Fed Rate Decision, PCE Prices, Earnings on Deck This Week

Investors will have their eyes set on the Fed meeting Wednesday and, later in the week, on the Fed’s preferred inflation gauge, PCE Price Report on Friday. Also on the schedule are the Consumer Confidence and Personal Spending reports, as well as a plethora of earnings reports.

Fed Meeting

The Federal Reserve Open Market Committee is expected to raise interest rates by 75 basis points again, after raising by the same amount in the middle of June. The central bank's two-day meeting concludes on Wednesday.

After higher-than-expected inflation reports in June, investors started to price in a full-100 basis point hike, but expectations for the full percentage point hike quickly waned.

While inflation rose at a higher pace than expected in June, commodity prices have fallen since mid June - pointing to some easing in price pressures. Meanwhile, the dollar has strengthened relative to other currencies, meaning import costs have eased some as well.

Despite the recent easing in global supply chain pressures, markets will likely continue to be jittery as progress is short-lived and conditions remain multiple standard deviations above usual levels.

PCE Prices

The June PCE Prices report is due Friday morning and is expected to come in at 1.0%, after May’s 0.6% rise.

Core PCE prices moderated on a year-over-year basis last month, which was an encouraging development. However, an unwelcomed decline in real PCE - the primary measure of consumer spending on goods and services in the U.S. - raised questions regarding the long-term impact of rising rates amidst a slowing economic environment.

Earnings

Earnings will be in abundance this week as earnings season really kicks into gear.

After an interesting report from Tesla (TSLA) last week, General Motors (GM) and Ford (F) take the stage this week. One thing we’ll be watching is potential comments on their supply chains, particularly if they are easing up or not.

Tesla CEO Elon Musk, interestingly, noted that prices for Tesla cars could start coming down near the end of the year as the company claws its way out of “supply chain hell”.

Now, it's hard to expect a similar development from GM and Ford, as electric vehicle drivetrains contain about 20 parts and internal combustion engines contain thousands of parts. But, any suggestion that there is light at the end of the tunnel, would be welcomed. Further, if the companies note pressures easing faster on the EV side, it could lead to a shift in resources to maximize output on the EV side of things, which would likely be a bullish development for long-term investors.

Meanwhile, Microsoft (MSFT), Google (GOOG), and Meta Platforms (META) are all up to bat this week as well.

Both Microsoft and Google provided some negative news in the days leading up to their reports. Google announced a hiring pause after previously announcing that it is slowing its hiring pace for the remainder of the year. Meanwhile, Microsoft pulled many open jobs, including openings in high-growth cloud services businesses.

Ultimately, investors don’t really know what to expect from this report. Are the companies getting the bad news out of the way so strong reports can shine through, or are they trying to prevent having too many negative headlines at the same time?

Either way, we’ll be watching cloud services - an untested recession-resistant industry - as a proxy for what to expect from later reports. Coinbase (COIN) previously announced that it will slash spending on AWS as a part of broader cutbacks, implying that an impending recession could contradict early beliefs that cloud services are recession-resistant.

It's worth noting that every recession is different and, while cloud computing could be vulnerable to a recession this time around, that doesn’t necessarily strip it of that title since the pandemic recession is the industry’s only real test, and cloud companies obviously passed with flying colors during that one.

During the pandemic, there was a flood of demand for these services. Now, companies are in a place where they need to stretch their dollars, so some of the less integral services are up for review.

Economic Events this Week

Tuesday

- 10:00 ET - Consumer Confidence

- 10:00 ET - New Home Sales

Wednesday

- 08:30 ET - Durable Orders

- 08:30 ET - Durable Orders, Ex-Transportation

- 10:00 ET - Pending Home Sales

- 10:30 ET - EIA Crude Oil Inventories

- 14:00 ET - FOMC Rate Decision

Thursday

- 08:30 ET - Chain Deflator-Adv.

- 08:30 ET - Continuing Claims

- 08:30 ET - GDP-Adv.

- 08:30 ET - Initial Claims

Friday

- 08:30 ET - Employment Cost Index

- 08:30 ET - PCE Prices

- 08:30 ET - PCE Prices - Core

- 08:30 ET - Personal Income

- 08:30 ET - Personal Spending

Earnings Reports This Week

Monday:

After the bell: LBRT, CDNS, NXPI, ARE, SUI, BRO, PKG, KOF, LOGI, WHR, FFIV, ACC, RRC, UHS, AGNC, RNR, CR, MEDP, HXL, SSD

Tuesday:

Before the bell: ADM, CAJ, CNC, DASTY, DSDVY, ECL, FISV, GE, KMB, KO, MCD, MCO, MMM, MSCI, NDEKY, RTX, SMNNY, UBS, UL, UPS

After the bell: MSFT, GOOG, GOOGL, V, VIST, TXN, MDLZ, CNI, CB, SYK, GM, CMG, DBOEY, ENPH, EQR, AMP, CSGP, FE, ESS, AGR

Wednesday:

Before the bell: ADP, AEP, BA, BMY, BSX, CJPRY, CME, DDAIF, DMLRY, EADSY, EQNR, GD, HUM, JPXGY, KHC, NSC, SHOP, SHW, TMUS, WM

After the bell: ALRS, META, QCOM, NOW, LRCX, EQIX, F, ORLY, CTSH, VICI, AVB, AWK, DRE, INVH, ALGN, RJF, MAA, URI, AEM, ICLR

Thursday:

Before the bell: AMT, CMCSA, CP, HON, HSY, KDP, LIN, MA, MIELY, MO, MRK, NOC, PFE, SNY, SO, SOLN, TMO, TRP, TTE, VLO

After the bell: AAPL, AMZN, INTC, EW, VALE, KLAC, LHX, DLR, AJG, DXCM, SGEN, ES, CLR, EIX, HIG, AVTR, VRSN, YUMC, VFC, BIO

Friday:

Before the bell: ABBV, AON, AZN, CHTR, CL, CVX, DSEEY, DSNKY, E, EJPRY, ENB, FJTSY, HTHIY, KDDIY, PG, PSX, SAN, SEKEY, SONY, XOM