Important barometers of inflation—the Producer Price Index (PPI) and Consumer Price Index (CPI) come out this week; however, U.S.-China trade negotiations and the Trump administration’s deadline on the Iran nuclear deal may dominate headlines, Prudential’s Chief Market Strategist Quincy Krosby said Monday in her weekly “Connecting the Dots” outlook.
Following the Federal Reserve meeting last week, a parade of Fed speakers will share their views on the economy, inflation and monetary policy. The PPI and CPI, released Wednesday and Thursday, respectively, will offer an important snapshot of inflation. “We are hearing companies tell us that input costs are rising,” Krosby said.
The market, however, may be more attuned to geopolitical concerns this week.
Headlines from the first round of U.S.-China trade talks suggest the two countries have laid the groundwork for continued negotiation, though negative comments from either side could be disruptive for the market. “If we hear that negotiations will continue, that should be positive for the market,” Krosby said.
With the administration’s May 12 deadline on the Iran nuclear deal in the news, oil prices are being monitored, as are sectors that would be negatively affected by a sharp rise in gasoline prices. The market is looking for any potential disruption of supply from Venezuela, a shutdown of Iranian exports, or tensions in the Middle East, Krosby said.
“We’re watching oil prices climb. The question is, ‘Has the oil market already discounted the possibility of the U.S. walking away from the deal?’ If gas prices climb well above $3.00 this summer, we could see a wide variety of sectors affected,” she said.
Earnings season winds down this week with companies like Walt Disney, Marriott and Nvidia reporting. The big interest will be whether the market can continue with the momentum created Friday when investor Warren Buffett announced he’d be buying more Apple stock, Krosby said.
“Technology gained strength, earnings have been strong as has top-line revenue growth. The unemployment rate reached its lowest in decades. Yet, this is a market that has stayed in a tight range,” Krosby said. “We’ll see this week if we can move ahead and the market has the ability to climb out of this.”
Earnings to watch:
E.W. Scripps, Sysco, Tyson Foods, Gannett, Walt Disney, Valeant Pharmaceuticals, Henry Schein Inc., Marriott, Siemens, Liberty Media, Mylan, Duke Energy, and Nvidia
This week’s important data releases:
Monday: Consumer Credit
Tuesday: NFIB Small Business Optimism Index; JOLTS (Job Openings and Labor Turnover Survey)
Friday: Consumer Sentiment
Read Quincy Krosby’s full Q2 Market Commentary: Regime Change.
The views and opinions are those of the author at the time of publication and are subject to change at any time due to market or economic conditions. This is solely for informational purposes. This is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.