Earnings for Costco and 3 other companies and the Fed’s favorite inflation gauge

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Earnings for Costco and 3 other companies and the Fed's favorite inflation gauge

There were plenty of discrepancies this week as higher bond yields on hotter-than-expected manufacturing activity data hit the economically sensitive Dow Jones Industrial Average, while an incredible quarter from Nvidia supported Nasdaq. The S&P 500, which is more tech-heavy than the Dow and less tech-heavy than the Nasdaq, is stuck in the middle. At the S&P 500 sector level, only information and communications technology services posted a higher level for the week. Tech stocks are up more than 3% – thanks again, Nvidia. Energy stocks, on the other hand, led the way down, down nearly 4% for the week. Our only oil and natural gas operation, Coterra Energy, has suffered a corresponding decline. In addition to Nvidia, the star of the show, club names Palo Alto Networks and TJX Companies also reported earnings this week. All three issued solid reports — despite the initial reaction we saw at Palo Alto Networks. Shares of the cybersecurity stock actually ended the week higher. More broadly, 96% of S&P 500 companies have released financial statements for their most recent quarter. According to data compiled by FactSet, 78% of them saw positive earnings surprises and 61% had positive sales surprises. Looking ahead, four more Club names — Salesforce, Best Buy, Foot Locker and Costco — will be on next week’s earnings calendar. That makes Broadcom’s quarterly release next month the final portfolio report of the earnings season. After a week of slowdown and inflation worries, we get the Fed’s favorite price pressure indicator – the personal consumption expenditures (PCE) price index. Economy April personal income and spending data, released on Friday, will attract the most attention because it contains the core PCE price index. With some growing concerns about inflation still driving much of day-to-day activity, we expect inflation rates to continue at lower levels. The consensus estimate per FactSet is for a 2.7% year-over-year increase in headline PCE and a 2.8% year-over-year increase in core PCE – both in line with what we saw in March. Thursday brings the second of three readings of first-quarter 2024 gross domestic product (GDP). Although this is an important indicator of economic activity across the US, but it’s important to note that we’re two months into the second quarter. That means investors will likely pay closer attention to more recent data, such as the aforementioned earnings and core PCE. April pending home sales end on Thursday. Housing is the sector most susceptible to inflation and has the greatest impact, as it is a large and unavoidable expense. Any sign that house price growth is slowing will be welcome news. Salesforce reports earnings Wednesday after the bell. We wanted to know how AI investments are driving demand for the company’s various cloud services, especially Data Cloud. Are they driving new business as well as expanding existing business partnerships? Of course, we will also look for management to maintain a healthy balance between growth and profits while investing and marketing them to customers. Best Buy reports Thursday before the bell. We want to see signs that AI-driven computing and device hardware refresh cycles will drive traffic to stores. Any commentary from management on AI-powered devices driving consumer interest will be a key topic for us. Same-store sales are expected to be negative in the reported quarter, so the post-earnings conference call will be important to understand the electronics innovations being made in future quarters. Foot Locker also reported on Thursday morning. We want to see continued progress in CEO Mary Dillon’s Lace Up turnaround strategy. Last time around it was a terrible report, with management missing its full-year target and pushing its operating margin target by two years. The company needs to show us that the worst is in the rearview mirror if the stock has any hope of getting out of the woods. Costco reports Thursday after the bell. We expect to see more insights on consumer sentiment and inflation. Quarterly sales results won’t be very revealing because Costco, unlike most companies, releases sales monthly. However, commentary on what the company is seeing in terms of foot traffic and buyer preferences will help inform our thoughts on the state of the economy. About two-thirds of GDP is tied to personal consumption. So when a company of its size and scope provides Costco reports, it’s important to listen to what management is seeing on the ground. There is also speculation about whether and when Costco might split its stock and increase membership fees. Historically, we have had to increase membership fees. Calendar Monday, May 27 The stock market is closed for Memorial Day. Tuesday, May 28 After the bell: CAVA Group (CAVA), Box (BOX) Wednesday, May 29 Before the bell: Abercrombie & Fitch (ANF), Chewy (CHWY), Dick’s Sporting Goods (DKS) , Advance Auto Parts (AAP) ) After the bell: Salesforce (CRM), Okta (OKTA), HP Inc (HPQ), American Eagle Outfitters (AEO), Capri Holdings (CPRI), Red Robin Gourmet Burgers (RRGB) Thursday , May 30 Before the bell: Best Buy (BBY), Foot Locker (FL), Canopy Growth (CGC), Dollar General (DG), Kohl’s (KSS), Burlington Stores (BURL) After the bell: Costco ( COST), Dell Technologies (DELL), Zscaler (ZS), Marvell Technology (MRVL), MongoDB (MDB), SentinelOne (S), ULTA Beauty (ULTA), Nordstrom (JWN), Gap (GPS) 8:30 a.m. ET : Initial unemployment claims 8:30 a.m. ET: Total Domestic Price Index 10 a.m. ET: Pending home sales Friday, May 31, 8:30 a.m. ET: Personal Income & Expenditure Index and PCE Price Index (See here for a complete list of stocks in Jim Cramer’s Charitable Trusts.) Be a subscriber to CNBC Investing Club with Jim Cramer, you will receive transaction notifications before Jim makes the transaction. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charity portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before making a trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , ALONG WITH OUR DISCLAIMER . NO OBLIGATION OR DUTY OF AUTHORITY EXISTS, OR IS CREATED BY YOUR RECEIVED OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.

A trader works during closing hours at the New York Stock Exchange (NYSE) on March 17, 2020 on Wall Street in New York City.

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There were plenty of discrepancies this week as higher bond yields as hotter-than-expected manufacturing data weighed on the economically sensitive index. Dow Jones Industrial Averagewhile a startling quarter from Nvidia support Nasdaq. The S&P 500which is more tech-heavy than Dow and less tech-heavy than Nasdaq, is stuck in the middle.