World Week Ahead: Eyes on Macy’s, Kohl’s
By Margreet Dietz
Aug. 7 (BusinessDesk) - The latest corporate earnings including from US retailers Macy’s and Kohl’s and reports on
inflation will draw attention this week.
Last week, the Dow Jones Industrial Average rose 1.2 percent, with the index closing at a record high for the eighth
consecutive session on Friday, while the Standard & Poor’s 500 Index added 0.2 percent.
And sentiment remains upbeat.
"We would expect [this] week to see market highs again just based on the positive tone created by strong second-quarter
earnings and favourable outlooks,” Tim Ghriskey, chief investment officer of Solaris Group, told Reuters. "We're really
in a sweet spot here."
To be sure, the Nasdaq Composite Index declined 0.4 percent last week.
Other US companies set to report their latest quarterly results in the coming days include Tyson Foods, CVS Health,
Nordstrom and JC Penney.
When it comes to US retailers, one topic will surely be discussed on their earnings conference calls—the impact of
Amazon, the world’s top online retailer. So far this quarter, Amazon has been brought up in some 130 earnings calls from
S 1500 components, according to Reuters.
"Any retailer, whether it's an online retailer or has online presence, or just brick and mortar, that tells you they’re
not concerned about Amazon, they’re either in denial or lying," Steven Osinski, marketing lecturer at Fowler College of
Business at San Diego State University, told Reuters.
Bolstering the mood on Friday was a Labour Department report showing that nonfarm payrolls climbed by 209,000 jobs last
month, beating economists’ expectations for a gain of about 180,000 and following an upwardly revised increase of
231,000 in June.
Average hourly earnings rose 0.3 percent in July, the biggest gain in five months, following a 0.2 percent advance in
June.
The report "suggests the Fed[eral Reserve] will still need to raise rates again this year, even if inflation remains
subdued," Capital Economics economist Michael Pearce said in a note.
Separately, a Commerce Department report showed that the US trade deficit shrunk to the lowest level in eight months in
June.
"Overall, the data provides reassurance that the real economy remains on a strong growth path at the start of the third
quarter,” Pearce noted.
The latest US economic data on tap in the coming days include reports on the labour market conditions index and consumer
credit, due today; NFIB small business optimism index, and JOLTS, due Tuesday; productivity and costs, and wholesale
trade, due Wednesday; weekly jobless claims and producer price index, due Thursday; as well as the consumer price index,
due Friday.
Last month Fed policy makers signalled they will start to reduce the central bank’s balance sheet “relatively soon,”
possibly as early as next month.
Investors will look for fresh clues on interest rates, inflation and the balance sheet in this week’s speeches from Fed
officials which include James Bullard and Neel Kashkari today, Charles Evans on Wednesday, William Dudley on Thursday,
and Robert Kaplan on Friday.
"The Fed set a low bar for balance sheet normalisation to begin in September, and [Friday’s jobs] number cleared that
bar with elan," Michael Feroli, economist at JPMorgan in New York, told Reuters.
While the latest jobs data offered a boost to the US dollar on Friday, the currency is unlikely to rally anytime soon
with the current Fed outlook.
“It is more of a story of providing underlying dollar support at key levels rather than a full-on reversal,” Alan
Ruskin, global co-head of foreign-exchange research at Deutsche Bank, told Bloomberg. “Unfortunately for the dollar, the
ideal dollar scenario needs a significant change in Fed expectations.”
In Europe, the Stoxx 600 gained 1 percent last Friday.
The latest economic data for the region slated for release in the coming days include Germany's industrial production
and eurozone sentix investor confidence, due today; Germany's trade balance, due Tuesday; as well as Germany's consumer
price index, due Friday.
(BusinessDesk)