Week Ahead on Wall Street: Gauging the War’s Reach

Estimated reading time: 4 minutes

The past month or so has seen global markets dip lower only to rip even higher. Talk about some strenuous cardio. But with the calendar clearing up a bit, now might be the time for markets to catch their breath.

At a Glance

• The news: The earnings calendar slows to a trickle, leaving investors to focus on the consumer and wholesale inflation reports.
• The context: The Iran war has thrust global energy markets into chaos, tech stocks have surged on even greater AI enthusiasm, and the Federal Reserve is trying to balance all these competing uncertainties as it sets interest rate policy. 
• Your move: Watch the core inflation readings, which strip out volatile food and energy prices. If these numbers show price pressure is spreading into other goods and services, expect bond yields to rise and stocks to struggle. 

After the whirlwind of the past few weeks, you can forgive traders for enjoying the relatively light calendar this week. The earnings deluge has passed, and we have a month before the next Federal Reserve meeting. We will presumably see Kevin Warsh confirmed as the next Fed chair, but that’s been baked in for a while and shouldn’t have much of an impact on markets.

What could have an impact are the CPI and PPI inflation reports, which are scheduled to come out Tuesday and Wednesday. The question is whether the oil shock stemming from the Iran war is spreading to other parts of the economy. 

More specifically, investors will want to know whether farmers and manufacturers are absorbing the higher costs of production or passing them on to everyday consumers. Given that a resolution to the war isn’t in sight, the new data will help us gauge the path of inflation.

Naturally, there are ramifications for Fed officials as well. If inflation comes in high, they may start discussing the possibility of raising benchmark interest rates. But so far, despite their divided decision last month (some wanted to continue hinting at future cuts, while others wanted to remove any such suggestions) they’ve indicated that rates are probably going to stay where they are for a while. 

On the Docket

Monday

• April Existing Home Sales: Most home transactions in any given month tend to come from the existing market, and as a result set the tone for the broader housing market.
• Earnings: Simon Property Group (SPG), Twenty-First Century Fox Class A (FOXA), STERIS (STE), Mosaic (MOS), Constellation Energy Co (CEG), Fox Class B (FOX)

Tuesday

• April NFIB Small Business Optimism: This measures how small business owners feel about current and future economic conditions.
• April Consumer Price Index: The CPI is one of the most popular indicators for tracking consumer price trends and is a marquee release for market watchers. 
• April Treasury Statement: This summarizes the U.S. federal government budget by tracking government revenues and expenditures.
• Fedspeak: Chicago Fed President Austan Goolsbee will speak at the Greater Rockford
• Earnings: Qnity Electronics (Q), Zebra Technologies (ZBRA)

Wednesday

• April Producer Price Index: The PPI tracks price trends that producers face and is down significantly from its peak earlier in the cycle.
• Weekly Mortgage Applications: Mortgage activity gives insight on demand conditions in the housing market.
• Earnings: Cisco (CSCO)

Thursday

• April Import/Export Price Indexes: These indexes track the changes in the prices of nonmilitary goods and services traded between the U.S. and the rest of the world. 
• April Retail Sales: This measures spending at retail stores and is a key indicator of consumer demand.
• Earnings: Applied Materials (AMAT)

Friday

• May Empire State Manufacturing Activity: The New York Fed’s survey of manufacturing executives in the region on business conditions and their outlook. 
• April Industrial Production and Capacity Utilization: The industrial sector accounts for much of the cyclical swings in economic activity.

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