PCE & Notable Earnings Draw the Market’s Focus

The past week saw much of the market’s short-term uncertainty be resolved as NVDA delivered a strong earnings beat, which propelled all three major indices to reach new 52-Week Highs, including new All-Time Highs for the Dow & S&P 500. Thus far through Q4 earnings season, earnings have come in nicely with approximately 75% of the S&P 500 companies that have reported posting an upside surprise on EPS. Now that it looks like Q4 earnings season will end on a strong note, this could be the springboard for the next up leg of this Bull market.

On deck this week are a handful of significant economic reports, most importantly the Personal Consumption Expenditures Price Index (PCE). Core PCE is the Fed’s favored measure of inflation so investors will surely be keyed in to see this fresh data. Also expected this week is the most recent U.S. New Homes Sales data. Additionally, the weekly Initial Jobless Claims data will be released on Thursday. Seeing this index continuing to trend downward will be a positive sign for the economy. Finally, there are a handful of notable companies set to report their Q4 earnings this week including Mega-Cap tech name Salesforce, Inc.

  • Personal Consumption Expenditures Price Index (PCE) – Before the opening bell, on Thursday morning the new PCE & Core PCE data for the month of January will be released. The PCE price index data is gathered to track the costs that U.S. consumers are paying for goods and services and to document the change in these costs over time. Core PCE is a pared down measure that excludes more volatile categories like Food & Energy and this is the index the Fed watches the most closely. 
    • January’s YoY Core PCE number is expected to come in at 2.8%, which would be slightly lower than December’s report of 2.9%.
  • U.S. New Home Sales– Every month, the U.S. Census Bureau releases their New Home Sales report which measures how many new construction homes were sold in that month. This report is a crucial measure for the major U.S. Homebuilders and businesses that are adjacent to this industry.
    • January’s New Home Sales report is expected to show that 675K new homes were sold during the month. This would be a slight increase from the previous month and a 4.17% increase YoY.
  • Initial Jobless Claims – The Department of Labor provides a weekly report that records new Initial Jobless Claims in the U.S. Over the past few weeks, initial claims have started trending back down after a brief blip higher. This turn downward is in-line with the longer-term trend in which initial claims have continued to fall following the recent peak in June 2023.
    • Thursday’s report is expected to show 210K new initial claims, which is slightly elevated from last week’s number of 201K. 
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Federal Reserve Watch

Last week, there were a handful of Fed member speaking engagements in which they attempted to convey where the committee currently stands. The theme of their messaging was that the FOMC is expecting to lower rates at some point this year, but only once they have seen substantial data and are confident that inflation is definitively remaining below 2%. Additionally, the Fed members that spoke communicated that the FOMC feels no pressure to act quickly. This would seem to suggest that the FOMC currently is leaning towards cutting policy rates later in the year.

  • Following last week’s bevy of Fed speak coupled with January’s CPI report, this has resulted in a strong move in the Fed Futures markets. The CME Group’s FedWatch Tool now projects a 97.5% probability that the Fed will maintain current policy rates at the upcoming March meeting. This is an increase from the previous week when the probability stood at 90.0%. Looking ahead to the next few FOMC meetings, Fed Futures are now indicating that the first rate cut will not come until the June meeting. The CME’s FedWatch tool projects a 67.6% probability that the FOMC will reduce rates at June’s meeting.
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This Week’s Notable Earnings

This week’s earnings reports will feature a pair of companies that are closely tied to the U.S. housing market as Lowe’s Companies, Inc. & TopBuild Corp. will report. Two top PC makers will post their Q4 earnings when Dell Technologies Inc. & HP Inc. release their reports. Finally, in what will likely be the most anticipated earnings report this week, Salesforce, Inc. will report their earnings results from the past quarter.

  • Two companies that are closely linked to the U.S. housing market are expected to report earnings this week. Lowe’s Companies, Inc. will post their Q4 earnings prior to the market open on Tuesday. LOW’s Q4 earnings are expected to be 26.3% lower when compared to Q4 of the previous year. On Wednesday, prior to the opening bell, TopBuild Corp. is expected to report a 15.02% increase YoY in quarterly earnings.
    • LOW earnings are expected to come in at $1.68 EPS.
    • BLD earnings are expected to come in at $4.60 EPS.
  • The latest earnings from two of the top PC makers are due this week. Up first, HP Inc. will report their fourth quarter earnings on Wednesday after the market close. Following this report, Dell Technologies Inc. will post their Q4 earnings after the bell on Thursday. HPQ is forecasted to grow quarterly earnings by high single digits when compared to the same quarter last year. This is while DELL is expected to post a slight decrease in earnings when compared to the same quarter last year.
    • HPQ earnings are expected to come in at $0.82 EPS.
    • DELL earnings are expected to come in at $1.47 EPS.
  • Salesforce, Inc. is on deck to report their Q4 earnings after the bell on Wednesday. CRM’s report will most certainly be the most closely watched as they are the largest company that will post earnings this week. CRM is projected to report a huge 56.5% YoY increase in full year earnings. If CRM can deliver, expect their shares to be rewarded.
    • CRM earnings are expected to come in at $1.72 EPS.

Thank you for reading this week’s edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week’s important market events.


Blane Markham

Author, Weekly Market Periscope

Hughes Optioneering Team