What do you know in the markets this week

This week, investors will be faced with fresh inflation data as the Federal Reserve rushes to cut fast-rising rates. The season for quarterly gains will also continue, with a group of closely watched stock index components announcing their results.

The Bureau of Labor Statistics’ April Consumer Price Index (CPI), due on Wednesday, will be one of the most closely watched economic reports this week. The headline index is expected to slow on a monthly basis and on an annual basis, providing a tentative indication that the rate of price increases may have peaked in March.

Specifically, economists assembled on the broadest measure of the CPI are looking forward to an 8.1% increase in April, down from March’s 8.5% rise. The rise was the fastest since 1981. On a monthly basis, the headline CPI is expected to rise by just 0.2%, also down sharply from March’s 1.2% rise.

Excluding volatile food and energy prices, the core measure of the CPI is expected to slow to a 6.0% annual increase. That would be the slowest rate since December, after March’s 6.5% year-on-year rise in core CPI.

Moderation in energy prices is likely to contribute significantly to the slowdown in the core CPI. Prices of crude oil, gas, and other energy commodities soared in late February and March after the initial Russian invasion of Ukraine. While energy and other supply chain disruptions related to these geopolitical concerns remained, the rate of price hikes from these events has temporarily diminished.

“Following the headline boost in March, energy prices are set to be a significant drag reflecting lower retail gasoline prices along with unfavorable seasonal factors,” Bank of America global economist Ethan Harris wrote in a note on Friday. “In the meantime, food prices should remain high. And if our forecasts prove correct, year on year [year-over-year] The general inflation rate will decrease to 7.9% from 8.5%, which confirms that the month of March is the peak of inflation on an annual basis.”

The story continues

However, under core inflation, some significantly overweight categories are still expected to emerge, keeping inflation high, if far from peak rates. Rents are expected to continue to rise in particular, reflecting increased demand as rising home prices and mortgage rates keep many homebuyers on the sidelines.

“Food, energy and shelter are the categories to watch, but shelter is a particular concern,” Greg McBride, chief financial analyst at BankRate, said in an email Friday. Shelter accounts for 40% of the CPI – as is the case with many family budgets – and with double increases in rents, this puts the family budget in limbo even if food and energy costs are level.”

More importantly, even if inflation drops below record levels, prices will still rise by clips well above pre-pandemic trends and the Federal Reserve’s goals for the US economy. The central bank last week launched its first 50 basis point rate hike since 2000 and announced the start of quantitative tightening, in some early moves to try to address the demand-side factors that are keeping prices high across the economy.

The latest inflation reports will show how far the Fed still has to go to bring inflation rates close to its 2% targets.

The Fed also telegraphed that its main priority now is to bring down inflation, even if that means sacrificing some economic growth. Investors are watching closely to see if the Fed can balance its goal of tackling inflation while avoiding causing a major economic downturn.

“I think investors now have to sort of balance the two outcomes we’re having, which are basically a soft landing, where the Fed can control inflation without pushing the economy into recession, and a hard landing,” said Robert Dent, Nomura vice president and US economist. , to Yahoo Finance Live on Friday: “to over-tighten and push growth into negative territory.”

“I also think part of what is happening is, the markets may have focused a lot on President Powell’s comments on Wednesday, echoing 75 basis points of gains and missing the broader point of the meeting, which is that the Fed is still very much in a position to [they will do] Whatever it takes to control inflation, I think they are ready to raise interest rates to a very narrow level.”

Disney earnings

This week, earnings season will kick off with another busy schedule of reports due to be released.

Disney (DIS), a member of the Dow Jones Industrial Average, will be one of the companies due to announce its results. Its diverse business, between theme parks, movie studios and streaming services, has positioned the company as a partial member of both the stay-at-home trade and reopening deals.

But this earnings season, Disney’s streaming business will be the main focal point after last month’s disappointing Netflix report. In that publication, Netflix unexpectedly recorded its first drop in subscriber growth for the first time in a decade, and said it expects to lose another two million users in the current quarter.

