Investors Await Busy Week; Producer Prices, Retail Sales, Netflix in Spotlight

Investors enjoy a day off from trading Monday in observance of Martin Luther King Jr. day as they brace for a busy week with data on inflation, retail sales and housing, plus a lot of earnings reports on deck.

PPI

The Producer Price Index is due in tandem with the retail sales report at 8:30 a.m. ET on Wednesday.

Headline prices are expected to have declined by 0.1% in December, while core prices are anticipated to have increased by 0.1%.

This report will be interesting for investors as producer price decreases tend to flow downstream to consumers. Importantly, processed and unprocessed goods for intermediate demand continued their downward trend in November with declines of 0.9% and 3.2% respectively.

Investors hope to see continued relief here as goods for intermediate demand are “inputs of production”. After years of shortages and delays pushing up the cost of production and, in turn, prices to consumers, investors can see an unclogging here that should help ensure further relief is passed on.

The stronger this trend is, the more investors can feel confident in betting on a faster end to rate hikes and potentially reductions by the Fed.

Retail Sales

Retail sales are expected to have slowed in December, with estimates set for the headline figure to decline by 0.8% and, excluding autos, fall by 0.5%.

The December results are pivotal as they cover a lot of holiday shopping and could help investors gauge how the consumer is faring as prices remain elevated.

While a sharper-than-expected decline could jerk stocks lower, Bank of America strategists caution against reading too much into the December report and waiting to see the January report before “drawing conclusions” on the consumer’s health. BofA cited significant discounts, sustained rotation from goods to services, and a trend of front-load holiday spending.

Housing Update

Last up on the economic side of things, the housing market will get its December update with Housing Starts and Building Permits Thursday and Existing Home Sales due Friday. The reports are expected to show a continued slowing in the housing market as higher rates continue to create affordability issues in the market.

Housing starts and building permits are expected to slow to annualized rates of 1.355 million homes and 1.37 million permits. Meanwhile, Existing Home Sales are expected to fall to an annualized rate of 3.96 million sales from 4.09 million the month before.

Earnings Season

Finally, earnings season gets going in full swing this week.

One of the most-watched earnings reports this week will be from Netflix (NFLX). Netflix, like many tech companies, has implemented new strategies to try and recapture lost demand. For Netflix, this was the ad-tiered subscription launched in November.

This report isn’t going to reflect what a full quarter of ad-tiered earnings will look like, however, it will give us a gauge as to how receptive to returning to the platform consumers are. Other Covid tech stocks could move in sympathy with Netflix Thursday as it could be indicative of the results of their efforts.

Lastly, banks continue reporting in numbers with Goldman Sachs (GS) and Morgan Stanley (MS) set to report Tuesday morning. Friday’s bank reports unnerved investors as banks set aside more than $4 billion in loan-loss provisions due to concerns over an impending recession.