The Week Ahead on Wall Street

Economic Data

The federal budget for June is released this afternoon. It will highlight the US Federal Government’s expenses and revenue. This budget represents the government’s financial priorities, which shape economic debates and fiscal ideology. In May this year, the federal budget was almost twice as high as it was during May of last year, due to increased government spending and decreased revenue as a result of the pandemic.

Tomorrow, a handful of June inflation metrics are published. Core CPI and the Consumer Price Index will shed light on price changes that impact consumers. At an aggregated level, the figures highlight the purchasing power of the US dollar and provide insight about whether or not the government’s economic policy is effective. The NFIB Small Business Index is also released. Small businesses account for roughly half of the nation’s private workforce, so the measure is an important barometer for the health of the economy.

The July Empire State Index is due on Wednesday. Investors use the monthly manufacturing survey of businesses in New York to get a sense of economic conditions in the state. June’s Import Price Index and industrial production figures are also released along with the Federal Reserve’s Beige Book in the afternoon.

Thursday might be the most important day to mark on the calendar this week. Investors will get a look at weekly initial jobless claims, retail sales, and the NAHB Home Builders’ Index. Combined, the three reports will shed light on the labor market, the retail industry, and the real estate sector. The Philly Fed Index and Business Inventories are also published on Thursday.

On Friday, the week wraps up with June housing starts and building permits, which will highlight underlying trends in the real estate space. Housing starts, which pinpoint the number of new residential construction projects that began last month is a key economic indicator. A flash reading of the Consumer Sentiment Index for July is also published, which will give investors a sneak peek at how the general public is feeling about the overall state of the US economy.

Earnings to Keep an Eye On

PepsiCo Inc (PEP) is scheduled to report its latest results before the market opens today. The snack and beverage giant may get a boost from stay-at-home snacking that has remained steady during the pandemic. Sales of salty snacks have jumped over the past few months, which may benefit PepsiCo’s Frito-Lay brand. The company has also been making investments in other areas such as ecommerce and data analytics, which has some analysts thinking the snack food empire is currently undervalued and primed for long-term growth.

Tomorrow is a big day for bank earnings. JPMorgan Chase & Co (JPM), Citigroup Inc (C), and Wells Fargo & Co (WFC) are all scheduled to report before the bell. Although low rates chip away at banks’ net interest margins, investment-banking and trading activity has remained active during the pandemic, which could generate substantial fee-income. That said, investors sometimes shy away from banks during recessions so all eyes will be on these three as they report their latest results.

On Wednesday, UnitedHealth Group Inc (UNH) is scheduled to report. The company has been reinvesting capital into its business at a steady rate, and investors who have held the stock over the past five years have been rewarded with a 150% return. Additionally, while the stock is more or less flat on the year, it returned over 18% in the second quarter. Investors will be keeping an eye out to see if that run will continue through the second half of the year.

Netflix Inc (NFLX) reports after markets close on Thursday. The streaming giant has been the poster child for the “stay-at-home” stock trade as more people huddle at home to entertain themselves. Last quarter Netflix added 15.77 million paid subscribers globally, which was more than double its target for subscriber growth. As lockdowns partially eased in May and June, some investors thought the stock was overbought, but now increasing coronavirus cases across the US could mean people will continue to stay at home. Johnson & Johnson (JNJ), Taiwan Semiconductor Manufacturing Co Ltd (TSM), and Abbott Laboratories (ABT) are also scheduled to report.

The world’s largest asset manager, BlackRock Inc (BLK) reports on Friday. Over the past two decades, the company has transformed itself into a multi-product giant with the acquisitions of Merrill Lynch Investment Management and iShares. The company recently received a “Hold” rating from Deutsche Bank (DB). More broadly, consensus estimates among 11 analysts are pegging BlackRock as a “Strong Buy” with an average price target of $570.50. It will be interesting to observe how the company performed over the recent volatile stretch and what’s in store for the future.

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