Markets continued their slump on Monday with the S&P falling 3.20% and the tech-heavy NASDAQ dropping 4.29%.
Cryptos didn’t fare any better as the two dominant projects, Bitcoin (BTC) and Ethereum (ETH), have fallen 11% each over the past 24 hours and nearly 20% over the last week
What’s Falling?
Nearly every industry is experiencing a bearish turn . The S&P 500 has fallen over 16% since the start of 2022 while the assets hit the hardest are the ones which prospered during the pandemic as cryptos are down significantly (Bitcoin and Ethereum down over 50% from all-time highs) and Cathie Wood’s famed Ark Innovation ETF (ARKK) having fallen 57% in 2022.
Concerns are only mounting on the damaging effects of sustained high inflation, lockdowns in China, ongoing war between Russia and Ukraine, supply chain disruptions, and tighter monetary policies could have on the economy in the near future. The fight against inflation remains a central concern with investors awaiting new inflation data this week from the Consumer Price Index (CPI) and Producer Price Index (PPI) results for April.
Inflation Update
CPI and PPI numbers are supposed to rise significantly less than they did in March with the CPI expected to increase 0.2% in April while the PPI is projected to jump 0.5%. In comparison, the CPI and PPI rose 1.2% and 1.4% respectively the previous month.
However, while the slower rate of inflation is a good sign, the numbers are are heavily impacted by the surge in energy prices following the sanctions levied against Russia after its invasion of Ukraine. Consumer energy prices jumped 11% in March, heavily skewing the overall price jump as core prices (excluding food and energy) increased 0.3% compared to the overall 1.2% rise. Most of the effects on sanctions levied against Russia have already been felt in relation to oil and gas prices with crude oil prices remaining far more stable in April than they were in March.
In fact, while overall consumer prices are estimated to rise far less than they did in March, core prices are expected to jump 0.4% in April following a 0.3% increase in March. The core Producer Price Index is however currently projected to increase 0.6% after a 1.0% rise in March. The slower expected rate in core producer price inflation still has core prices rising more than overall prices and at an extremely high annual rate of over 7%.
Barring some massive surprise where prices actually fall or remain stable in April, the results from the CPI and PPI reports are most likely just going to reaffirm the view that the Fed needs to continue its planned aggressive tightening of monetary policy. The most plausible change in plans that could be caused by new inflation numbers is an even bigger expected rise in prices leading to the Fed considering a 75 basis point interest rate hike or similar more aggressive tighter policies.
Earnings Season Winding Down
Lastly, earnings season continues this week with many firms reporting quarterly results but the biggest firms having already reported. A few big names do remain though with none bigger than Disney (DIS) which is expected to report after the close on Wednesday, May 11. Analysts project the media giant to report earnings-per-share (EPS) of $1.19 compared to $0.79 in its year-ago quarter and revenues of $20 billion compared to $16 billion last year. Many of Disney’s investors are focused on the company’s streaming services and its growth but it's the firm’s giant theme-park business that has rebounded massively since the pandemic and largely contributed to the stronger projected numbers this quarter compared to its year-ago quarter.
In addition to Disney, other big names set to report this week include Fox Corporation (FOXA), Fidelity National Financial (FNF), Coinbase Global (COIN), US Foods Holdings (USFD) and Motorola Solutions (MSI) among others.
Economic Events this Week
Tuesday
- 6:00 a.m. - NFIB Small Business Optimism
Wednesday
- 8:30 a.m. - CPI & Core CPI
- 10:30 a.m.- EIA Crude Oil Inventories
Thursday
- 8:30 a.m. - Initial & Continuing Claims
- 8:30 a.m. - PPI & Core PPI
- 10:30 a.m. - EIA Natural Gas Inventories
Friday
- 8:30 a.m. - Import Price Index
- 8:30 a.m. - Export Price Index
Earnings Reports This Week
Below are some of the highlights. You can check out the full earnings calendar here.
Tuesday:
Before the bell:
SYY, LI, BLDR, ARMK, FOXA, BHC, LCII, WMG, TDG, NXST, H, BCO, IGT, XRAY, PTON
After the bell:
OXY, FNF, RKT, GFS, JXN, EA, COIN, WELL, YELL, DAR, KGC, ELY, WYNN, GO, RXT, SCSC
Wednesday:
Before the bell:
PFGC, PRGO, SLVM, NOMD, WWW, WEN, LTH, DNUT
After the bell:
DIS, CPNG, STE, DOX, APP, CPA, PAAS, ATCO
Thursday:
Before the bell:
USFD, TPR, PRMW, NICE, HIMX, PGTI, UTZ
After the bell:
MSI, COMP, AQN, TOST, VZIO, TBLA, AFRM, UP, NEWR
Sector and Industry Sentiment
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