Netflix attributed the declining number of subscribers to a combination of competition, saturation of its main North American market, password-sharing and, to a lesser extent, its exit from Russia after the country invaded Ukraine. While Disney+ didn’t officially launch in Russia to begin with, Disney announced in March that it would pause all work in the country as well, including the release of new movies.

Consensus analysts are also looking at a slowdown in subscribers of the main Disney+ streaming service. According to Bloomberg estimates, Wall Street expects the number of Disney+ subscribers to grow by about 4.2 million in the second quarter of the company’s fiscal year. This brings the total number of subscribers to about 134.1 million. The number of subscribers during the same period last year increased by 8.7 million, and in the previous quarter it increased by 11.7 million.

But while Disney+ will likely see a slowdown in growth, Disney’s parks, experiences and consumer products division is expected to grow. Analysts are looking to the unit to generate $1.61 billion in operating profit on $6.1 billion in revenue. In the same quarter last year, the theme park unit posted an operating loss as virus-related restrictions impacted consumer mobility.

Disney is expected to report adjusted earnings per share of $1.18 on revenue of $20.12 billion for the second quarter of the fiscal year. Disney shares are down nearly 30% year-to-date, underperforming against the S&P 500’s drop of more than 13% over that period.

Economic calendar

• Monday: Wholesale Inventories, MoM, March End (expected 2.3%, 2.3% in previous print); Wholesale Sales, MoM, March (1.8% expected, 1.7% in previous print)

• Tuesday: NFIB Small Business Optimism Index, April (expect 92.9, previous reading 93.2)

• Wednesday: MBA Mortgage Applications, Week ending May 6 (2.5% over previous week), CPI, MoM, Apr (0.2% expected, 1.2% in March); CPI excluding food and energy, MoM, Apr (0.4% expected, 0.3% in March); CPI, YoY (8.1% expected, 8.5% in March); CPI excluding food and energy, YoY, Apr (6.0% and 6.5% expected in March); Monthly Budget Statement, April ($220.0 billion – $192.7 billion expected in March)

• Thursday: PPI, MoM, Apr (0.5% expected, 1.4% in March); PPI excluding food and energy, MoM, Apr (0.6% expected, 1.0% in March); PPI excluding food and energy, YoY, Apr (8.9% expected, 9.2% in March); Initial Jobless Claims, week ending May 7 (190.000 expected, 200,000 over previous week); Continuing Claims, Week Ending April 30 (1.384 million over the previous week)

• Friday: Import Price Index, MoM, Apr (0.7% expected, 2.6% in March); Import Price Index, YoY, Apr (1.2% expected, 1.1% in March); Export Price Index, MoM, Apr (0.7% expected, 4.5% in March); Export Price Index, YoY, Apr (18.8% in March); University of Michigan Sentiment, Pre-May (expect 64.0, 65.2 in April)

earnings calendar

Monday

Before market open: Coty Inc. (COTY), Blue Apron (APRN), and Duke Energy Corp. (DUK), Palantir Technologies (PLTR), and Tyson Foods (TSN)

After market close: Vroom (VRM), Simon Property Group (SPG), Lemonade Inc. (LMND), Novavax (NVAX), AMC Entertainment (AMC), Plug Power (PLUG), Zynga (ZNGA)

Tuesday

Before market opening: Hyatt Hotels (H), Warner Music Group (WMG), Peloton (PTON), Norwegian Cruise Line Holdings (NCLH), Planet Fitness (PLNT)

After market close: Roblox (RBLX), Occidental Petroleum (OXY), Coinbase (COIN), Sofi Technologies (SOFI), Allbirds (BIRD), Rocket Cos. (RKT), Wynn Resorts (WYNN), Electronic Arts (EA)

Wednesday

Before market open: Yeti Holdings (YETI), Olaplex (OLPX), Krispy Kreme (DNUT)

After market close: Disney (DIS), Rivian Automotive (RIVN), Bumble (BMBL), Sonos Inc. (SONO), Beyond Meat (BYND), Dutch Bros. (BROS)

Thursday

Before market open: WeWork (WE), Six Flags Entertainment (SIX)

After market closes: AFRM, Figs Inc. (VEGG), Toast Inc. (TEOST)

Friday

There are no notable reports scheduled for release

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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