The global business elite will gather in the mountains of Davos, Switzerland this week against a backdrop of turbulent markets and an uncertain economic outlook.
For the first time in more than two years, CEOs, politicians and billionaires are set to meet at World Economic Forum After a gap caused by the epidemic. The Russian war in Ukraine, the COVID-19 pandemic, and fears of economic gloom will be among the main topics discussed, as top world leaders face the most ambiguous predictions about global cooperation in years.
There is no doubt that the recent turmoil in the financial markets is one of the issues on the minds of many attendees in Davos, where the S&P 500 Index completed its work. Seventh consecutive week of lossesthe longest streak since 2001. The benchmark index has fallen seven consecutive weeks only twice since 1980, according to market data.
The S&P 500 slipped into bear market territory — defined as a 20% drop from recent highs — during Friday, but a late afternoon rally prevented a close below that line. Next week, traders will be watching and looking for 3,837.24, with a close below that level confirming the first bear market for the S&P 500 since 2020.
On the economic front, the Federal Reserve’s May 4 meeting minutes are due out on Wednesday, and are expected to give investors a better picture of where policy makers see interest rates heading in 2022. Uncertainty around the pace and size of the Fed rate has pressured the cycle Strolling the stock markets, as investors brace for an economic slowdown with indications that inflation is becoming entrenched in the pockets of the economy.
Traders will also be watching a series of US economic data closely, particularly Thursday’s second estimate of first-quarter GDP growth. A country’s GDP – the broadest measure of economic activity – contracted at an annual rate of 1.4% between January and March as supply chain disruptions, inflation and war-induced disruptions in Eastern Europe weighed on growth. The updated estimate is expected to show a revised contraction of 1.3%, according to Bloomberg estimates.
Elsewhere in the economic calendar, the Bureau of Economic Analysis is due to release a new reading of monthly personal consumption expenditures (PCE). PCE, the Federal Reserve’s preferred inflation measure, will provide markets with the latest look at how quickly prices are rising across the country. Economists expect personal consumption expenditures to fall slightly, posting a 0.2% monthly increase in April, down from last month’s 0.9% reading, according to Bloomberg data. The reading will still represent the 17th consecutive monthly increase and represent a 6.2% increase in the index compared to last year.
Corporate profits also remain in focus after big retailer Walmart (WMT) and target (TGT) Investors panicked last week, as retailers lowered their expectations and told investors that their inventory channels were becoming bloated. Target has erased a quarter of its market value, and Walmart shares are down 20% – the biggest drops since the 1987 crash. Companies have also reduced their overall retail sector with them – the SPDR S&P Retail ETF (XRT) is down more than 9% last week.
“Investors have been struggling with all three factors so far this year: central banks, the conflict in Ukraine and frequent shutdowns in China,” said Brian Jacobsen, senior investment analyst at Allspring Global Investments. “Last week, we had to add another ‘C’, to squeeze profit margins from major retailers.”
Jacobsen noted that “it was inevitable that there would be some payoff from the increase in profits caused by the epidemic, which many companies suffered, but this payoff may be greater than originally thought.” “Businesses have to deal with rising input costs, consumers bogged down by higher prices, and changing spending patterns.”
Reports from more retailers are underway next week, with results emerging from names including Macy’s (M), sporting goods have (DKS) and Ulta Beauty (Ulta). The results are likely to provide more clarity to investors about the state of US consumers and the resilience of corporate earnings in the face of persistent inflation.
“Unfortunately, there is no safe haven,” Eva Addos, chief operating officer of ER Shares, told Yahoo Finance Live. “When we see the news that came from consumer discretion and commodities, it shows the hardships that companies face regardless of their size, and, ironically, these are the sectors — commodities and consumer appreciation — that are seen as safe havens in a bad economic market.”
The lackluster earnings season is about to end. S&P 500 companies reporting first-quarter results experienced the largest negative price reaction to positive earnings per share surprises since 2011, according to data from FactSet.
