After US equities bounced back last week after a much-anticipated Federal Reserve decision on monetary policy, investors are expecting somewhat calmer corporate and economic data releases this week.
One of the most popular earnings reports comes after the market close on Monday from Nike (NKE). As one of the few companies to report earnings that cover this year’s results, Nike’s fiscal third quarter results will provide an update on how the multinational has performed in the early months of 2022 amid the ongoing pandemic and war in Ukraine. .
Nike stock has fallen more than 20% year-to-date through Friday’s close, trailing the S&P 500’s decline of more than 6% over the same period. Investors have become wary of stocks that are heavily exposed to both international headwinds and current supply chain issues. Earlier this month, Nike joined a number of other US companies in announcing that it was downsizing its business in Russia amid the war in Ukraine, saying it would no longer accept online orders and would close stores in Russia.
“We expect Q3 2022 to focus on: 1) the supply chain, including inventory on hand and in transit; 2) China, where political backlash and restrictions remain due to COVID-19; 3) wholesale distribution and plans for its optimization. Further; and 3) demand, which remains elevated in North America [North America] and the Europe, Middle East and Africa region [Europe, the Middle East, and Africa],” Telsey Advisory Group analyst Cristina Fernandez wrote in a note on Friday.
“While the immediate outlook for Nike is fragile until inventory flow returns to normal, Nike should continue to capitalize on enhanced consumer connections through its membership program, strong full-price sales, greater use of data across the organization, and a more integrated strategic wholesale. models through the One Nike Marketplace initiative,” she added.
The story goes on
Nike basketball shoes worn by Los Angeles Clippers guard Eric Bledsoe (12) during the second half of an NBA basketball game on Wednesday, January 19, 2022, in Denver. The Nuggets won in overtime, 130–128. (AP Photo/David Zalubowski)
Back in December, during the last reporting day and a phone call from Nike, the company said it expects third-quarter sales to grow by a small percentage in the single digits, with full-year sales rising to the mid-single digits. Fernandez said she expects Nike to repeat that guidance on Monday.
Overall, according to Bloomberg consensus data, Nike’s sales for the quarter ending February will be $10.6 billion. This would mean an increase of 3% over the same period last year. Adjusted earnings per share (EPS) are expected to reach 72 cents per share compared to 90 cents per share last year.
Sales in Greater China, one of Nike’s key markets, are expected to top $2 billion again after falling below that threshold in the second fiscal quarter as cases of COVID-19 in China impacted consumer mobility and spending. However, the country is battling a novel coronavirus outbreak that could pose some risks to both sales and supply for Nike’s latest and future results.
In December, Nike CFO Matthew Friend said the company was “growing with confidence that supply will normalize ahead of fiscal year 23.”
For many other large companies, however, supply chain issues remain at the forefront. According to a FactSet report, 358 S&P 500 companies mentioned “supply chain” during fourth-quarter earnings reports, a figure well above the five-year average of 187.
“This is the second-highest number of S&P 500 companies to refer to a ‘supply chain’ in earnings reports dating back to at least 2010 (using current historical components of the index),” FactSet’s John Butters said in a note. “The current record is 362, this happened in the previous quarter (Q3 2021).”
Consumer sentiment
In terms of economic data, this week’s Consumer Sentiment Report, due from the University of Michigan on Friday, will offer an updated picture of the state of consumers amid soaring inflation and the geopolitical crisis in Ukraine.
The revised consumer survey index is expected to be unchanged from its provisional reading of 59.7 in March, the lowest reading since 2011. Such a result would reinforce worsening consumer assessments of current and future conditions amid rising prices and turmoil overseas. It would also suggest whether inflation expectations are resetting and consolidating at historically high levels: earlier this month, consumers said they expected inflation to rise to 5.1% next year, the highest level expected since 1981, according to University of Michigan. .
More importantly, the consumer sentiment index will serve as an indicator of whether the decline in optimism could eventually lead to a tangible drop in consumer spending, thereby slowing down economic activity in the US. US consumer spending accounts for more than two-thirds of overall economic activity, and there are early signs that rising prices are holding back at least some of the demand. Retail sales rose just 0.3% in February, data from the Commerce Department showed last week, falling short of Wall Street’s expectations. And excluding gasoline and auto sales, which were primarily driven by higher energy prices, retail sales actually declined for the month.
“Consumer sentiment, the Treasury yield curve, economists’ expectations for growth and investor sentiment are all showing signs of fatigue and highlighting the possibility of a recession looming on the horizon,” Lindsey Bell, Ally’s chief market and financial strategist, wrote in an email Friday. . . “According to the University of Michigan, consumer sentiment has been declining since August, and in February it recorded its lowest reading since 2011 at 62.8. Readings of 65 or below often coincide with a recession.”
“To be sure, we will need to keep an eye on the consumer as their trust has been eroded,” Bell added. “But I believe that given their still strong financial position and the strength of the job market, perhaps this could be a temporary boost in self-confidence. half of 2022 is characterized by a more resilient global economy and easing inflationary pressures.”
Economic calendar
Monday: Chicago Fed National Activity Index, February (0.69 in January)
Tuesday: Richmond Fed Manufacturing Index March (expected 2, 1 in February)
Wednesday: MBA Mortgage Applications Week ending March 18 (-1.2% in the prior week); New home sales, February (expected 815,000, 801,000 in January)
Thursday: Initial jobless claims, week ending March 19 (expected 211,000, 214,000 previous week); Ongoing claims, week ending March 12 (Expected 1.481M, 1.419M the previous week); Orders for durable goods, preliminary data for February (expectation -0.5%, January – 1.6%); Orders for non-defense capital goods, excluding aircraft, preliminary data for February (expected 0.5%, 1.0% in January). S&P Global US Composite PMI Pre-March (Expectation 54.2, Feb 55.9); Kansas City Fed Manufacturing Index, March (29 in February)
Friday: Pending home sales, February (1.0% expected, -5.7% in January); University of Michigan Sentiment, March Finals (59.7 expected, 59.7 in February)
income calendar
Monday
After market close: Nike (NKE)
Tuesday
Before the Market Opens: Carnival Corp. (CCL)
After market close: Adobe (ADBE)
Wednesday
Before Market Opening: General Mills (GIS)
Thursday
After Market Close: Darden Restaurants (DRI)
Friday
No important reports scheduled for release
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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