Stocks got the week off to a mixed start Monday as the S&P 500 and the Dow declined, while the Nasdaq and Russell 2000 advanced. Helping move markets today was a G-7 announcement that the countries reached a deal which would impose a 15% minimum global tax rate on foreign earnings.
Treasury Secretary Janet Yellen defended the President's renewed push for a $4 trillion stimulus package yesterday following the G-7 summit, saying that higher interest rates might be a "plus" for society and the Fed. This is because we have been fighting with too low of inflation of the last decade and that some extra spending may in fact help get us back to more normal interest rate levels.
Lastly, AMC Entertainment (AMC) continued to attract swarms of YOLO investors as it runs on extremely high volatility. AMC stock rocketed 14% higher Monday as Reddit's latest toy-security closed at $53.16 a share.
GameStop EarningsSpeaking of Reddit faves, GameStop (GME), the original stock commandeered by retail investors, is set to release earnings this Wednesday, June 9, after the market closes. Not that technicals and underlying business actually mean anything to anyone who owns GME stock these days, but Wall Street expects the video game retailer to report a first quarter loss of $0.71 per share on revenue of $1.16 billion. Barring any GME surprises, the company will take a step back from last quarters earnings miss where it reported profits of $1.34 per share on $2.1 billion in revenue (est. $1.42 per share on $2.2 billion).
This trend of retail investors deciding that a stock is worth exponentially more than its underlying business would suggest may be here to stay, even after the hordes of bros on r/WallStreetBets get back to regular living as the pandemic slowly comes to a close.
"This is no longer our grandparents', or for that matter, our parents' stock market," Ryan Nauman, a strategist at Zephyr told Yahoo Finance Live. He continued by saying investors may need to be on the lookout for alternative data sets to take the opinions of the growing number of retail investors into account.
This means that, going forward, it might become a little less strange to see in analyst coverage on stocks include what social media is thinking in regards to the stock, especially in regards to heavily shorted stocks, which have been the primary targets thus far. However, boosted unemployment checks and other government assistance will not be around forever. Investors whose budget is capable of including risky bets in the stock market will dwindle, so while the retail interest in the stock market may be here to stay, it's hard to tell how much these new investors will be able to push prices around. This is even harder to predict as pulling off what has happened thus far requires a lot of organization amongst internet acquaintances, so with everyone spending less time on forums, and the figureheads being diluted by new voices trying to offer their input on the next target, these pump-and-dump schemes will likely get diluted.
Consumer Price IndexIn more traditional news, investors will be watching out for warning signs Thursday morning that inflation is ramping up. The Consumer Price Index (CPI), core and otherwise, is scheduled to be released at 8:30 a.m. ET on June 10 and will be covering the month of May. Core CPI is expected to have slowed its increase in May with an increase of 0.4%, considerably lower than the 0.9% reported in April. Meanwhile, the more inclusive CPI reading is expected to have the same showing of 0.4% from a reading of 0.8% in April.
Investors will be hoping that the CPI numbers cool off from the previous month's unexpected spike, which dampened investors spirits and spurred a 2% selloff in the S&P 500. Despite reactions, any increases will likely prove to be transitory. This is mostly caused by the base effect, which occurs because this years numbers are being compared with the year before, meaning growth looks exaggerated in the year-over-year numbers because the recovery (2021) numbers are being compared proportionally with the numbers reported during the worst of the economic crash. There are also still significant price changes related to shortages or other temporary issues in the economy.
As long as the numbers aren't too drastically above predictions, the narrative from the Fed, Treasury, and most economists should hold true as the high readings only appear high as we transition from the economic crash into a healthy economy again. Despite that, there could be a harsh reaction (just like during the previous month) to a miss when it is reported, so while long-term investors should be ok, day traders may find the day difficult if such a reaction occurs.
Real Estate, commodities including gold and precious metals, as well as consumer cyclicals (think needs and not wants, if you have to spend your weakening dollar, it'll be food before an iPhone XYZ) tend to increase during times of inflation. So if the market screams bloody murder Thursday, stocks in those industries may show as the winners that day and possibly for a few days to come as the dust settles and people realize that it was indeed, just the latest iteration of the base effect. However, it is an irrational market during uncertain times, so really anything could happen.
Economic Events this WeekTuesday - 8:30 a.m. - Trade Balance - 10:00 a.m.- JOLTS - Job Openings
Wednesday - 10:30 a.m.- EIA Crude Oil Inventories
Thursday - 8:30 a.m. - Initial Claims - 8:30 a.m. - Continuing Claims - 8:30 a.m. - CPI and Core CPI
Friday - 10:00 a.m. - University of Michigan Consumer Sentiment - Prelim