The market is expecting key results and economic data this week

We’re taking our time this morning to start another week of trading, but we’ll have an eventful week ahead of us at the end. That’s good, too, because the last Federal Open Market Committee (FOMC) meeting is coming up mid-next week, where the consensus is that the Fed will raise interest rates another 25 basis points (bps) to a range of 5.00-5.25% — for the first time since 2007

Starting tomorrow and throughout Tuesday, we’ll watch economic reports on Case-Shiller home prices for February, new home sales for March, and consumer confidence for April. Plus durable goods orders, trade balance and personal consumption expenditure (PCE) all for March. In addition, there is weekly information on the number of unemployed people and the first printout of Gross Domestic Product (GDP) for the first quarter – and of course it is earnings season for the first quarter.

Of them PCE data is by far the most important when it comes to forecasting the Fed’s interest rate decisions. Fed Chairman Jay Powell routinely cites PCE events, and this time the report comes out a few days before the Fed. The year-over-year headline PCE indicator was +5.0% last month, while the core was +4.6% – a cycle low on both fronts. That said, we’ll be watching closely to see whether these numbers continue to decline significantly or whether they indicate a nadir in inflation that continues to exceed twice the optimal inflation rate. If this happens, expect the Fed to raise rates another 25 basis points and look for further increases.

Coca-Cola KO reported first-quarter earnings this morning, beating both earnings and earnings estimates: Earnings of 68 cents per share on sales of $10.96 billion for the quarter topped the Zacks Consensus Estimate of 65 cents per share and $10.85 billion dollars. Net income increased by more than $30 billion year-over-year, driven by both higher demand and increased prices. Organic sales increased by +12% year-on-year. The guidelines were consistent with her previous report. All in all, a solid quarter. To learn more about KO earnings, click here.

Later this week we will hear earnings reports from Microsoft MSFT, Alphabet GOOGLE, Meta FINISH, McDonald’s MCD, Amazon AMZN and lots of others. But perhaps the most important report will be released after today’s close: a regional bank headquartered in San Francisco First Republic Bank FRC, for which over the last month it was at times clear that another domino would fall. So far, all is well – new private sector deposits have been raised that can keep the FRC solvent; today’s Q1 report will provide key details. Profits are expected to be -64% lower than last year’s quarter and revenues are expected to be -19% lower than Q1 2022.

Pre-market futures have returned to their neutral/defensive stance, hovering around a zero balance (except for the Dow, which is currently at -34 points): the S&P 500 is at -1 point, while the Nasdaq is at +2. Last week, we traded overall declines, but so far early trading is trending upwards. Perhaps we will see a reversal of the downward trend of the last few weeks. But realistically, we may have to wait for the FOMC meeting to know for sure where we’re headed.

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