With the anticipated Federal Reserve rate cut now in effect, Wall Street has experienced a remarkable week characterized by numerous record closures. For the first time in four years, even the small-cap Russell 2000 index joined the ranks of those hitting all-time highs.
Looking ahead, the market’s trajectory remains uncertain as we approach the third-quarter earnings season in just a few weeks. Following that, the Fed’s October policy meeting is on the horizon. While it might seem premature to address these upcoming events, the market consistently functions as a forward-looking entity that is never dormant. In the near term, the calendar appears relatively light, particularly in the week ahead.
The primary economic highlight will be the Fed’s preferred inflation metric—the Personal Consumption Expenditures (PCE) index. While ongoing inflation risks are still a concern, the central bank has indicated its primary focus is on the robustness of the U.S. labor market. Consequently, attention will also be on the weekly initial jobless claims, alongside various housing market indicators.
On the earnings front, Costco is the only significant portfolio name expected to unveil its results. Aside from Costco, memory chip manufacturer Micron’s insights into AI demand will also be of interest, but otherwise, it’s a quieter week for major earnings announcements.
What to Watch This Week
1. Inflation Reports
Before trading commences on Friday, the August personal income and spending report will be released, which includes the crucial PCE index. Unlike the Consumer Price Index (CPI), the Fed prefers the PCE for gauging inflation as part of its aim to maintain a 2% target. Although inflation has consistently surpassed this benchmark, the Fed’s recent decision to cut the overnight lending rate by a quarter percentage point underscores its concerns about potential negative impacts on employment. Fed Chair Jerome Powell’s comments from his Jackson Hole address reiterate this focus on labor market health.
Still, the market will react sensitively to the forthcoming PCE print. If it emerges hotter than anticipated, there could be a sell-off, reflecting concerns that the Fed may have misjudged its pivot in focus from tariff-induced inflation. Analysts expect a 3% year-over-year increase in the core PCE index, which excludes volatile food and energy prices.
2. Economic Data
Additional economic updates include reports on new and existing home sales, expected on Wednesday and Thursday, respectively, along with the final read on second-quarter U.S. Gross Domestic Product (GDP), slated for release Thursday morning. While all three are significant economic indicators, the housing data is particularly critical, as it pertains directly to consumer shelter costs—the largest inflation metric. Observers will be keen to see how the bond market reacts to this housing data following the Fed’s rate cut.
While recent trends saw mortgage rates decline, they have recently begun to rise again, bringing additional scrutiny to the housing numbers. The bond market’s response to housing indicators will carry more weight than the GDP figures, especially with regards to future housing market conditions.
3. Costco Earnings
As the last holdout in the summer earnings season, Costco is set to release its quarterly results after the closing bell on Thursday. Rather than revenue figures, the market will scrutinize metrics like margin performance and management’s insights into consumer spending trends. Given that Costco’s membership model allows for low-profit margins through bulk sales, its competitive advantage has intensified as consumers seek value amidst high inflation.
Analysts currently project Costco will announce earnings of $5.81 per share on revenues of $86.09 billion.
Upcoming Week Overview
Monday, Sept. 22: No significant events
Tuesday, Sept. 23: AutoZone (AZO) before the bell; Micron (MU), AAR Corp. (AIR), MillerKnoll (MLKN), and Worthington Industries (WOR) after the bell
Wednesday, Sept. 24: New home sales at 10 a.m. ET; Cintas (CTAS) and THOR Industries (THO) before the bell; KB Home (KBH), HB Fuller (FUL), Stitch Fix (SFIX), Steelcase (SCS), and Worthington Steel (WS) after the bell
Thursday, Sept. 25: Personal Consumption Expenditures (PCE) price index and initial jobless claims at 8:30 a.m. ET; existing home sales at 10 a.m. ET; Accenture (ACN), CarMax (KMX), Jabil (JBL), TD SYNNEX (SNX), and BlackBerry (BB) before the bell; Costco (COST) and Concentrix (CNCX) after the bell
Friday, Sept. 26: University of Michigan’s consumer sentiment survey (final reading) at 10 a.m. ET
As the market navigates through these pivotal indicators and earnings reports, investors will be poised for any signals that may impact future trends.
