Stock market bulls looking to extend the rally in the upcoming week will face a major obstacle in the way of the Federal Reserve’s preferred inflation measure.
The release of the Personal Consumption Expenditures (PCE) index for October on Thursday is expected to show that “core” PCE inflation, the Fed’s favored gauge, rose by 3.5% on an annual basis last month.
This upcoming week’s economic calendar will include updates on manufacturing activity, consumer confidence, and home prices.
Corporate earnings reports are anticipated from Salesforce (CRM), Snowflake (SNOW), Okta (OKTA), Dollar Tree (DLTR), Foot Locker (FL), Kroger (KR), and Ulta Beauty (ULTA).
Last week, all three major stock averages finished around 1% higher after the leadership drama at OpenAI and Nivida’s (NVDA) latest quarterly report captured investor attention.
The Focus on Inflation
The upcoming week will test the current market as stocks ended Friday with the best monthly gain in over a year.
The latest inflation reading on Thursday is expected to act as the final chance for economic data to affect the market narrative that the US economy is headed for a “soft landing.”
Recent economic data has aligned with that narrative, leading to a rally in beaten-up areas of the stock market such as small-cap stocks and meme stocks.
According to data from the CME Group, the market is pricing in just a 12% chance of another Fed rate increase.
Economists project that “core” PCE inflation in October was at 3.5%, with a 0.2% increase over the previous month.
Stocks surged earlier this month and bond yields dropped after October’s Consumer Price Index displayed a slowdown in inflation.
Software and Sales
On the corporate front, a variety of quarterly results will give investors more insight into consumer health, software demand, and the impact of AI on businesses and their customers.
Foot Locker, Ulta Beauty, and Dollar Tree will be closely watched for forecasts regarding the holiday season and the impact of rising interest rates and a softening labor market on consumer behavior.
Salesforce’s guidance for the current quarter will be thoroughly analyzed by investors, with a focus on demand for the company’s AI products.
Results from Workday, Intuit, Snowflake, and Okta are also expected to touch on similar themes in the week ahead.
Weekly Calendar
Monday
Economic data: Dallas Fed Manufacturing Activity, New home sales for October, New home sales month-over-month
Earnings: Zscaler (ZS)
Tuesday
Economic data: Conference Board Consumer Confidence, S&P CoreLogic Case-Shiller Home Price Index month-over-month and year-over-year
Earnings: CrowdStrike (CRWD), Hewlett Packard Enterprise (HPE), Intuit (INTU), Workday (WDAY)
Wednesday
Economic data: MBA Mortgage Applications, Wholesale inventories month-over-month, Third quarter GDP, Third quarter personal consumption
Earnings: Dollar Tree (DLTR), Foot Locker (FL), Five Below (FIVE), Hormel Foods (HRL), La-Z-Boy (LZB), Okta (OKTA), Petco (WOOF), Snowflake (SNOW), Salesforce (CRM), Victoria’s Secret (VSCO)
Thursday
Economic data: Initial and continuing jobless claims, Personal income, Personal spending, PCE inflation month-over-month and year-over-year, “Core” PCE month-over-month and year-over-year
Earnings: Academy Sports and Outdoors (ASO), Big Lots (BIG), Build-A-Bear (BBW), Cracker Barrel (CBRL), Dell (DELL), Kroger (KR), Marvell (MRVL), TD Bank (TD), Ulta Beauty (ULTA)
Friday
Economic news: S&P Global US Manufacturing PMI, ISM manufacturing
Earnings: Bank of Montreal (BMO)
Josh Schafer is a reporter for Yahoo Finance.
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