U.S. equity markets rallied on Friday but declined for the week, driven by concerns about inflation and the prospect of more aggressive tightening by the Federal Reserve. The Dow recorded its seventh consecutive weekly loss, while the S&P 500 notched its sixth. For the week, the Dow fell 2.1%, the S&P 500 declined 2.4%, and the Nasdaq shed 2.8%. The yield on the 10-Year Treasury note rose on Friday but fell for the week, settling at 2.93% as bonds rallied, reversing the downward trend in the bond market over recent months as investors sought safety in U.S. Treasurys. Crude oil prices fell early in the week, briefly falling below $100 per barrel on Tuesday, and rising in the second half of the week to close at $110 a barrel.
This week, we can expect the latest housing market updates with April figures for U.S. housing starts and existing home sales on Wednesday and Thursday, respectively. The latest Consumer Price Index (CPI) inflation figures for the eurozone, U.K., and Canada will be released this week, providing an indication of whether or not global inflation rates have peaked. We can also expect the U.S. Census Bureau’s report on retail sales for the month of April and earnings from a number of major retailers, including retailers Walmart, Target, Home Depot, and Lowe’s.
- Earnings season continues, with earnings from major retailers including Walmart, Target, Home Depot, and Lowe's. The monthly update to retail sales growth will also be released, tracking the month of April.
- Further updates to the U.S. housing market are expected, with April housing starts and building permits due to be released on Wednesday, followed by existing home sales on Thursday.
- Key international inflation updates will become available as Canada, the U.K., and Eurozone are expected to release their respective consumer price index (CPI) figures for April.
Monday, May 16
- Mitsubishi (MUFG), Ryanair (RYAAY), AngloGold (AU) and Tencent (TME) report earnings
- NY Empire State Manufacturing Index (May)
Tuesday, May 17
- Walmart (WMT), Home Depot (HD), JD.com (JD), Vodafone (VOD), Baidu (BIDU), and Trip.com (TCOM) report earnings
- U.S. Retail Sales (April)
- U.S. Industrial Production (April)
- NAHB Housing Market Index (May)
- Japan GDP Growth (Q1 2022)
- Japan Industrial Production (March)
Wednesday, May 18
- Cisco (CSCO), Lowe’s (LOW), Target (TGT), Analog Devices (ADI), TJ Maxx (TJX), and Bath & Body Works (BBWI) report earnings
- U.S. Housing Starts and Building Permits (April)
- U.K. Consumer Price Index (CPI) (April)
- U.K. Producer Price Index (PPI) (April)
- Eurozone Consumer Price Index (CPI) (April)
- Canada Consumer Price Index (CPI) (April)
Thursday, May 19
- Ross Stores (ROST), BJ’s Wholesale Club (BJ), and Kohl’s (KSS) report earnings
- U.S. Existing Home Sales (April)
Friday, May 20
- Deere (DE) and Foot Locker (FL) report earnings
- Germany Producer Price Index (PPI) (April)
- U.K. Retail Sales (April)
Retailers' Sales and Earnings
Highlights of the week will include retail sales and earnings from large retailers, with Walmart, Target, and home improvement retailers Home Depot and Lowe’s expected to report results. Retail sales in the U.S. are projected to have accelerated to a monthly rate of 0.9% in April, following a 0.5% rise in March. Retail sales have been robust in recent months despite rising costs, however momentum may slow as high inflation, currently running at 40-year-highs, continues to erode consumer sentiment and purchasing power.
Retail giant Walmart is expected to report earnings on Tuesday morning, with favorable expectations after a strong report for the fourth quarter of 2021. The company has recently expanded its seamless pickup and delivery programs and expanded club membership benefits, as well as Walmart+ and InHome delivery services. Home improvement retailers Home Depot and Lowe’s are also expected to report on Tuesday and Wednesday, respectively. Revenue and net income for Home Depot are projected to have declined in the first quarter, with earnings per share expected to decline 5.4% from a year earlier to $3.65 a share. Recent quarters have brought positive results for Home Depot due to a surging housing market, however a potential slowdown in demand could impact earnings over the upcoming quarters.
Housing Market Updates
We can expect updates on the U.S. housing market with the release of April housing starts and existing home sales on Wednesday and Thursday, respectively. Consensus estimates call for a decline in housing starts to 1.76 million in April, after an unexpected rise to 1.79 million starts in March. Meanwhile, existing home sales are also projected to decline, to 5.63 million compared to 5.77 million in March. Rising mortgage rates and declining affordability are increasingly weighing on demand in the housing market, and it is likely that home purchases will be on a downward trend over upcoming months.
Inflation Data from Abroad
Following the release of the latest CPI inflation data in the U.S., which showed prices rose 8.3% in April from a year prior, we can expect more updates on inflation from the eurozone, the U.K., and Canada. The average annual inflation rate in the 19-member eurozone currency bloc currently stands at 7.5%, and is projected to remain unchanged at 7.5% in the upcoming April release. U.K. inflation has accelerated considerably in recent months, to 7% year-over-year in March, and is projected to have surged further to a rate of 9.1% in April. U.K. inflation is currently running at the fastest pace in 30 years, while eurozone inflation is at the highest level since the introduction of the currency in 1999.