What to Expect in the Markets This Week

Markets rallied early in the week after the Federal Reserve raised its benchmark federal funds rate by 50 basis points (bps), and Fed Chair Jerome Powell announced a less hawkish trajectory for upcoming policy meetings. However, the “relief rally” proved to be short lived, as markets tumbled sharply on Thursday, and extended losses on Friday. For the week, the Dow and S&P 500 declined 0.2%, and the Nasdaq shed 1.5%. Meanwhile, the yield on the 10-Year U.S. Treasury note surged above 3% for the first time since 2018, ending the week at 3.13% as global bond markets continued to sell off. Crude oil futures rose to above $110 per barrel, as the European Union decided to phase out all Russian oil and natural gas products by the end of the year.

Next week, we can expect the latest updates on inflation in the U.S., with the release of the April Consumer Price Index (CPI) and Producer Price Index (PPI). Inflation figures will be available for China and Germany this week as well, along with data on industrial production growth for Europe and the U.K. We can also expect earnings from two of the world’s largest automakers, Toyota and Honda, along with Disney, Alibaba, Electronic Arts, Fox Corporation, Warner Music Group, and WeWork.

Events Calendar:

Monday, May 9

• Duke Energy (DUK), Suncor Energy (SU), Exelon (EXC), Simon Property Group (SPG), BioNTech (BNTX), and Tyson Foods (TSN) report earnings
• U.S. Wholesale Inventories (March)

Tuesday, May 10

• Sony (SONY), Occidental Petroleum (OXY), Takeda Pharmaceuticals (TAK), Sysco (SYY), Electronic Arts (EA), Coinbase (COIN), Fox Corporation (FOX), and Warner Music Group (WMG) report earnings
• U.S. Consumer Inflation Expectations (April)
• NFIB Business Optimism Index (April)
• IBD/TIPP Economic Optimism (May)
• China Inflation Rate (March)
• Germany ZEW Economic Sentiment (March)

Wednesday, May 11

• Toyota (TM), Disney (DIS), and Chinese Petroleum & Chemical (SNP), Rivian Automotive (RIVN), and Sun Life Financial (SLF) report earnings
• U.S. Consumer Price Index (CPI) (April)
• Germany Consumer Price Index (CPI) (April)

Thursday, May 12

• Alibaba (BABA), Brookfield Asset Management (BAM), Motorola (MSI), Dillard’s (DDS), and WeWork (WE) report earnings
• U.S. Producer Price Index (PPI) (April)
• U.K. Industrial Production (March)

Friday, May 13

• Honda (HMC) reports earnings
• U.S. Consumer Sentiment (May)
• Eurozone Industrial Production (February)
• University of Michigan Consumer Sentiment – Preliminary (May)

Inflation Updates

The latest U.S. inflation figures will become available this week, as the Bureau of Labor Statistics is set to release the April updates for its Consumer Price Index (CPI) and Producer Price Index (PPI) on Wednesday and Thursday, respectively. Economists expect inflation to slow to an annual rate of 8.1%, down from a 40-year-high of 8.5% in March. Inflationary gains have been driven by soaring energy costs, along with an acceleration in the prices of food and other consumer staples in recent months. Producer prices are also expected to decelerate slightly, to an annual rate of 10.7%, from a record 11.2% rise in March.

Consumer Sentiment

On Friday, the University of Michigan will release the preliminary reading of its Consumer Sentiment Index for May. Consensus estimates call for a reading of 63.6, down from 65.2 recorded in April. Last month, the index had risen 9.8% on higher expectations for the economy and personal financial expectations in the year ahead. However, the index remained near decade-long lows as uncertainty about rising inflation, the war in Ukraine, and supply chain disruptions related to COVID-19 lockdowns in China continued to weigh on confidence.