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Markets Continue Downward Spiral Ahead of Dense Week of Economic Data

Monday, September 26, 2022 04:36 PM | Neal Farmer
Markets Continue Downward Spiral Ahead of Dense Week of Economic Data

Stocks fell once again on Monday as concerns about a recession remain high Federal Reserve raises interest rates to fight against inflation. The dollar continues to strengthen while European currencies reach new lows. The pound hit an all time low while the euro hit its lowest mark since 2002.

Looking forward this week, investors await the August Personal Consumption Expenditures (PCE) report for an update on inflation and personal income/spending. Meanwhile, earnings reports heat up this week with major names such as Nike (NKE), Carnival (CCL), Micron (MU), and Rite Aid (RAD) releasing results.

Inflation Update

The August Personal Consumption Expenditure report is expected to show overall prices rising at a modest 0.2% after dropping 0.1% in July. Core prices (excluding food and energy) are meanwhile projected to jump 0.4% in August following its 0.1% increase the previous month. The PCE report comes after the Consumer Price Index (CPI) showed overall prices rising 0.1% in August and core prices jumping 0.6%.

The higher core price jump comes as a result of energy prices falling dramatically from the highs they reached earlier in the year following the invasion of Ukraine and subsequent sanctions against Russia. The 0.4% expected jump in core prices is down from some of the highest jumps following the pandemic but is still above a 2% annual target rate and is unlikely to persuade the Federal Reserve to slow its tightening of monetary policy.

Other Economic Data

The PCE report is also projected to show personal income rising by 0.3% after increasing 0.2% in July while personal spending is expected to jump just 0.2% in August following its 0.1% hike the previous month. Meanwhile, initial unemployment claims are projected to stay flat at 213,000 and the third estimate for the second quarter gross domestic product (GDP) is expected to show a 0.6% drop. New home sales are estimated to fall to 500,000 sales in August from 511,000 the previous month. Lastly, consumer confidence is projected to rise from a reading of 103.2 to 105.0 in September.

Earnings Round-Up

No one major sector dominates the list of earnings reports this week but plenty of big names are set to release quarterly performance results. All the big names besides Carnival are projected to report worse earnings-per-share (EPS) than their year-ago quarter with Bed Bath & Beyond (BBBY) expected to fall the most.

Bed Bath & Beyond is expected to report -$1.80 EPS after reporting an EPS of -$0.72 a year ago. Additionally, Bed Bath & Beyond has struggled massively of late even being able to meet earnings estimates and its mid August meme rally is all but gone as the stock remains down more than 50% in 2022 and is roughly 70% lower over the last twelve months.

Nike is projected to report an EPS of $0.92 (compared to $1.16 a year ago) while Rite Aid is expecting earnings-per-share of -$0.46 (verse -$0.41 from a year ago). Lastly, CarMax (KMX) is projected to fall from $1.72 EPS a year ago to $1.42 and Micron is expecting its EPS to fall from $2.42 to $1.38.

All in all, earnings estimates show corporations struggling to grow as margins tighten with higher costs and discretionary spending falling as economic activity slows.

Economic Events this Week

Tuesday

- 8:30 ET - Durable Orders

- 10:00 ET - Consumer Confidence

- 10:00 ET - New Home Sales

Wednesday

- 10:00 ET - Pending Home Sales

- 10:30 ET - EIA Crude Oil Inventories

Thursday

- 08:30 ET - Initial & Continuing Claims

- 08:30 ET - Q2 GDP Third Estimate

Friday

- 8:30 ET - PCE Prices

- 8:30 ET - Core PCE Prices

- 8:30 ET - Personal Income & Spending

Earnings Reports This Week

Tuesday:

Before the bell:

SNX, JBL, UNFI, CBRL, DAVA

After the bell:

BB, PRGS

Wednesday:

Before the bell:

THO, CTAS, PAYX, CGNT

After the bell:

CNXC, JEF, MLKN, MTN

Thursday:

Before the bell:

KMX, RAD, BBBY, WOR

After the bell:

NKE, MU, CMTL

Friday:

Before the bell:

CCL

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