month); Retail Sales Control GroupOctober (0.3% expected, 0.4% during previous month); Import price indexMonth-over-month, October (-0.5% expected, -1.2% during previous month); Import Price Index Excluding PetroleumMonth-over-month, October (-0.8% expected, -0.5% during previous month); Import price indexYear-over-year, October (4.0% expected, 6.0% during previous month); Export Price IndexMonth-over-month, October (-0.2% expected, -0.8% during previous month); Export Price IndexYear-over-year, October (9.5% during previous month); Industrial productionMonth-over-month, October (0.1% expected, 0.4% during previous month); Capacity utilizationOctober (80.4% expected, 80.3% during previous month); Manufacturing (SIC) productionOctober (0.2% expected, 0.4% during previous month); Business inventories, September (0.5% expected, 0.8% during previous month); NAHB Housing Market Index, November (36 expected, 38 in previous month); Network long-term tick flowsSeptember ($197.9 billion), Total network tick flowsSeptember ($275.6 billion)

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Thursday: Housing startsOctober (1.412 million expected, 1.439 during previous month); Building permitsOctober (1.515 million expected, 1.564 million in the previous month, upwardly revised to 1.696 million); Housing startsMonth-over-month, October (-1.9% expected, -8.1% during previous month); Building permitsMonth-over-month, October (-3.1% expected, -1.4% during previous month); Philadelphia Fed Business Outlook IndexNovember (-6.0 expected, -8.7 during previous month); Initial unemployment claimsWeek ended November 12 (221,000 expected, 225,000 during previous week); Continuing claimsweek ended November 5 (1.493 during previous week); Kansas City Fed Manufacturing ActivityNovember (-7 expected, -7 in previous month)

Friday: Existing home salesOctober (4.37 million expected, 4.71 million during previous month); Existing home salesMonth-over-month, October (-7.3% expected, -1.5% during previous month); Leading indexOctober (-0.4% expected, -0.4% in previous month)

Earnings calendar

Monday: J&J Snack Foods (JJSF), Oatly Group (OTLY), Tower Semiconductor (TSEM), Weber (WEBR)

Tuesday: Home Depot (HD), Walmart (WMT), Advance Auto Parts (AAP), Energizer (ENR), Krispy Kreme (DNUT), Tencent Music (TME)

Wednesday: Cisco Systems ( CSCO ), Bath & Body Works ( BBWI ), Helmerich & Payne ( HP ), Lowe’s ( LOW ), Manchester United ( MANU ), Nvidia ( NVDA ), Sonos ( SONO ), Target ( TGT ), TJX Companies ( TJX), Victoria’s Secret (VSCO), Williams-Sonoma (WSM)

Thursday: Alibaba Group (BABA), BJ’s Wholesale (BJ), Dole (DOLE), Farfetch (FTCH), Gap (GPS), Kohl’s (KSS), Macy’s (M), Palo Alto Networks (PANW), Ross Stores (ROST), The Children’s Place (PLCE)

Friday: Foot Locker (FL), JD.com (JD)

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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