What do you know this week?

The Fed’s preferred measure of inflation will be the main hurdle for stock market bulls looking to extend the recent rally next week.

Thursday morning will see the release of the personal consumption expenditures (PCE) index for October, and economists expect “core” inflation – the Fed’s preferred measure – to rise by 3.5% annually last month.

The economic calendar will also include updates on manufacturing activity, consumer confidence and home prices.

On the institutional side, quarterly reports are expected from Salesforce (CRM), Snowflake (SNOW), Okta (OKTA), Dollar Tree (DLTR), Foot Locker (FL), Kroger (KR), and Ulta Beauty (ULTA).

Shares exited a holiday-shortened trading week on a high note, with the leadership drama in OpenAI and Nevada’s ( NVDA ) latest quarterly report capturing the bulk of investors’ attention. The three major averages closed the three and a half days of trading up about 1%.

Inflation in focus

Overall, next week will provide a test of the current market, as stocks ended Friday heading for their best monthly gains in more than a year.

Thursday’s inflation reading will provide a final chance for economic data to derail the current equity-boosting narrative that the U.S. economy may be headed toward a “soft landing,” where inflation falls to the central bank’s 2% target without a sharp economic downturn.

Recent economic data has fallen in line with this trajectory, sending battered areas of the stock market like penny stocks and meme stocks into rally mode.

This data beat expectations for the Fed as well, with markets now anticipating only a 12% chance that the Fed will raise interest rates again. According to CME Group data.

Economists expect annual inflation under the Fed’s preferred measure of inflation — “core” personal consumption expenditures — to reach 3.5% in October. Over the previous month, economists expect “core” personal consumption expenditures to rise by 0.2%.

In a note to clients this month, Michael Feroli, chief U.S. economist at JPMorgan, noted that this 0.2% monthly rise “would leave the 3- and 6-month annualized gains in this measure at 2.5% and 2.6%,” which is much closer. To the 2% rate set by the Federal Reserve. The target is set to emerge compared to October’s 12-month gains.

The story continues

“Those increases are close enough to the Fed’s 2% inflation target that most FOMC members will likely be content to stick with policy and let quiet labor market activity finish the job of bringing inflation back on target,” Feroli added. “We still believe the Fed’s next move is toward easier policy, but not until the third quarter of 2024.”

Earlier this month, stocks rose and bonds rose — pushing yields lower — after the October CPI showed inflation continued to slow last month.

Software and soft sales

On the corporate side, some of the quarterly results will provide investors with another look at consumer health, a look at the state of software demand, and whether AI is moving the needle for these companies’ clients.

Foot Locker, Ulta Beauty and Dollar Tree will be closely watched for any holiday outlook and comments on whether higher interest rates and a weak labor market are prompting consumers to trade lower.

Salesforce’s guidance for the current quarter will be scrutinized by the Street, with analysts at Goldman Sachs noting that this period picks up when customers are deciding renewals and additions to next year’s service.

Wall Street analysts expect the company’s results to reveal how companies that pay for cloud services or tools like Slack respond to price increases. Updates on demand for Salesforce’s AI products will also be in focus.

“Customers continue to optimize spend, reduce shelves, and prioritize programs that deliver near-term value creation, resulting in a challenging demand environment.” [Salesforce]“,” Citi analyst Tyler Radke wrote in a note to clients on Wednesday.

Next week’s results for Workday, Intuit, Snowflake and Okta should cover similar themes.

Weekly calendar

Monday

Economic data: Dallas Fed manufacturing activity (-16 expected, -19.2 previously); New Home Sales, October (annual expected 723,000, previously 759,000); New Home Sales, MoM, October (-4.8% expected, +12.3% previously)

Profits: Zscaler(ZS)

Tuesday

Economic data: Consumer Confidence Conference, November (101 expected, 102.6 previously); S&P CoreLogic Case-Shiller, 20-City Composite Home Price Index, Monthly, September (+0.9% expected, +1.01% previous); S&P CoreLogic Case-Shiller Composite Index of 20-City Home Prices, YoY, September (+4.2% expected, +2.16% previous)

Profits: CrowdStrike (CRWD), Hewlett Packard Enterprise (HPE), Intuit (INTU), Workday (WDAY)

Wednesday

Economic data: MBA Mortgage Applications, week ending November 24 (previously +3.0%); Wholesale Inventories MoM, October (+0.2% previously); Q3 GDP, 2nd Estimate (+5.0% annual rate expected, +4.9% previously); Q3 Personal Consumption, 2nd Estimate (+2.4% y/y expected; +2.4% previously)

Profits: Dollar Tree (DLTR), Foot Locker (FL), Five Below (FIVE), Hormel Foods (HRL), La-Z-Boy (LZB), Okta (OKTA), Petco (WOOF), Snowflake (SNOW), Salesforce (CRM), Victoria’s Secret (VSCO)

Thursday

Economic data: Initial jobless claims, week ending November 25 (218,000 expected, 209,000 previously); Unemployment claims continue, week ending November 18 (1.87 million expected, 1.84 million previously); Personal Income, Monthly, October (+0.2% expected, +0.3% previously); Personal Spending, MoM, October (+0.2% expected, +0.7% previously); PCE Inflation, MoM, October (+0.1% expected, +0.4% previously); PCE Inflation, YoY, October (+3.1% expected, +3.4% previously); “Core” PCE, MoM, October (+0.2% expected, +0.3% previously); “Core” PCE, YoY, October (+3.5% expected; +3.7% previously)

Profits: Academy Sports and Outdoors (ASO), Big Lots (BIG), Build-A-Bear (BBW), Cracker Barrel (CBRL), Dell (DELL), Kroger (KR), Marvell (MRVL), TD Bank (TD) , ULTA Beauty

Friday

Economic news: US S&P Global Manufacturing PMI, November final (previously 49.4); ISM Manufacturing Index, November (47.7 expected, 46.7 previous)

Profits: Bank of Montreal (BMO)

Josh Schaeffer is a reporter for Yahoo Finance.

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