Retail Sales Data in Focus As S&P 500 Giants to Report Earnings This Week

The equity markets in the United States rose yet again on Friday to close out a strong week. All major indices, including the Dow Jones, the S&P 500, and the Nasdaq Composite index, gained momentum after a lower-than-expected rise in consumer inflation data drove optimism higher on hopes the Federal Reserve will ease its monetary tightening measures in the next 12 months.

Corporates and households have been wrestling with rising interest rates and red-hot inflation in 2022, which have impacted consumer spending as well as enterprise sales and profit margins across sectors.

In the last week, the Dow Jones index rose by 4.2% while the S&P 500 and Nasdaq Composite surged by 6% and 8%, respectively. Additionally, the easing of COVID-19-related restrictions in China resulted in an uptick in oil futures while energy stocks rose higher due to the possibility of increased demand for fossil fuels.

Let’s now see what is in store for investors in the next week.

 

Retail sales and earnings will drive investor sentiment

The largest big-box retailers, including Walmart (NYSE: WMT), Target (NYSE: TGT), Lowe’s (NYSE: LOW), Macy’s (NYSE: M), and Home Depot (NYSE: HD), are scheduled to report quarterly earnings this week. According to estimates from Yahoo Finance for the last quarter, the earnings for:

Walmart earnings are forecast to fall by 9% YoY

Lowe’s earnings are forecast to rise by 13.6% YoY

Target earnings are forecast to fall by 30% YoY

Macy’s earnings are forecast to fall by 84.6% YoY

Home Depot’s earnings are forecast to rise by 4.6% YoY

 

Big-box giants such as Walmart and Target’s earnings might contract as the companies have slashed product prices to reduce inventory levels due to lower spending by households amid a challenging macro-environment.

The U.S. Census Bureau will also publish retail sales data for October, which is a key indicator of consumer spending. According to experts, retail sales growth is projected at 0.8% for the month of October, similar to the reading in September. 

An increase in commodity prices, including food and fuel, will expectedly impact discretionary spending for individuals and households to account for the higher costs of debt and interest payments. It will be interesting to see if the holiday season will boost retail spending in Q4 of 2022.

 

Housing market insights

The U.S. housing market will also be in focus with the release of the NAHB Housing Market Index this Wednesday. A day later, the U.S. Census Bureau will publish data on housing starts and building permits for October.

Housing starts are expected to fall to 1.42 million in October, from 1.44 million in September and a peak of 1.81 million in April.

Finally, the National Association of Realtors will release existing home sales figures for October on Friday. Existing home sales are expected to fall from 4.71 million in September to 4.36 million in October. It would be the ninth consecutive month of decline for existing home sales after it peaked at 4.69 million in January 2022.

As the average 30-year fixed-rate mortgages are hovering around 7%, the demand for home loans should plummet even further by the end of 2022.