This week, investors will get another likely hot inflation reading and several key corporate earnings results, offering additional catalysts after the volatility in risky assets over the past few weeks.
In terms of economic data, the Bureau of Labor Statistics (BLS) Consumer Price Index (CPI) will be the most closely watched release on Thursday. Investors were anxiously waiting for signs of a peak in inflation, and in this regard, the incoming data is unlikely to bring such benefits.
According to Bloomberg consensus data, consensus economists expect the headline consumer price index to pick up to a 7.9% year-on-year gain, compared to 7.5% in January. Such a result would set a new 40-year high inflation rate. And even without volatile food and energy prices, the CPI is likely to rise 6.4% from January’s 6.0%.
Monthly data is also expected to continue to rise. Economists are expecting a 0.8% month-on-month rise in the February’s broadest consumer price index, marking 21 consecutive months of gains after rising 0.6% in January.
The latest CPI report will only capture the very early impact on prices of Russia’s war in Ukraine, with a full-scale invasion in late February. Fears that this geopolitical conflict will disrupt the energy complex of Ukraine or Russia – the world’s third-largest oil producer – have sent U.S. crude oil prices soaring above $110 a barrel to more than a decade high.
Cropped shot of young woman with shopping cart standing along groceries aisle buying groceries for daily necessities in supermarket
Other recent economic data also suggests that prices in the US economy continue to rise. The Institute for Supply Management’s February Service Index, released late last week, showed prices rose from January and that businesses surveyed “continue to suffer from supply chain disruptions, capacity shortages, inflation, logistical challenges and labor shortages.” . And in the Department of Labor Employment Report last week, average hourly wage growth was well above pre-pandemic trends with a 5.1% year-on-year increase, though down slightly from the 5.5% jump in January.
The story goes on
Even ahead of the upcoming CPI inflation data and the latest employment report, key Federal Reserve officials have already signaled that the central bank is ready to continue raising interest rates after its mid-March meeting. Federal Reserve Chairman Jerome Powell said last week that he would support a 25 basis point rate hike this month. While some market participants were anticipating a 50 basis point increase with the turbo in advance, such a move would set off a process of higher borrowing costs in all markets and help dampen demand, which in turn would drive down prices.
“As prices rise, you are on the demand curve and people demand less. I think the Fed is hoping there are some other channels in the global economy that will show up and help bring inflation down,” Nathan Sheets, Chief Economist at Citi Global told Yahoo Finance. “And some of the factors that the Fed has pointed out in its minutes is one is continued progress on supply chain disruptions. The other is further progress in lowering commodity prices. And I have to say, given what I’m seeing at the moment, they both seem pretty far away.”
“Now the third, and perhaps a little more reassuring, is that as we make strides in managing the pandemic better… this will allow this red-hot, commodity-intensive goods sector to be rebalanced more into the services sector and allow some prices for these goods that were so high and rising fast [to] calm down a bit,” he added. “The Fed has its fingers crossed for these things to happen and to support lower inflation in addition to this channel of demand destruction.”
Rivian earnings, fourth quarter reporting season draws to a close
While the vast majority of S&P 500 companies have now reported fourth-quarter earnings, a few closely watched new public companies are still set to release results this week.
One of them will be Rivian (RIVN), an electric vehicle company backed by Amazon and Ford, which went public in November in the sixth-largest IPO in US history and the largest last year. However, the stock has since fallen more than 50% since the start of the year amid a wide rotation of growth and technology stocks.
However, Rivian has had its fair share of company-specific problems. The California electric vehicle maker has missed its 2021 vehicle production target, down from the 1,200 vehicles it planned last year. Shares tumbled yet again this week after Rivian canceled price hikes on its electric trucks and SUVs for some pre-orders due to backlash from customers.
IMAGE SHARED TO RIVIAN AUTOMOTIVE, LLC – The Rivian R1T all-electric truck in Times Square on listing day Wednesday, November 10, 2021 in New York City. (Anne-Sophie Fiello-Jensen/AP Images for Rivian Automotive, LLC)
Overall, Rivian is expected to post nearly $64 million in earnings when it reports results on Thursday after the market closed. Net losses are expected to be $1.8 billion compared to $1.2 billion in the third quarter.
Rivian’s results, as well as other reports this week including Bumble (BMBL), StitchFix (SFIX) and Oracle (ORCL), will be released at the end of the Q4 reporting season, which has been solid for most S&P 500 companies so far. While these results cover a period before the geopolitical conflict between Russia and Ukraine and the ensuing uncertainty over the global economic landscape, earnings reports signal a solid momentum in corporate profitability ahead of the new year.
“The fourth quarter reporting season, although it clearly preceded everything we see now, was well ahead of expectations, and we saw really strong positive developments and positive forecasts for 2022. The first quarter will definitely be a wild card,” Amanda Agati, chief investment officer at PNC Asset Management Group, told Yahoo Finance Live. “We’re going to have to watch very, very closely what’s going on with rising production costs, pressure on wages, now we have a story with energy coming into the equation. So I do think there’s an element of risk in that, but I also think the underlying fundamental story is pretty strong.”
Economic calendar
Monday: Consumer credit, January (expected $24.000 billion, December $18.898 billion)
Tuesday: NFIB Small Business Optimism February (97.4 expected, 97.1 in January); Trade balance, January (expectation -87.1 billion dollars, December -80.7 billion dollars); Wholesale inventories on a monthly basis, final data for January (expected 0.8%, preliminary data 0.8%).
Wednesday: MBA Mortgage Applications Week ending March 4 (-0.7% in the previous week); JOLTS Vacancies, January (Expected 10.968M, 10.925M the previous week)
Thursday: CPI m/m, February (expect 0.8%, 0.6% in January); CPI excluding food and energy m/m, February (0.5% expected, 0.6% in January); CPI y/y, February (expect 7.9%, Jan 7.5%); CPI excluding food and energy y/y, February (6.4% expected, 6.0% in January); Initial jobless claims, week ending March 5 (expected 220,000, 215,000 previous week); Ongoing claims, week ending 26 Feb (1.476M in the previous week); Household equity change, Q4 ($2.4 trillion in Q3); February Monthly Budget Report ($118.7 billion in January)
Friday: University of Michigan sentiment, preliminary data for March (62.5 expected, 62.8 in February)
income calendar
Monday
No notable release schedule reports
Tuesday
Before market open: Dick’s Sporting Goods (DKS), Olaplex (OLPX).
After market close: Bumble (BMBL), StitchFix (SFIX), MongoDB (MDB), Figs (FIGS)
Wednesday
Before market open: No scheduled reports for release
After market close: Sonder Holdings (SOND), CrowdStrike (CRWD), Asana (ASAN)
Thursday
Before market open: No scheduled reports for release
After market close: DocuSign (DOCU), Rivian (RIVN), Oracle (ORCL), Ulta Beauty (ULTA)
Friday
Before the Market Opens: WeWork (WE)
After Market Close: No 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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