The state of the US consumer will take center stage in the week ahead as quarterly results from America's premier big-box retailers and the July retail sales report highlight the calendar.
Home Depot (HD), Target (TGT), and Walmart (WMT) lead an earnings calendar that also includes TJX Companies (TJX), Ross Stores (ROST), and Deere & Co. (DE).
The July retail sales report is due out Tuesday morning while the minutes from the Federal Reserve's July meeting will be released Wednesday afternoon. Yahoo Finance will also feature a week-long special, Retail Evolution: The New Era, during our livestreaming programming beginning Monday morning.
Last week, markets were mixed as August's lackluster trading continued during the month's first full week.
The Dow Jones Industrial Average (^DJI) continued trudging higher, rising 0.6% on the week while the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) both closed the week in the red. The Nasdaq Composite and S&P 500 enter the third week of August at their lowest levels in a month.
Last week's Consumer Price Index (CPI) report showed headline inflation's rapid cooldown took a pause in July, rising 3.2% last month after increasing 3% in June.
But economists came away from the report focused on monthly price increases remaining low for the second straight month.
On a monthly basis, core CPI, which strips out the volatile food and energy categories, increased 0.2% in July, the same increase as in June. That marked the first time since February 2021 that core CPI rose just 0.2% in consecutive months.
"This month's soft core print confirms the disinflationary process," Morgan Stanley chief US economist Ellen Zentner wrote after the report on Thursday. "After 6 months of 0.4% [month-over-month] prints, a second 0.16% [month-over-month increase] comes as a sign of continued deceleration."
Most Wall Street economists now see the Fed holding interest rates steady at its next meeting in September.
"The Fed is attempting to fine tune the policy path as it gets close to the end of the hiking cycle and does not want to short-circuit the business cycle if inflation is already moving towards target," Bank of America US economist Michael Gapen wrote on Friday.
The firm now expects the Fed will raise rates in November as opposed to next month, writing, "An additional six weeks would give the Fed more time to assess the trajectory of the economy."
As of Friday afternoon, markets were pricing in a roughly 89% chance that the Fed holds steady at its September meeting, up from a 72% chance on July 11, per data from CME Group.
The minutes from the Fed's July meeting, which will offer additional insight into how Fed officials see the future path of policy, are set for release at 2 p.m. ET on Wednesday.
Retail in focus
From "Barbie" and Taylor Swift to economists pushing back or eliminating recession calls, a resilient consumer has been the story of the economy during the summer of 2023.
Corporate results from major banks and some airlines have told a similar story too. There has been a slowdown, but in large part the consumer continues to spend more than most investors and economists had expected, leading to surprising growth in the American economy.
This week will provide more key details on how Americans are spending and, more importantly, if companies think a second-half consumer slowdown is materializing.
The July retail sales report is expected at 8:30 a.m. ET on Tuesday with economists anticipating sales increased 0.4% over the prior month. Retail sales increased 0.2% in June.
"We expect a robust July sales report," Bank of America economist Aditya Bhave wrote on Thursday, citing the company's credit and debit card data which showed spending was strong during the July 4 holiday. "We forecast above-consensus increases of 0.7% and 0.6% in the Census Bureau's July figures for retail sales ex-autos and the core control group, respectively."
On the corporate side, investors will be looking to see if some of the cracks that appeared in the retail space three months ago have widened.
In May, Home Depot warned consumers were completing smaller projects at home and buying fewer big-ticket items. Meanwhile, Target said its discretionary business, which includes items like technology and clothes, had begun to lag.
At both Target and Walmart, investors will be focused on same-store sales, any signs of a consumer trade-down, how cooling inflation could be impacting margins, and the state of retail crime.
At Target, any lasting impacts after customer backlash regarding the company's Pride Collection released in May will also be in focus. Walmart investors will be on the lookout for how grocery and pharmacy differentiate Walmart from other retailers.
"The question is what happens in the back half of the year and into next year as some of the of the excess savings are worked down and the labor market becomes a little less certain," UBS analyst Michael Lasser told Yahoo Finance Live last week. "I am expecting mixed results and a cautious tone from some of these retailers as the pressures linger on the consumer."
Weekly calendar
Monday
Earnings: Canoo (GOEV), Monday.com (MNDY), Rumble (RUM)
Economic data: No notable economic news.
Tuesday
Earnings: Cava (CAVA), H&R Block (HRB) Home Depot (HD), On Holding AG (ONON)
Economic data: Retail sales, month-over-month, July (+0.4% expected, +0.2% previously); Retail sales excluding autos and gas, month-over-month, July (+0.4% expected, +0.3% previously); Import price index, month-over-month, July (+0.2% expected, -0.2% previously); Export price index, month-over-month, July (+0.2% expected, -0.9% previously); Empire manufacturing, August (-0.4 expected, +1.1 previously)
Wednesday
Earnings: Cisco Systems (CSCO), JD.com (JD), Target (TGT), TJX Companies (TJX)
Economic data: MBA mortgage applications, August 11 (-3.1% previously); Building permits, month-over-month, July (2.0% expected, -3.7% prior); Housing starts, month-over-month, July (0.9% expected, -8.0% previously); Industrial production, month-over-month, July (+0.3% expected, -0.5% previously); FOMC minutes
Thursday
Earnings: Applied Materials (AMAT), Dole (DOLE), Farfetch (FTCH), Ross Stores (ROST), Walmart (WMT)
Economic data: Weekly initial jobless claims, week ending August 12 (239,000 expected, 248,000 previously); Philadelphia Fed Business Outlook, August (-10 expected, -13.5 previously); Leading Economic Index, July (-0.4% expected, -0.7% previously)
Friday
Earnings: Deere & Co. (DE), Estee Lauder (EL), XPeng (XPEV)
Economic data: No notable economic news.
Josh Schafer is a reporter for Yahoo Finance.
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