Costco earnings and Fed inflation gauge could potentially disrupt the markets this week, as investors turn their attention from the impressive profits reported by tech giants to more extensive concerns regarding the U.S. consumer’s well-being and persistent inflationary pressures.
The market has been on a positive trajectory, with the Nasdaq Composite hitting record highs, the Dow surpassing 40,000 points, and the S&P 500 eyeing its best May gain since 2009. However, the focus is now shifting towards the health of the U.S. consumer and inflation concerns.
The collective first-quarter profits for the S&P 500 constituents are expected to rise by 8% to $471 billion, exceeding initial forecasts of 5.7%. Around 78% of companies have beaten Wall Street forecasts, in line with recent trends.
Looking ahead, earnings growth is projected to improve to 10.9% in the current quarter, supported mainly by the information technology and communications services sectors.
This week, Salesforce and Costco are set to provide crucial insights into the market’s current narrative. Salesforce is anticipated to report a 41.5% increase in bottom-line results for the quarter ended in April, with revenue reaching $9.15 billion. The focus will be on its full-year update following a disappointing forecast in February.
Costco, on the other hand, is expected to reveal an 8.2% revenue increase to over $58 billion, with earnings per share of $3.70. The market will closely watch for any indications of a pullback in consumer spending following reports from companies like McDonald’s and Target.
Consumer spending, which predominantly drives economic growth, will play a significant role in the Commerce Department’s GDP growth estimate for the first quarter. Inflation data, particularly the PCE Price Index report on May 31, will also be closely monitored to gauge the impact on the Fed’s interest rate decisions.
Interest rate traders are adjusting their bets on a potential Fed rate cut, currently seeing higher odds for a reduction in the autumn months. Bond markets will witness a series of Treasury auctions totaling $183 billion, presenting further insights into market sentiment.
Considering the evolving economic landscape and market-specific tests, investors are bracing for potential volatility and closely monitoring key indicators to navigate the shifting market dynamics.
