Today kicks off two big days of economic reports. We still have earnings trickling in, but the real driver for the next week should be the April Consumer Price Index report here on Wednesday morning, the April Producer Price Index report tomorrow morning and the continuing discussions around the debt ceiling.
Expectations are for a Core CPI and Core PPI of 0.3% and the same for the PPI. CPI is expected to be a bit higher at 0.4%. Traders will watch for a number to come in fiery hot or icy cold here. A read-out below 0.3%, especially a negative number, initially should excite the bulls and result in an uptick in expectations of a rate cut sooner rather than later.
I still don't believe we'll see anything in the next two Fed decision cycles, but that could be subject to change based on the April and May CPI and PPI numbers.
Overall, outside of technology, most indexes are stuck in an indecisive or bearish range, so while I expect better-than-expected inflation results to get bought, I'm not sure we'll see them stick outside of the recent winners.
The trouble comes in if inflation numbers are hotter than anticipated. While we have two days of numbers coming at us, I expect anything well outside of today's expectations will give us the bulk of the reaction for both days.
Speaking of trouble, Airbnb (ABNB) may be in trouble after it forecast fewer bookings and lower average daily rates for the second quarter on Tuesday. Airbnb shares traded down to $112 last night and were indicated below $110 in premarket trading today. An open below $116 puts the stock below both its 10-day and 21-day exponential moving averages (EMAs). In addition, it puts the stock below its recent floor with only $108 as a possible point of support. Below that and it's anyone's guess where buyers step in.
Price sensitivity is a factor right how for Airbnb, according to CEO Brian Chesky, who said, "In the United States, the lowest price listings have the highest occupancy." While revenue is anticipated to be in line with expectations next quarter, it calls into question the impact of competition on AirBnb's growth, which a company with a price-to-earnings ratio of 45 can hardly afford. Also, the shares rallied aggressively into last night's earnings announcement.
I don't have an interest in shorting here, and the $1.6 billion in free cash flow intrigues me, so if ABNB sells off hard and goes sub-$100 I'll take a look at a short-term bounce trade in the $95 to $97 area. Chances are bulls will step in before this level, but if we get there I'll have an alert set and give it a look. Until then, I'm focused on the inflation data this morning.