Stock markets experienced in a sharp drop last week as strong economic reports dimmed the outlook for future rate cuts, while Treasury yields spiked, and oil prices jumped. However, investors’ optimism was rekindled on Friday on expectations that a robust economy will support strong corporate earnings.
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This assumption regarding continued strong corporate profitability will begin to be put to the test this week, as the Q1 2024 earnings season kicks off on Friday with reports from the leading banks. With stock valuations near their two-year high, earnings – and even more importantly, further guidance – will draw increased investor attention and pave the path forward for stock market performance.
This week, investors will also focus on the incoming economic data and minutes from the March FOMC meeting. The latest comments from several policymakers, including Fed Chair Jerome Powell, underscored that policymakers are not convinced inflation has sustainably subsided, and are looking for further proof in the data. The central bank members, as well as investors, will closely watch the economic reports scheduled to be released this week.
Three Economic Events
Here are three economic events that could affect your portfolio this week. For a full listing of additional economic events, check out the TipRanks Economic Calendar.
» March’s CPI and CPI ex. Food and Energy (Core CPI) – Wednesday, 04/10 – The CPI report is one of the two key indicators used to measure inflation (the second one is the Personal Consumption Expenditures, or PCE). Policymakers, businesses, and consumers closely watch the CPI report, as it reflects the price trends in the economy, shapes consumer spending and business outlooks, and directly affects the Federal Reserve’s policy rate decisions.
» March’s Producer Price Index (PPI) – Thursday, 04/11 – This report reflects input prices for producers and manufacturers. Since PPI measures the costs of producing consumer goods – directly affecting retail pricing – PPI is seen as a good pre-indicator of inflationary pressures. This makes it a leading indicator for the following month’s CPI. Thus, the PPI directly impacts the overall inflation outlook among policymakers.
» April’s Michigan Consumer Sentiment Index and UoM 5-year Consumer Inflation Expectations (preliminary readings) – Friday, 04/12 – These reports portray the results of a monthly survey of consumer confidence levels and consumers’ views of long-term inflation in the United States. The level of confidence affects consumer spending, which contributes about 70% of the U.S. GDP. The inflation expectations index is used as a component of the Fed’s Index of Inflation Expectations calculations.
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