U.S. equities rose again last week, with all major market indices extending their second-quarter gains. While we have received simply ugly April economic data, including Friday's record-breaking jobs report, the sentiment driving the market higher stems from investor hopes the global economy has bottomed from the coronavirus pandemic, will rebound strongly late this quarter and further in the back half of 2020.
The direction of the market in the coming weeks will hinge on progress in reopening the U.S. and European economies as well as economic data confirming that the expected rebound in China is indeed under way.
This week, in addition to the continuation of the current earnings season and the usual mid-month economic data we will also be closely watching for any rebound in the number of reported coronavirus cases as more states have begun to reopen their economies. Granted these openings are on a staged basis, but the coming days will reveal whether they will progress to the next stage or if they will revert back to prior restrictions.
In terms of economic data coming at us, it will be a decidedly heavy in the back half of the week, which includes the April Retail Sales report and the April Industrial Production report. We expect the retail sales numbers will show further declines for many sub-index segments, including restaurants and department stores, but also some favorable data for digital shopping and grocery. Much like with Friday's jobs report, expected numbers could be overlooked in favor of positive reopening comments as investors look forward, not in the rear-view mirror.
Here's a closer look at the economic data scheduled for this week:
Tuesday, May 12: NFIB Small Business Optimism Index; April CPI.
Wednesday, May 13: Weekly MBA Mortgage Applications Index; April PPI; EIA Oil Inventories.
Thursday, May 14: Weekly Jobless Claims; April Import/Export Prices; EIA Natural Gas Inventories.
Friday, May 15: May Empire State Manufacturing Index; April Retail Sales; April Industrial Production; March Business Inventories; March JOLTS Jobs Openings report; May University of Michigan Consumer Sentiment (Preliminary).
This week brings a significant drop in the number of companies reporting their quarterly results, with just 19 S&P 500 constituents and 600 companies total. While we will enjoy the lull before retailers start to report their April quarterly results, we'd note that current 2020 earnings expectations for the S&P 500 call for EPS of $133.83, down almost 18% from 2019's EPS of $163.02.
Looking at the quarterly spread for that 2020 consensus, EPS is expected drop 26% in the first half of the year and then rebound more than 22%. As much as the market is focused on the reopening of the economy, we could be in for a bumpy ride should reality fail to live up to that expected EPS rebound.
Below is a more detailed look at the earnings reports that we'll be focusing on this week:
Monday, May 11: AutoNation (AN) , Ceva (CEVA) , Cinemark (CNK) , Marriott (MAR) , Under Armour (UAA) , Caesars Entertainment (CZR) , DataDog (DDOG) , Inter Parfums (IPAR) , International Flavors & Fragrances (IFF) , Tilray (TLRY) .
Tuesday, May 12: Honda Motor (HMC) , Ingersoll-Rand (IR) .
Wednesday, May 13: CyberArk (CYBR) , Dillard's (DDS) , Cisco Systems (CSCO) , Jack in the Box (JACK) , SmileDirectClub (SDC) .
Thursday, May 14: Alibaba (BABA) , MakeMyTrip (MMYT) , Applied Materials (AMAT) , Chuy's (CHUY) , Farfetch Ltd. (FTCH) , Hertz Global (HTZ) , NortonLifeLock (NLOK) .
Friday, May 15: V.F. Corp. (VFC) .
This commentary is an excerpt from the Trifecta Stocks Roundup, a weekly feature sent to subscribers of Trifecta Stocks. Click here to learn more about this portfolio, trading ideas and market commentary product.
-- Bob Lang and Chris Versace are co-portfolio managers of Trifecta Stocks.
Alibaba and Applied Materials are holdings in the Trifecta Stocks portfolio.
