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Earnings extravaganza, FOMC meeting, Q1 GDP: What to know in the week ahead

Heidi Chung
Reporter

Investors are bracing for a busy week ahead packed with events that have market-moving potential. Tech behemoths such as Amazon, Apple, Alphabet, Tesla, Facebook and Microsoft are gearing up to report earnings this week, the Federal Open Market Committee (FOMC) will be conducting its two-day meeting, and key economic data releases will test the market.

Earnings extravaganza

Earnings season kicks into high gear. About 140 S&P 500 (^GSPC) companies, a fifth of the index, are set to report quarterly results this week.

“The market response to [earnings] results has been generally positive, ex-Financials,” Raymond James Chief Investment Officer Larry Adam said in a note April 24. “Some of the best earnings reactions have come from Technology-oriented stocks, as supportive results were needed following very stable estimate revisions heading into earnings season (along with strong relative performance this year). Overall, the S&P 500 is now expected to see a 14.4% earnings contraction in Q1, with the majority of weakness coming from the Energy, Consumer Discretionary, Financials, Industrials, and Materials sectors. These stocks have, accordingly, felt the brunt of the weakness in this bear market. Whereas, sectors with the most stable estimate revisions - i.e., Health Care, Technology, and Consumer Staples - have seen some of the best performance.”

Some of the mega-cap companies reporting this week include PepsiCo, Caterpillar, 3M, Alphabet, Advanced Micro Devices, Starbucks, General Electric, Boeing, Microsoft, Facebook, Tesla, Apple, Amazon, Qualcomm, Twitter, Comcast, McDonald’s, Gilead and ExxonMobil.

Fed meeting

The FOMC will be meeting Tuesday and Wednesday, and Fed Chair Jay Powell will hold a press conference at the conclusion of the two-day event. It is widely expected that the central bank will hold off from any major announcements, but market participants will be paying close attention to any updates in regards to the Fed’s recents actions to combat COVID-19 as well as additional insight into the committee’s ever-changing views about economic outlook.

“We don’t expect any major announcements coming out of next week’s FOMC meeting,” JPMorgan economist Michael Feroli wrote in a note April 24. “The Fed’s focus in recent months has been on the roll-out of its alphabet soup of lending programs. We believe that will continue to be the case next week. The traditional focus of monetary policy—the level of risk-free interest rates—will likely be on the back burner for now.”

Federal Reserve Board Chairman Jerome Powell arrives at his news conference after the two-day meeting of the Federal Open Market Committee (FOMC) on interest rate policy in Washington, U.S., June 13, 2018. REUTERS/Yuri Gripas

Many changes are expected in the Fed’s language in its April statement.

“The Committee’s April statement will have to take on board this dramatic deterioration in the economy,” Goldman Sachs economist Jan Hatzius said in an April 23 note. “We expect the statement to note that economic activity has ‘contracted sharply,’ to take stock of the historic surge in layoffs, and to acknowledge that household spending and business investment have “declined sharply.” The appendix at the end shows our full expectations for the April statement.”

Q1 GDP

Investors will get a taste of the carnage inflicted by COVID-19 on the U.S. economy with the release of first-quarter Gross Domestic Product (GDP) on Wednesday morning.

“The plunge in activity in the second half of March, as coronavirus restrictions proliferated, means that the first-quarter GDP data will show output contracting for the first time in six years, and worse is to come in the second quarter,” Capital Economics said in a note to clients April 24.

GDP during the first quarter is expected to have contracted 3.7% quarter-on-quarter, down sharply from 2.1% growth in the fourth quarter. Following retail sales record plunge in March, Personal Consumption likely contracted 2.3% in Q1, down from a 1.8% increase in Q4.

“January and February showed solid growth, but COVID-19 contagion and the ensuing shutdowns led to a collapse in the final weeks of March, which should be enough to push growth for the entire quarter into negative territory,” Credit Suisse noted on April 23. “We expect March was the beginning of a recession in the US, followed by a more severe contraction in the second quarter.”

Economic calendar

Monday: Dallas Fed Manufacturing Activity, April (-76.0 expected, -70.0 in March)

Tuesday: Wholesale Inventories month-on-month, March preliminary (-0.7% in February); Conference Board Consumer Confidence, April (87.8 expected, 120.0 in March); Richmond Fed Manufacturing Index, April (-38 expected, 2 in March)

Wednesday: MBA Mortgage Applications, week ended April 24 (-0.3% prior); GDP annualized quarter-on-quarter, Q1 (-3.7% expected, +2.1% in Q4 2019); Personal consumption, Q1 (-2.3% expected, +1.8% in Q4 2019); GDP Price Index, Q1 (+1.0% expected, +1.3% in Q4 2019); Core PCE quarter-on-quarter, Q1 (+1.8% expected, +1.3% in Q4 2019); Pending home sales month-on-month, March (-11.0% expected, +2.4% in February); 

Thursday: Personal income, March (-1.7% expected, +0.6% in February); Personal Spending, March (-4.2% expected, +0.2% in February); Initial Jobless Claims, week ended April 25 (3.5 million expected, 4.427 million prior); Continuing Claims, week ended April 18 (15.976 prior); Employment Cost Index, Q1 (+0.6% expected, +0.7% in Q4 2019); MNI Chicago PMI, April (36.0 expected, 47.8 in March); Bloomberg Consumer Comfort, week ended April 26 (41.4 prior)

Friday: Markit US Manufacturing PMI, April final (36.9 prior); Construction spending month-on-month, March (-3.6% expected, -1.3% in February); ISM Manufacturing, April (37.0 expected, 49.1 in March); ISM Prices Paid, April (37.4 in March) 

Earnings calendar

Monday: N/A

Tuesday: PepsiCo (PEP), Caterpillar (CAT), 3M (MMM), Pfizer (PFE), DR Horton (DHI), Harley-Davidson (HOG), UPS (UPS), Southwest Airlines (LUV) before market open; Mondelez (MDLZ), Ford (F), Advanced Micro Devices (AMD), Alphabet (GOOGL), Starbucks (SBUX) after market close

Wednesday: Anthem (ANTM), Humana (HUM), General Electric (GE), Hasbro (HAS), Blue Apron (APRN), Yum Brands (YUM), Mastercard (MA), Boeing (BA), Brinker International (EAT), Dine Brands (DIN) before market open; eBay (EBAY), Facebook (FB), Microsoft (MSFT), Qualcomm (QCOM), Tesla (TSLA), United Rentals (URI), Vertex Pharma (VRTX) after market close

Thursday: Cigna (CI), Altria (MO), Twitter (TWTR), Dow Inc (DOW), Comcast (CMCSA), McDonald’s (MCD), Kraft Heinz (KHC), Dunkin Brands (DNKN), Molson Coors (TAP), Tapestry (TPR), American Airlines (AAL), Kellogg (K) before market open; Amazon (AMZN), Apple (AAPL), U.S. Steel (X), Visa (V), MGM Resorts (MGM), Gilead (GILD), Whirlpool (WHR) after market close

Friday: Esteé Lauder (EL), AbbVie (ABBV), ExxonMobil (XOM) before market open

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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