All three major averages closed higher for the week, driven by softer retail sales and consumer price data for April. It was another bad news is good news week for Wall Street, with both weaker-than-expected reports pointing to further disinflation — which is key to any hopes of the Federal Reserve cutting interest rates in 2024. Two more reports supported the idea that the central bank’s fight against inflation is working: U.S. single-family homebuilding and permits fell in April after a surprise rise the previous month, while industrial production came in below expectations. Not everything signaled a slowing down. The producer price index , a measure of wholesale prices, increased 0.5% for the month of April, exceeding the 0.3% Dow Jones estimate. Still, there was enough “bad” news to push stocks higher. The S & P 500 on Wednesday closed above 5,300 for the first time ever. One day later, the Dow made history by topping 40,000 and then closing above that milestone on Friday to end the week. The Dow finished up 1.2% for its fifth consecutive weekly gain. The S & P 500 rose 1.5% and the Nasdaq climbed 2.1%. Within the broad-based S & P 500, technology led to the upside, followed by real estate and health care. Industrials and consumer discretionary were the only two sectors to close lower. The second-quarter earnings season is winding down. Roughly 93% of S & P 500 companies have now reported, according to data compiled by FactSet. And the data has been mostly good, with 78% reporting a positive earnings surprise and 60% delivering a positive sales surprise. The week ahead is slower for economic data, except for two housing reports. But we will get earnings from three portfolio companies, including one of our two “own, don’t trade” stocks. In the week ahead, three portfolio companies will report results, while it will be fairly slow for economic data, except for a couple of housing reports. The state of housing: The April existing home sales report on Wednesday and the April new home sales report on Thursday are both important for one reason: The housing market has been a thorn in the Fed’s side, staying hot despite higher interest rates. Indeed, shelter costs have been the stickiest of inflation sources. This past week’s weaker housing report was a continuation of the disinflation that started in March 2023, but is still way above the Fed’s 2% target. And since housing accounts for roughly one-third of CPI — and even more at the core level — is a key cost pressuring consumers and preventing the Fed from cutting rates. Earnings : After a week without earnings from any Club stocks, we’ll get three this coming week. Palo Alto Networks looks to escape the penalty box, following a disappointing January quarter as management undertook a new strategy to accelerate the pace of “platformization,” or the bundling of its services and products for clients. The move does put some near-term pressure on financials, but is expected to result in…
Read More: Nvidia, TJX, Palo Alto Networks report earnings next week
