Falling stock market heads for busy week of tech earnings and economic data
Traders work on the floor of the New York Stock Exchange (NYSE) on March 28, 2022 in New York City.
Spencer Platt | Getty Images
A tough April for Wall Street saw the S&P 500 slide for three straight weeks, and now investors will be grappling with a slate of earnings reports and key inflation data.
Rising interest rates and continued high inflation weighed on equities and raised concerns of an economic slowdown. The next few days will bring a fresh look at some of the biggest companies in the world, as well as economic growth.
Big tech revenue
The week ahead will feature big reports from nearly every sector, but tech stocks will be the focus.
Microsoft and Alphabet will release their latest results after the bell on Tuesday, followed by Meta Platforms, parent Facebook, on Wednesday, and Apple and Amazon on Thursday.
Earnings season has delivered strong results so far, with rates beating broadly in line with recent quarters, although earnings expectations have fallen in recent months as Wall Street analysts scrutinized the economy restless.
“The market has done a pretty good job of lowering expectations so far this year,” said Shawn Cruz, chief strategist at TD Ameritrade.
However, there have certainly been some negative reporters, and perhaps none more so than Netflix. Shares of the streaming video giant fell 35% on Wednesday after revealing a surprise loss of subscribers. The drop seemed to weigh not only on other streaming stocks such as Warner Bros. Discovery, but also on other more speculative names, such as solar power games, which fell on an overall strong market day.
With the size of tech companies reporting next week, investors should be aware of the spread of trading potential. Cruz said he was watching to see if there were any signs that economic pressures were hurting subscription businesses more broadly, such as software and cybersecurity stocks, instead of just being a video story in streaming.
“The market was rewarding those companies, the companies that went out there and got contracts signed…but now it can almost turn into a double-edged sword where,” Cruz said.
“When you’re a growing business and you go from not just steady growth to moderate growth, but also user saturation, you’re really going to be hit hard,” he added.
Inflation will also be front and center for investors in the week ahead, with the Personal Consumption Expenditure Index – the Fed’s preferred gauge of inflation – due out Friday before the bell. the Core PCE jumped 5.4% in February.
The basic reading excludes volatile food and energy prices, but these have been pushed so high in recent months that they are seriously eating away at consumers’ wallets.
“Spiking inflation wouldn’t be a problem if it were generated entirely by supply constraints, related to food and energy, but central banks can’t just sit and wait for it’s normalizing,” Steven Major, global head of fixed income research at HSBC, said in a note to clients on Friday.
Traders have been betting on an increasingly aggressive Federal Reserve in recent weeks. On Friday, the Fed futures market implied a 50 basis point rise in May and an additional 75 basis point rise in June.
Fed Chairman Jerome Powell told an International Monetary Fund panel on Thursday that the Fed could not be content with some estimates showing inflation had peaked and said the tighter policy could be appropriate. He said it was “absolutely essential” to achieve price stability.
“It may be that the actual peak was in March, but we don’t know that, so we’re not going to count on that,” Powell said.
Fed officials have been a bit contradictory on the way forward in recent weeks, with some advocating an aggressive stance and a possible 75 basis point hike while others are taking a more wait-and-see approach.
Ultimately, inflation data may force the Fed’s hand on rate hikes.
“In our view, given the complacency of this group, the Fed will deliberately only risk a recession if inflation remains stuck above 3%. Therefore, rather than eagerly awaiting the next speaker from the Fed, we’re focused on one question: is the economy on the path to acceptable or unacceptable inflation. Anything else is just rhetoric,” Ethan Harris, global economist at Bank of America, said Friday in a statement. a note to customers.
Other economic data
The PCE release will follow several other major economic news throughout the week.
On Tuesday, the S&P/Case-Shiller home price index and new home sales data will provide an updated view of the US housing market. Earnings from DR Horton on Tuesday will also complement this picture.
And on Thursday, the preliminary first-quarter GDP reading will be closely watched as investors look for signs of an economic slowdown.
Calendar for the coming week
Earnings: Coca-Cola, Activision-Blizzard, Otis, Whirlpool, Zions Bancorp
Earnings: Microsoft, Alphabet, Visa, PepsiCo, UPS, Canadian National Railways, Texas Instruments, General Electric, Mondelez, General Motors, Chipotle, DR Horton, Capital One, Warner Bros. Discovery
8:00 a.m. Building permits, durable goods orders
9:00 a.m. S&P/Case-Shiller Home Price Index
10:00 a.m. Consumer confidence, new home sales
Earnings: Meta, T-Mobile, Amgen, Qualcomm, Boeing, Canadian Pacific, PayPal, Norfolk Southern, Ford, Humana, Kraft Heinz, Discover Financial, O’Reilly Automotive
8:30 a.m. Bulk orders
10:00 a.m. Door-to-door sales pending
Earnings: Apple, Amazon, Mastercard, Eli Lilly, Merck, Thermo Fisher, Comcast, Intel, McDonald’s, Caterpillar, Northrop Grumman, Keurig Dr. Pepper, Twitter, KLA Corp. Altria, Robinhood
8:30 a.m. Unemployment insurance claims, Q1 GDP
11:00 a.m. Kansas City Fed Manufacturing Index
Earnings: Exxon, Chevron, AbbVie, AstraZeneca, Bristol-Myers Squibb, Honeywell, Charter, Colgate-Palmolive, Phillips 66, LyondellBasell, Bloomin’ Brands, TAL Education
8:30 a.m. PCE, personal income
9:45 a.m. Chicago PMI
10:00 a.m. Consumer Sentiment from the University of Michigan
– CNBC’s Michael Bloom contributed to this report.