Retail Earnings and Federal Reserve Set the Trend This Week

Retail sector

Home Depot and Walmart are in the spotlight today with investors anxious to learn how well the retailers are handling the unwelcome combination of supply chain bottlenecks, labor shortages, and climbing inflation. Walmart in particular is considered a good gauge of U.S. consumer health as they sell goods across so many sectors and in every corner of the country.

The retail sector results reported so far are primarily from online vendors, so this week’s bevy of customer facing companies should provide a lot of additional insights into consumer shopping trends that have evolved over the course of the pandemic.

Investors are also very interested to hear holiday season projections as well as what obstacles retailers are most worried about heading into 2022.

Economic data

Today also brings the release of October Retail Sales which are expected to get a boost from an early start to holiday shopping as well as higher gas prices. The Delta Covid wave had mostly receded in October so this month’s report is considered a very important gauge for the U.S. economy. A disappointing number will raise worries that inflation is starting to keep a lid on consumer spending. On the other hand, a strong read will reinforce the bulls’ view that the economy is mostly back on track and consumers are healthy enough to handle the current levels of inflation.

Other economic data today includes Industrial Production, Business Inventories, and the NAHB Housing Market Index.

Federal Reserve

Today also begins a parade of Federal Reserve officials that are making the rounds over the next couple of days. Regional Fed Presidents delivering remarks today include Atlanta’s Raphael Bostic, Philadelphia’s Patrick Harker, and San Francisco’s Mary Daly.

There are another six Fed speakers on tap tomorrow. Investors will be listening very closely for signs that officials are becoming more concerned that inflation is not “transitory” and/or feel the need to move up the timeline for winding down the Fed’s pandemic support.

The Fed most recently indicated it will fully wind down its $120 billion-per-month bond purchases by the middle of next year. At that point, Wall Street expects the Fed will begin lifting interest rates.

This week could also bring a decision from President Biden as to whether Fed Chair Jerome Powell will keep his job, with his term ending in February. There is some speculation that Biden might seek to replace him with current Fed Governor Lael Brainard.

For a look at all of today’s economic events, check out our economic calendar.