As of Friday, 95% of companies in the S&P 500 reported first-quarter earnings, with 77% reflecting actual earnings per share above the average EPS estimate. However, companies that reported positive earnings surprises saw an average price drop of 0.5% two days before earnings announcements and within two days after the earnings release, according to FactSet. This percentage drop is well below the five-year average price increase of 0.8% over the same period for companies that reported positive earnings surprises.
Monday: Chicago Fed National Activity Index, April (0.44 over the previous month)
Tuesday: US S&P Global Manufacturing Index, Preliminary for May (expect 57.8, 59.2 over the previous month); S&P Global US Services PMI, Pre-May (expect 55.5, 55.6 over previous month); US S&P Global Composite PMI, preliminary to May (expect 55.5, 56.0 over previous month); Richmond Fed Manufacturing Index, May (12, 14 over the previous month); New Home Sales, April (expect 750,000, 763,000 over previous month); New Home Sales, MoM, Apr (-1.7%, -8.6% over the previous month)
Wednesday: MBA Mortgage Applications, week ending May 20 (-11.0% over the previous week); Durable Goods Orders, Primer for April (0.6% expected, 1.1% over the previous month); Durable Goods Excluding Transportation, 1st April (0.6% expected, 1.4% over the previous month); Non-defense capital goods orders excluding aircraft, preliminary April (0.5% expected, 1.3% over previous month) Non-defense capital goods excluding aircraft shipments, early April (0.5% expected, 0.4% over previous month); FOMC meeting minutes, May 4
Thursday: GDP Annual, Quarterly, 1st 2nd Quarter (-1.3% expected, -1.4% previously); Personal consumption, quarter after quarter, Q1-2 (2.8% expected, 2.7% previously); GDP Price Index, Quarter by Quarter, 1st 2nd Quarter (8.0% expected, 8.0% previously); Core PCE, quarterly, second quarter (5.2% expected, 5.2% previously); Initial Jobless Claims, week ending May 21 (expect 210,000, 218,000 over previous week); Continuing Claims, week ending May 14 (expect 1.310 million, 1.317 million over previous week); Pending Home Sales, MoM, Apr (-1.9% expected, -1.2% over the previous month); NSA Pending Home Sales, YoY, Apr (-8.9% over the previous month); Kansas City Fed Fed Manufacturing Index, May (20 expected, 25 over previous month)
Friday: Developed Goods Trade Balance, April (- $ 114.8 billion expected, – $ 125.3 billion over the previous month, revised to – $ 127.1 billion); Wholesale Inventory, MoM, Introductory for April (2.0% expected, 2.3% over previous month), Personal Income, MoM, Apr (0.5% expected, 0.5% over previous month); Personal Spending, MoM, Apr (0.6% expected, 1.1% over the previous month); Real Personal Spending, MoM, Apr (0.5% expected, 0.2% over the previous month); Retail Inventory, MoM, Apr (2.0% over the previous month); PCE contraction, MoM, Apr (0.2% expected, 0.9% over the previous month); PCE contraction, YoY, Apr (6.2% expected, 6.6% over the previous month); PCE Core Deflator, MoM, Apr (0.3% expected, 0.3% over the previous month); Core deflator for PCE, YoY, Apr (4.9% expected, 5.2% over the previous month); University of Michigan morale, May final (59.1 expected, 59.1 over the previous month); University of Michigan Current Conditions, May Final (63.6 over the previous month); University of Michigan Forecast, May Finals (56.3 over the previous month); University of Michigan One-Year Inflation, May Final (5.4% over the previous month); University of Michigan 5-10 year inflation, May final (3.0% over the previous month)
Before the market opens: There are no notable reports scheduled for release.
Before the market opens: Macy’s (M), dollar tree (DLTR), dollar general (DJ), Ulta Beauty (Ulta(Lions Gate)LGF), VMware (VMW) , Ali Baba (Baba), Burlington Stores (BURL), jack in the box (jack), dent (BKE)
After market close: There are no notable reports scheduled for release.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter Tweet embed
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