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Producer price index, Levi Strauss earnings – What to know in markets Tuesday

Investors on Tuesday will receive a print on producer prices changes and quarterly results from two familiar consumer-facing companies.

Consensus economists expect producer prices rose 0.1% from August to September, matching the pace from the month prior, according to Bloomberg-compiled estimates. Over last year, the Bureau of Labor Statistics’s producer price index (PPI) is expected to have risen 1.8%, also matching August’s pace.

The “core” PPI, which excludes typically more volatile food and energy prices, is anticipated to have risen 0.2% on a monthly basis, with price increases decelerating slightly from August’s 0.3% pace. Over last year, core PPI is expected to have risen 2.3%.

The September PPI comes two days before the release of the consumer price index (CPI), which tracks changes in prices of consumer goods. While the PPI has not always been a perfect indicator of CPI results, over the course of this year, producer price fluctuations on both the headline and core prints have closely mirrored those in consumer price changes. The core CPI and PPI each rose by 0.3% on a monthly basis August, and headline CPI and PPI each rose by 0.1% for the month.

The report on changes in producer prices also follows the Institute of Supply Management’s report last week that found U.S. manufacturing activity fell to the weakest level in a decade in September. The report presages a potentially weaker-than-expected increase in producer prices, which are apt to be influenced by trade uncertainty and other macroeconomic factors that have also weighed on the manufacturing sector as a whole.

“Producer prices are more sensitive to swings in the business cycle ... particularly in manufacturing and construction,” Wells Fargo Securities analysts wrote in a note Friday. “The trade war has influenced the data, as prices for materials and inputs that compete with imports have been pulled higher. We suspect that the weakness in the manufacturing sector may cause producer prices to come in slightly below expectations.”

Neither headline nor core PPI serves as the Federal Reserve’s preferred measure of underlying inflation in the U.S. economy, with that designation reserved for the core personal consumptions expenditures (PCE) price index. However, the PPI – and especially the core PPI stripped of more variable categories – provides another snapshot of price trends in the domestic economy, against a backdrop of still-muted inflation signals.

Domino’s, Levi Strauss report results

Meanwhile, Domino’s Pizza (DPZ) and retailer Levi Strauss (LEVI) will each report quarterly earnings results Tuesday.

Domino’s is expected to report adjusted earnings of $2.07 per share on revenue of $823.1 million, according to Bloomberg consensus data. Earnings are expected before market open Tuesday.

The pizza chain has struggled to meet the Street’s sales expectations amid rising competitive pressure in the fast food space, and especially as delivery aggregators including Doordash, UberEats (UBER), Postmates and Grubhub (GRUB) flood consumers with a bevy of on-demand options. Domino’s domestic same-store sales, a closely watched metric for restaurants, have decelerated for the past five consecutive quarters.

Shares of Domino’s have fallen more than 2% during the year-to-date, underperforming against a 17.2% gain in the S&P 500.

Denim-maker Levi Strauss is also set to report earnings results Tuesday after market close, in its third quarterly report since returning to the public markets in March.

The San Francisco, California-based retailer is expected to report adjusted earnings of 28 cents on revenue of $1.44 billion for its fiscal third quarter, according to Bloomberg-compiled estimates.

Levi Strauss has progressively been branching out of its legacy business of selling jeans into other clothing categories including tops, a category which grew by 37% during the last full fiscal year.

Jeans trousers are displayed at a Levi Strauss store in New York, U.S., March 19, 2019. REUTERS/Shannon Stapleton

The company has also been pushing to grow its direct-to-consumer channel through both brick-and-mortar and e-commerce expansion. The direct-to-consumer sales segment grew faster than Levi Strauss’s wholesale revenue in the most recent quarter, and could ultimately create a long-term boost to margins. However, Levi Strauss’s investment in building out its direct-to-consumer network has also resulted in higher expenses in the past couple quarters.

Investors will be also be eyeing the company’s international and domestic growth trends. While Levi Strauss derives the greatest portion of revenue from the U.S. (or about 55% of the total last year), European sales have also comprised a sizable portion at nearly one-third of annual revenue and have been growing at a faster clip. Levi Strauss also gets about 16% of revenue from Asia, with sales from this geographic segment growing 6% in the most recent quarter.

Shares of Levi Strauss have risen about 16% above their IPO price through Monday’s close.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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