The primary barrier for bulls in the stock market hoping to build on the recent advance in the next week will be the Federal Reserve’s favoured inflation indicator.
The Personal Consumption Expenditures (PCE) index for October will be released on Thursday morning. Economists anticipate that “core” PCE inflation, the Fed’s preferred measure, increased by 3.5% annually last month.
Updates on consumer confidence, property prices, and factory activity will also be included in the economic calendar.
Quarterly results from Salesforce (CRM), Snowflake (SNOW), Okta (OKTA), Dollar Tree (DLTR), Foot Locker (FL), Kroger (KR), and Ulta Beauty (ULTA) are anticipated from the corporate side.
In general, the next week will be a test for the state of the market, with equities closing Friday on pace for their largest monthly rise in over a year.
The US economy may be destined for a “soft landing,” in which inflation retreats to the central bank’s 2% objective without a significant economic slowdown. This narrative is now supporting equities. However, Thursday’s inflation number may present the last opportunity for economic data to undermine this theory.
That trajectory has been supported by recent economic statistics, which has caused beaten-down segments of the stock market, such as meme stocks and small cap firms, to rise.
The markets are already pricing in just a 12% likelihood that the Fed would increase rates again as a result of this data, which has also shifted expectations for the Fed.
The Fed’s favoured inflation indicator, “core” PCE, which registered 3.5% in October, is what economists use to estimate yearly inflation. Economists predict that “core” PCE increased by 0.2% in the previous month.
In October’s 12-month gain, JPMorgan’s chief US economist Michael Feroli observed in a note to clients that this 0.2% monthly increase “would leave the 3- and 6-month annualised gains in that measure at 2.5% and 2.6%,” which is substantially closer to the Fed’s 2% objective.
“Those increases are close enough to the Fed’s 2% inflation goal that most on the FOMC are likely content to stand pat on policy and let cooling labour market activity finish the job of getting inflation back to target,” Feroli said.
A scattering of quarterly results from the corporate side will give investors more insight into the status of software demand, the health of consumers, and if AI is making a difference for these companies’ clientele.
We’ll be keeping a careful eye on Foot Locker, Ulta Beauty, and Dollar Tree for any holiday season projections and insights into whether rising interest rates and a contracting labour market are encouraging shoppers to downsize.
The Street will be closely examining Salesforce’s expectations for the current quarter; Goldman Sachs analysts have noted that this is the time when customers make decisions about service renewals and add-ons for the upcoming year.
Wall Street analysts anticipate that the company’s results will show how businesses using Slack or other cloud-based applications are reacting to pricing increases. There will also be an emphasis on demand updates for Salesforce’s AI solutions.
“In a note to clients on Wednesday, Tyler Radke, a Citi analyst, stated that Salesforce is facing a challenging demand environment as customers continue to optimise spend, reduce shelf ware, and prioritise software that delivers near-term value creation.”
In the upcoming week, results from Workday, Intuit, Snowflake, and Okta should focus on related topics.