Key inflation data, quarterly results from Disney (DIS), and an increasingly contentious debate over the looming national debt limit await investors in the week ahead.
For investors, Wednesday morning's Consumer Price Index (CPI) report for April will be the week's biggest release, with markets looking for signs of a further slowdown in consumer prices.
Wall Street expects headline CPI, which includes the price of food and energy, rose 5% over last year in April, which would match the annual increase seen in March. Prices are set to rise 0.4% on a month-over-month basis.
On a "core" basis, which strips out the food and energy prices, inflation is forecast to rise 5.5% over last year in April, a slowdown from the 5.6% increase seen in March. Monthly core price increases are expected to clock in at 0.4%.
On Tuesday, President Biden is expected to meet with the Speaker of the House Kevin McCarthy and other top congressional leaders as worries intensify that the U.S. will default on its date as early as June 1. Historically, uncertainty surrounding the debt ceiling has weighed on stocks.
Elsewhere in Washington, a hearing entitled "Federal Responses to Recent Bank Failure" is expected for Wednesday. The hearing comes as pressure mounts on several regional banks that have seen their stock price deteriorate and are reportedly looking for buyers.
This rally, however, wasn't enough to push the major indexes higher for the week, with the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) both falling after the Federal Reserve raised rates last week in what Wall Street called a "hawkish pause" that left open the possibility of more rate hikes.
This week's data on consumer and producer prices comes on the heels of Friday's April jobs report which showed the US labor market remaining more resilient than expected in the face of aggressive rate hikes from the Fed.
Downward revisions in Friday's report which showed 149,000 fewer jobs were created in February and March than had been previously reported tempered some optimism about the labor market. In an email on Friday, BlackRock's Rick Rieder called the report "mixed" and said the data was "consistent with a slowing labor market in the most cyclical areas, but not a weak one overall."
On the inflation side, economists at Wells Fargo said in a note last week higher gas prices likely drove the expected monthly growth in headline CPI for April, but said a slowdown in the economy will likely continue to push overall price increases lower.
"As we have been saying for some time now, we expect that slowing economic activity will trigger a material deceleration in inflation, but the path back to 2% will be long and bumpy," the firm wrote in a note on Friday.
Democrats and Republicans sit at a standstill over the debt limit ahead of Biden's meeting with congressional leaders. Markets have recently become focused on the so-called "X-date" when the US could default on its debt.
In a note to clients last week, strategist on Bank of America's global rates and currencies team said this data likely stands at June 1, in-line with projections from Treasury Secretary Janet Yellen. And this date keeps the most acute market reaction still about a week away, in BofA's view.
"Prior debt limit episodes imply that broader markets don't seem to price in debt limit scenarios until two weeks before the projected X date," the firm wrote. "We expect this [debt limit] resolution will likely go down to the wire which means risk of higher rate & broad market volatility in late May or early June."
On the corporate side, Disney will headline the week of earnings reports as the company's restructuring plans and ongoing battle with Florida Governor Ron DeSantis have been in focus ahead of the report.
Broadly, S&P 500 companies are having their best earnings season when compared to Street expectations since the final quarter of 2021, according to FactSet. Through Friday, 85% of companies in the S&P 500 had reported first quarter results with 79% beating earnings per share earnings estimates.
Still, earnings are actually declining. The current quarter's blended earnings growth rate, which combines actual results and remaining estimates, sits at -2.2%. If actual earnings for S&P 500 remain negative, it’ll be the second consecutive quarter of earnings declines for companies in the index.
Speaking Saturday at the company's annual shareholders meeting, Berkshire Hathaway CEO Warren Buffett said many of the conglomerate's portfolio companies are expecting earnings declines this year, adding that the current economic environment is "different" than it was six months ago.
Economic data: Wholesale inventories, month-over-month, March (+0.1% expected, +0.1% previously)
Economic data: NFIB small business optimism, April (89.8 expected, 90.1 previously)
Earnings: Affirm (AFRM), Airbnb (ABNB), Celsius Holdings (CELH), Coty (COTY), Dutch Bros. (BROS), EV Go (EVGO), Fisker (FSR), Occidental Petroleum (OXY), Rivian (RIVN), Twilio (TWLO), Wynn Resorts (WYNN), Under Armour (UAA)
Economic data: Consumer Price Index, month-over-month, April (+0.4% expected, +0.1% previously); CPI, year-over-year, April (+5% expected; +5% previously); Core CPI, month-over-month, April (+0.4% expected; +0.4% previously); Core CPI, year-over-year, April (+5.5% expected; +5.6% previously); MBA weekly mortgage applications (-1.2% previously)
Economic news: Initial jobless claims, week ended May 6 (245,000 expected, 242,000 previously); PPI, month-over-month, April (+0.3% expected, -0.5% previously); PPI, year-over-year, April (+2.5% expected; +2.7% previously); Core PPI, month-over-month, April (+0.3% expected, -0.1% previously); Core PPI, year-over-year, April (+3.3% expected; +3.4% previously)
Economic news: Import prices, month-over-month, April (0.3% expected, -0.6% previously); Export prices, month-over-month, April (+0.3% expected, -0.3% previously); University of Michigan consumer sentiment, May preliminary (63.0 expected, 63.5 previously)
Earnings: Spectrum Brands (SPB)
Josh is a reporter for Yahoo Finance.