Wall Street is likely to focus on retail earnings and inflation and other data this week to get a read on whether the economy is slowing enough to stave off recession and prompt the Federal Reserve to eventually lower interest rates.
The market is coming off an erratic week that ended quietly as investors, having digested the election results, turned their attention to upcoming economic reports including minutes from the Federal Reserve’s last meeting and the Labor Department’s Producer Price Index.
The retail reports — as well as the Commerce Department’s monthly retail sales report — will be key, as two-thirds of economic growth is driven by consumers. Accordingly, Wall Street will eagerly await forecasts from retailers like Wal-Mart Stores Inc. and Target Corp. about the holiday selling season.
Investors hope the retail sales report as well as a reading of the PPI, which measures the wholesale cost of goods, will show an economy that is slowing adequately to help make a case for the Fed to lower short-term interest rates. The central bank left interest rates unchanged at its last three meetings, interrupting a string of 17 consecutive increases over two years.
Investors are often anxious for the latest economic data as they try to determine whether the Fed, as some market observers contend, overreached in its efforts to curb inflation and slowed the economy too quickly.
The flow of economic news for the week is expected to start slowly; on tap for Monday are budget data from the Treasury Department. On Tuesday, investors will receive a bevy of information including Commerce Department data on retail sales as well as business inventories.
Also that day, the Labor Department is set to release the PPI and its core PPI, which excludes often volatile costs for energy and food. The figures are closely watched as investors look to the gauge the threat of inflation.
Speeches from St. Louis Fed President Bill Poole on monetary policy and from San Francisco Fed President Janet Yellen could draw investor attention a day ahead of the release of the Fed minutes. Wednesday not only brings the Fed’s October meeting minutes but a weekly Energy Department report on crude inventories.
On Thursday, investors can expect the Labor Department’s consumer price index, the key measure of inflation. The core figure, like that of the producer price index, excludes food and energy costs.
The day also brings weekly data on initial unemployment claims as well as the Fed’s report on industrial production and capacity utilization for October.
Poole is expected to deliver another speech Thursday as is Fed Governor Randall S. Kroszner. The Philadelphia Fed also reports on regional manufacturing activity for October.
Friday, the Commerce Department is expected to release its report on October housing starts and building permits. Also Friday, Cleveland Fed President Sandra Pianalto is expected to give a speech.
Wal-Mart Stores Inc. is expected to report Tuesday third-quarter results of 60 cents per share, according to analysts polled by Thomson Financial. Its stock, which closed at $46.47 Friday, has traded within a 52-week range of $42.31 to $52.15.
Rival Target Corp. will also post results, which Wall Street has pinned at 55 cents per share. The discount retailer’s shares closed at $57.94 Friday, and have traded within a 52-week range of $44.70 to $60.34.
Also reporting on Tuesday is Home Depot Inc., closely watched because of its link to the housing industry. Analysts expect the home improvement chain to report third-quarter earnings of 75 cents per share. Shares closed at $36.64 Friday, near the middle of a 52-week range of $32.85 and $43.95.
On Wednesday, conglomerate Tyco International Ltd. is expected to post fourth-quarter earnings of 49 cents per share. The stock, which closed up 29 cents at $29.64 on Friday, has traded within a 52-week range of $24.65 and $31.28.
Technology stocks will be in focus on Thursday with both Dell Inc. and Hewlett-Packard Co. reporting results. Dell is seen reporting a profit of 24 cents per share. It closed at $24.89 Friday, near the middle of its 52-week range of $18.95 to $33.22.
HP is projected to turn in a profit of 63 cents per share during the fourth quarter. The stock, which closed at $39.99 Friday, has traded within a 52-week range of $27.68 and $40.10.
Also reporting on Thursday is Starbucks Corp., expected to post earnings of 17 cents per share for the fourth quarter. The coffee chain closed at $37.79 Friday, near the top end of its 52-week range of $28.72 and $39.88.