What do you know this week

Deliberations over the debt ceiling, more retail earnings, and minutes from the latest Federal Reserve meeting await investors as the highlights of the coming week.

House Speaker Kevin McCarthy (R-Calif.) said Saturday that discussions about the debt ceiling will not resume until President Biden returns from his trip to Japan for a G-7 meeting. On Sunday before leaving the G7, Biden called the GOP’s position on the debt ceiling “unacceptable,” adding that “it is time for the other side to move from its extreme positions.” This is as Treasury Secretary Janet Yellen looms on June 1st.

On Friday, both sides paused talks, raising doubts about the possibility of a near-term agreement and sending markets lower.

All three major indices still ended the week with gains, however, particularly the Nasdaq, which gained more than 3%.

The Nasdaq and S&P 500 had their best week since March and their highest weekly close since August 2022. The Nasdaq is up more than 20%, while the S&P 500 is up more than 9%. The Dow Jones Industrial Average is barely clinging to gains for the year.

Stocks were encouraged last week after retail earnings struck a dovish tone about consumer spending for the year, but did not sound the alarm about a full-blown recession just yet.

Next week, results from Dollar General (DG), Costco (COST), and BJ (BJ) will provide more insights into consumer health. Wal-Mart’s (WMT) results hinted at the benefits to some retailers of wealthier consumers trading down to save money as inflation pressures household budgets.

“We’ve seen transactions at Walmart, at Target, at TJX, at Ross that are positive year after year, which suggests that there is some commerce going down the value side of the equation as some of these regular consumers make different choices,” Bernstein retail analyst Anisha Sherman said. to Yahoo Finance Live on Friday. “And that’s what some of the new data shows is that wasn’t the case last year. So for retail, I think it’s a positive.”

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On the technology front, Nvidia (NVDA), which has seen its stock rise more than 100% this year, is expected to report earnings on Wednesday.

On the economic data front, investors will be looking for more hints about the Fed’s path forward as investors prepare for the end of the central bank’s most aggressive rate hike campaign since the early 1980s.

On Thursday, the second estimate of first-quarter GDP will provide a look at growth in the first quarter and another examination of the central bank’s preferred inflation measure, the personal consumption expenditures (PCE) price index, for the first quarter.

Economists expect “core” personal consumption expenditures — which exclude the more volatile costs of food and energy — to rise 4.9% year-on-year in the first quarter, unchanged from the first reading; “Core” personal consumption expenditures are expected to rise 0.3% in April, an unchanged monthly increase from March.

But the debt ceiling will remain the biggest factor for investors until a resolution is found on the current negotiations.

Traditionally, markets have been more volatile as the “X date” — or the date when the United States defaults on its commitments — approaches, with defaults more likely to affect markets in the more than two weeks prior to this date.

“If date X is passed without an official default, we would see the decline in Q2 deepen another 5% to 3,750, but prove temporary,” UBS’s global economics and strategy team wrote in a note to clients on Friday.

“A one-week period of non-coupon payment and default would result in up to a 20% drop in inventories towards 3,400, and keep them pent up at those low levels through the third quarter before a partial recovery towards 3,800 by the end of the year. A very unlikely scenario of no coupon payment for two years. A month that will not only lead to an immediate drop of up to 30% in stocks, but also a very weak recovery.”

The S&P 500 closed at 4,191 on Friday.

Debt ceiling discussions will also take a bigger place in investors’ conversation going forward as earnings season wraps up this week.

Going into Friday, 94% of the S&P 500 reported earnings. On average, companies beat estimates by 6.5%, according to Evercore ISI, while posting a decline in earnings for the second straight quarter.

However, stocks have rallied since the start of the first-quarter earnings season, and the oft-discussed impending recession hasn’t affected the markets yet.

“When considering the timing of a recession, the consumer remains key,” Julien Emmanuel, who leads equity and portfolio strategy at Evercore ISI, wrote in a note to clients on Friday.

“The resilient consumer was very much the main theme in first-quarter results, although the booked earnings season for banks and retailers did notice some slowdown later in the quarter. Declining momentum could put pressure back on estimates in line with historical revision trends. .”

Weekly calendar

Monday

economic data: There are no significant economic data to be released.

Earnings: Ryanair (RYAAY), Zoom (ZM)

Tuesday

economic data: S&P Global US Manufacturing PMI, May, Preliminary (50.0 expected, 50.2 prior); S&P Global US Services PMI, May Preliminary Reading (53.6 Previous); New Home Sales, April (660,000 expected annual rate, 683,000 previously); New Home Sales, MoM, April (-3.4% forecast, +9.6% prior);

Earnings: Autozone (AZO), BJ’s Wholesale Club (BJ), Dick’s Sporting Goods (DKS), Intuit (INTU), Lowe’s (L), Willams & Sonoma (WSM), Palo Alto Networks (PANW), Toll Brothers (TOL), Urban Outfitters (URBN)

Wednesday

economic data: MBA Mortgage Applications (previously -5.7%); Federal Open Market Committee minutes

Earnings: Abercrombie & Fitch (ANF), BMO (BMO), elf Beauty (ELF), Kohl’s (KSS), Nvidia (NVDA), petco (woof), red robin (RRGB), snowflake (snow)

Thursday

economic data: Initial Jobless Claims (250,000 expected, 242,000 previous); Q1 GDP, second estimate (expected +1.1% annual rate, +1.1% prior)

Earnings: Autodesk (ADSK), Best Buy (BBY), Burlington (BURL), Build-A-Bear (BLDR), Costco (COST), Deckers Outdoor (DECK), Dollar Tree (DLTR), Gap (GPS), Marvell (MRVL) )), Medtronic (MDT), Ralph Lauren (RL), RH (RH), Ulta Beauty (ULTA), TD Bank (TD), Workday (WDAY)

Friday

economic data: Personal Income, MoM, April (+0.4% forecast, +0.3% prior); Personal Spending, on a monthly basis, April (+0.4% expected, 0% prior); PCE Deflator, MoM, April (+0.3% expected, +0.1% prior); PCE Deflator, YoY, April (+4.6% expected, +4.6% prior); University of Michigan Consumer Confidence, May Final Read (58.0 expected, 57.7 prior)

earnings: large pieces (big)

Josh is Yahoo Finance Correspondent.

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