A Roundup of Financial News: Fed Minutes, PCE Inflation, and Walmart Earnings
Quick Summary
This week, Walmart and Home Depot will release earnings, and the Federal Reserve’s preferred inflation measure and the minutes from the Fed’s policy meeting will be released. The US consumer remains resilient in the face of high inflation, evidenced by January’s retail sales data. The Personal Consumption Expenditures (PCE) price index, the Fed’s most closely watched assessment of prices, is set to show that prices likely jumped 0.5% over the prior month in January. Core PCE, which removes the volatile food and energy components, is set to show a 0.4% climb over the prior month. The Consumer Price Index (CPI) showed inflation picked up in January, while cooling only slightly over the year. Wall Street banks have revised their expectations for upcoming rate hikes by the Federal Reserve, and the minutes from the FOMC’s meeting will offer insight into the thinking behind officials’ 25-basis-point increase earlier in the month. Walmart and Home Depot’s earnings, the PCE price index and FOMC minutes will be the highlights of the holiday-shortened week ahead.
Full Story – Fed minutes, PCE inflation, Walmart earnings: What to know this week
Earnings from retail giants Walmart (WMT) and the Home Depot (HD) this week, along with the latest update on the Federal Reserve’s preferred inflation measure and the minutes from the Fed’s latest policy meeting will be highlights in the holiday-shortened week ahead.
U.S. stock and bond markets will be closed on Monday for President’s day.
Results from Walmart and Home Depot, both due out before the market open on Tuesday, will offer further updates on the health of the U.S. consumer, which remains resilient in the face of stubbornly high inflation, most recently evidenced by January’s retail sales data out last week.
On the economic data side, all eyes will be on the Personal Consumption Expenditures (PCE) price index — the Fed’s most closely watched assessment of how quickly prices are rising across the economy — which is set for release Wednesday morning.
Prices in January likely jumped 0.5% over the prior month as measured by the PCE index, according to data from Bloomberg. in December PCE inflation rose just 0.1% month-on-month. On an annual basis, PCE inflation is projected to come in at 5% in January, no improvement from the year-over-year figure reported at the end of 2022.
Core PCE, which removes the volatile food and energy components out, is set to show a 0.4% climb over the prior month — ticking up slightly from 0.3% in December — and a marginally slower rise of 4.3% over the year, down from 4.4% in the last month of 2022.
If realized, those numbers would support recent indications inflation is not falling at the pace and extent investors have been hoping for, even as prices have stabilized from the peaks of the current cycle.
The Consumer Price Index (CPI) out last week showed inflation picked up in January, while cooling only slightly over the year to 6.4%. And producer prices shot up by the biggest amount in seven months in January.
This view has thwarted the market’s recent momentum.
On Friday, the Dow Jones Industrial Average logged its third-straight losing week for the first time since September, closing down 0.1% for the five-day trading period. T
he S&P 500 was down 0.3% for the week, its second consecutive week in the red, while the Nasdaq was an outlier, notching a weekly gain of 0.6%.
The bumpier-than-anticipated road to restoring price stability and strong economic data to start the year — nonfarm payrolls rose by 517,000 in January while retail sales surged 3% — have prompted Wall Street banks to revise their expectations for upcoming rate hikes by the Federal Reserve.
Teams at Goldman Sachs and Bank of America said this week they estimate three more rate increases this year; ahead of February’s interest rate increase, some market participants had seen that move potentially marking the end of the Fed’s rate hiking cycle.
Economists at Goldman Sachs and BofA each added additional 25-basis-point rate hikes in June to their forecasts, bringing both banks’ projected estimates for the peak of the federal funds rate in this cycle to a new range of 5.25%-5.5%.
Bank of America also indicated evidence is strong for a potential 0.50% increase at the Federal Reserve’s next meeting in March.
“In our view, several forces would have to come together to cause the Fed to revert to a larger 50-basis-point rate hike,” a team of strategists led by Michael Gapen said in a Friday note.
Minutes from the Federal Open Market Committee’s (FOMC) meeting Jan. 31-Feb. 1 out Wednesday afternoon will offer insight into the thinking behind officials’ 25-basis-point increase earlier in the month.
Cleveland Fed President Loretta Mester said in a speech Thursday she would have favored raising interest rates by 0.50%, asserting that she and…
