The week ahead will wrap up the second quarter and first half of what has been a tough 2022 for investors.
Several key economic reports, including core PCE inflation – the Federal Reserve’s preferred measure of consumer prices – are available, as well as earnings from Nike (NKE), Jefferies (JEF), Micron Technology (MU) and Bed Bath & Beyond (BBBY).
The S&P 500 rose more than 3% on Friday and gained more than 6% for the week, its second-best week this year and its first weekly gain since late May.
The benchmark remains on pace with one of its worst six-month open since 1970. Only five times since 1932 has the S&P 500 lost 15% or more in the first six months of a year; through Friday’s close, the benchmark was down just under 18%.
“As bad as [this year] has been for investors, the good news is that previous years that were down at least 15% midway through the year have seen the last six months higher each time, with an average return of almost 24%,” said LPL Financial’s chief market strategist. ryan derick noted earlier this week.
And indeed, investors generally remain optimistic about the prospect of a rebound despite this year’s downturn.
Although analysts have lowered their price targets on S&P 500 companies in recent months – bringing the index’s upward consensus target price below 5000 for the first time since August 2021 – the estimate of 4987, June 28-23 remains 31.4% above the closing price of the same day’s closing price of 3,795.73, according to FactSet data.
This suggests that analysts expect the index to rise more than 30% over the next 12 months.
JP Morgan strategist Marko Kolanovic said in a note to clients on Friday that US stocks could climb up to 7% next week as investors rebalance their portfolios at the end of the month, in the second quarter and in the first half.
“Next week’s rebalancing is significant as equity markets have fallen significantly over the past month, past quarter, and past half year,” Kolanovic said. “On top of that, the market is in an oversold condition, cash balances are at record highs and recent market short selling activity has reached levels not seen since 2008.”
On the economic calendar, personal consumption expenditure (PCE) data will be closely watched by traders this week. The Bureau of Economic Analysis will release its monthly PCE deflator on Thursday, giving investors the latest view on inflation in the U.S. economy as the Federal Reserve raises its benchmark interest rate to rein in price rises.
Economists polled by Bloomberg expect the PCE to rise 0.7% in May from 0.2% the previous month. On an annual basis, the PCE deflator is expected to accelerate to 6.4%, from a rise of 6.3% in April.
The core PCE index, which excludes the cost of food and energy, is expected to remain stable compared to the previous month’s print. Economists expect the core PCE to rise 5.1% in May, compared to April’s 5.1% rise.
The latest data from the PCE will come as the US central bank‘s fight against inflation looks increasingly complex, with a growing number of economists and strategists on Wall Street suggesting the Fed will not be able to rein in prices without tipping the economy into a recession.
“I fear that the likelihood of a soft landing, meaning you reduce inflation without unduly harming growth and jobs, has fallen significantly due to a series of errors by the Federal Reserve. “, said the economist Mohamed El-Erian told Yahoo Finance Live last week.
Elsewhere on the economic calendar, investors will be keeping a close eye on Monday’s durable goods numbers, Tuesday’s Conference Board consumer confidence reading and several manufacturing and housing reports throughout the week. Investors will also get a third and final reading of first quarter GDP.
On the earnings side, reports from Nike (NKE), Bed Bath & Beyond (BBBY), Jefferies (JEF) and Micron Technology (MU) will be featured.
Monday: Durable Goods OrdersMay Preliminary (0.2% expected, 0.5% in previous month); Durable goods excluding transportMay Preliminary (0.3% expected, 0.4% in previous month); Door-to-door sales pendingmonth-over-month, May (-3.9% expected, -3.9% in prior month); Home sales pending NSAyear-over-year, April (-11.5% over the prior month); Dallas Fed Manufacturing ActivityJune (-6.5 expected, -7.3 in previous month)
Tuesday: Expected merchandise trade balanceMay (-$105.4 billion expected, -$105.9 billion in prior month, revised to -$106.7 billion); Wholesale inventorymonth-over-month, May preliminary (2.2% expected, 2.2% in prior month); Retail inventorymonth-over-month, May (1.6 expected, 0.7% in prior month); FHFA Housing Price IndexApril (1.6% expected, 1.5% in previous month); Composite S&P CoreLogic Case-Shiller 20 citiesmonth-over-month, April (1.85% expected, 2.42% in prior month); Composite S&P CoreLogic Case-Shiller 20 citiesYoY, April (21.20% expected, 21.17% in prior month); US National S&P CoreLogic Case-Shiller House Price Indexyear-over-year, April (20.55% over the previous month); Conference Board Consumer ConfidenceJune (100 expected, 106.4 in previous month); Richmond Fed Manufacturing IndexJune (-5 expected, -9 in previous month)
Wednesday: MBA Mortgage Applicationsweek ended June 24 (-4.2% over the previous week); Annualized GDPquarter over quarter, third quarter (-1.5% expected, -1.5% before); Personal consumptionquarter over quarter, third quarter (3.1% expected, 3.1% before); GDP price indexquarter over quarter, third quarter (8.1% expected, 8.1% before); Basic PCEquarter to quarter, 1T second (5.1% expected, 5.1% before)
Thursday: Personal incomemonth-over-month, May (0.5% expected, 0.4% in prior month); Personal expensesmonth-over-month, May (0.4% expected, 0.9% in prior month); Actual personal expensesmonth-over-month, May (-0.2% expected, 0.7% in prior month); Initial jobless claimsweek ended June 25 (230,000 expected, 229,000 the previous week); Continuing claimsweek ended June 18 (1.310 million expected, 1.315 million the previous week); PCE deflatormonth-over-month, May (0.7% expected, 0.2% in prior month); PCE deflatoryear-on-year, May (6.4% expected, 6.3% in prior month); Basic PCE deflatormonth-over-month, May (0.4% expected, 0.3% in prior month); Basic PCE deflatoryear-over-year, May (4.8% expected, 4.9% in prior month); IMN Chicago PMIJune (58 expected, 60.3 in previous month)
Friday: US S&P Global Manufacturing PMIJune final (52.4 expected, 52.4 before); Building expensesmonth-over-month, May (0.4% expected, 0.2% in prior month); ISM manufacturingJune (54.7 expected, 56.1 in previous month); ISM prices paidJune (80.0 expected, 82.2 in previous month), ISM New Orders, June (55.1 in previous month); ISM Jobs, June (49.6 in the previous month); Total vehicle salesJune (13.40 million, 12.68 in the previous month)
Before the market opens: No notable reports scheduled for publication.
After grant: Nike (NKE), Jefferies Financial Group (I F), Trip.com Group (TCOM)
Before the market opens: No notable reports scheduled for publication.
After grant: AeroVironment (AVAV)
Before the market opens: Barnes & Noble Education (BNED), Bed bath and beyond (BBBY), General Mills (GIS), McCormick & Co. (MKC), Payment (PAYX)
After grant: MillerKnoll (MLKN)
Before the market opens: Constellation Brands (STZ)
After grant: Micron Technology (MU), Walgreens Boot Alliance (WBA)
No notable reports scheduled for publication.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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