Focus on Stimulus Discussions During Short Trading Week

Markets will be coming off a mixed week when they re-open Tuesday after Monday's Presidents Day holiday.

Stimulus Discussions

Investors’ focus remains on stimulus discussions with President Biden’s $1.9 trillion proposal gaining traction as the Senate can now shift its attention from Trump’s impeachment to relief packages after the former president was acquitted over the weekend. The House approved $1,400 stimulus checks for most Americans on Friday as part of a package that also includes increased unemployment benefits. The bill’s inclusion of a $15 an hour federal minimum wage has less support but likely enough from Democrats to pass in the Senate without bipartisan support through the budget process known as reconciliation.

A House vote on the bill is expected next week. House Speaker Nancy Pelosi has said the goal is to have the bill on President Biden’s desk before March 14. Millions of Americans would lose their unemployment benefits on this date if additional funding isn't approved. If everything goes to plan, Americans should begin receiving checks in the middle of March. However, things hardly go ever to plan in D.C. and a major potential stumbling block at the moment is Democratic Sen. Joe Manchin. The West Virginia senator voiced his opinion that only the neediest Americans should get a full $1,400 check and prefers a $50,000 yearly income threshold as opposed to $75,000 for phasing out payments.

Economic Data

In addition to stimulus discussions, investors will be focusing on major economic data released this week. Likely the biggest data being released will be January’s retail sales data. December showed a decline of 0.7% but analysts are expecting an increase of 0.8% for last month. Retail sales haven't shown an increase from month to month since September with November notably falling 1.4%. Consumer spending dropped at the end of the fourth quarter with expiring unemployment benefits and increased restrictions as coronavirus cases rose but new stimulus and improved case rates have analysts more optimistic for the first month of 2021.

Core Producer Price Index (PPI) is expected to increase 0.2% for the month of January. PPI grew 0.1% in December and the Consumer Price Index (CPI) rose 0.3% in January.

Initial claims are expected to drop to 775,000 last week from 793,000 the previous week. The rate of decline in claims has dropped significantly since August but has steadily been decreasing every week since the week ending January 9. Continuing claims fell to 4.55 million for the week ending January 30.

Earnings

Another week another large batch of quarterly earnings reports are scheduled this week. Many smaller corporations will be releasing their recent results but the two titans reporting this week are Walmart (WMT) and CVS Health (CVS).

CVS will report its fourth-quarter results before the open on Tuesday with expected revenue of $68.8 billion and an EPS of $1.24. CVS reported earnings of $1.73 per share on $66.9 billion in the fourth quarter of 2019. CVS has also notably outperformed estimates in earnings and revenue every quarter over the past year.

Walmart is set to report its earnings for the fiscal quarter ending January 2021 before the open on Thursday. WMT is expected to report EPS of $1.51 and revenue of $147 billion. A year ago Walmart earned of $1.38 per share and revenue of $141 billion. Walmart has outperformed EPS and revenue estimates for the most part over the past year but missed EPS expectations in its year-ago quarter.