A huge week is setting up on the macroeconomic front, with the Federal Reserve and the European Central Bank both scheduled to decide on interest rates and update on monetary policy amid persistent inflation. The consensus view is that the ECB will lift interest rates by a quarter point and the Federal Reserve will stand pat.
The big meetings arrive with market optimism ramping up in the early part of June. The recent rally has seen 10 of the 11 S&P 500 sectors push higher. However, a surprise from the central bank or the nail-biting-inducing CPI and PPI reports could cool off bullish sentiment once again. Seeking Alpha contributor ING Economic and Financial Analysis contended that the Fed will likely hold the benchmark rate steady, only to “leave the door open for further rate hikes if inflation does not slow.”
Earnings spotlight: Monday, June 12 – Oracle (ORCL)
Earnings spotlight: Tuesday, June 13 – Iteris (ITI)
Earnings spotlight: Wednesday, June 14 – Lennar (LEN) and AMMO (POWW)
Earnings spotlight: Thursday, June 15 – Adobe (ADBE), Kroger (KR), and Jabil (JBL).
Volatility watch: Options trading volume is elevated in general on Akebia Therapeutics (AKBA), Icahn Enterprises (IEP), and Nikola (NKLA).
Quant ratings: Stocks with recent quant rating changes include ACV Auctions (ACVA) to Strong Buy from Hold, Dave & Buster’s Entertainment (PLAY) to Strong Buy from Hold, and Dollar General (DG) to Sell from Hold. See the stocks with the very highest rated Seeking Alpha Quant Ratings.
Dividend watch: Companies forecast to boost their quarterly payouts include W. R. Berkley Corporation (WRB) to $0.11 from $0.10, Kroger (KR) to $0.28 from $0.26, and Caterpillar (CAT) to $1.26 from $1.20. Meanwhile, Redwood Trust (RWT) is on watch for a potential cut in its dividend payout rate. See Seeking Alpha’s list of Quick Dividend Stock Picks.
CPI preview: The consumer price index report will be closely watched with the shadow of inflation hanging over the market. Economists forecast a 0.4% increase in core CPI for May to match the level from April. Core CPI is seen being 5.3% in May in a slight moderation from the 5.5% pace in April. Headline CPI, which includes food and energy prices, is seen being up 4.1% in May. Bank of America expects a soft 0.1% month-over-month increase for food prices reflecting an increase in food away from home that should be partially offset by another decline in food at home. The firm anticipates May will mark the third consecutive decrease in food at home prices as costs associated with groceries such as commodity prices, transportation, and storage continue to ease. However, food away from home prices are tipped to continue to increase given high labor costs and still strong demand.
Seeking Alpha analyst Damir Tokic noted the disinflationary process in services and shelter has started, but from a very high level and at a very gradual clip. “The return to the 2% inflation target is unlikely without a deep recession with a significant increase in the unemployment rate,” he warned.
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