This Week’s Data Releases Can’t Miss!

The S&P 500 and other indices have clawed their way back to within 1% of their recent highs after an ORDERLY 5% pullback.

Now, I love an orderly pullback more than any investor out there.

Producer Price Index (PPI)

This is one of the highest impact data points out there as investors continue to watch the Federal Reserve battle with inflation.

The PPI measures changes to the prices that producers charge for goods and services. I call it “upstream inflation.”ppi forecast

Last month’s PPI showed a decline in producer prices for goods, but the services side of PPI grew considerably.

This is why we continue to see a focus on wage inflation in the jobs reports as wages are often the largest expense for service industries.

The net was for a PPI reading of 2.1%, putting it closer to “normal” readings.

Investors are going to want to see a headline PPI report that comes in less than 0.3% for the month of April. Anything higher than that will put the market on eggshells through Wednesday morning’s CPI release.

Consumer Price Index (CPI)

CPI data for April hits the tape on Wednesday morning. CPI represents the inflation that you and I are paying at the store. That imaginary “basket” of products that represents our daily purchases, including gasoline.

Like PPI, the CPI has been trending lower, but last month’s read gave investors and the Fed a little scare. The monthly “print” for March showed that inflation had increased a little, especially in the services industry.

Restaurants are getting the blame for some of the services increase, we’ll talk about that in just a few minutes on our Monday Morning Deep Dive, as prices that you and I are paying for more “discretionary” items continue to rise while food costs have finally leveled off.

Expectations for April’s CPI sits at 0.4% for the month, the same as last month’s print. The Fed seems to have bought enough time to allow a few more flat readings of CPI, but any “hotter-than-expected” number will cause the markets to sell off quickly.

Monthly Retail Sales  

In my opinion, this is the biggest report of the week.

Sure, the PPI and CPI reports will move markets, but this month’s retail sales reports have some huge implications.

Let’s break things down a little bit.

Last week we got a healthy dose of earnings reports from a number of consumer favorites.  Starbucks (SBUX), McDonald’s (MCD), Uber (UBER), Airbnb (ABNB), and the message from everyone in this space was the same. The consumer is ready to pull back on their activity.

This news came as we head into a fresh week of earnings that focuses on… retail companies.

First, it was reported on CNBC this morning that consumer debt is flashing some warning signs by way of delinquency rates.

According to their report – by way of Wells Fargo (WFC) – credit card delinquencies are now reaching the levels seen immediately before the pandemic. Consumers have spent the last two years charging their retail and discretionary (travel) activity, and it appears that the clock may be running out on the Main Street consumer.

We’ve heard about the resiliency of the consumer for the last year as inflation has whittled away at their spending power, but it has yet to result in a meaningful pullback in their spending habits.

This week’s retail sales report and a bevy of retail stores’ earnings result may turn that tide.

Companies like Home Depot (HD), Walmart (WMT), Alibaba (BABA), JD.com (JD), and Under Armor (UAA) will start to give a peek into how much consumers are opening their wallets to spend more money than perhaps they don’t have.

Bottom line, economists have been worried about the consequences of consumer spending falling off of a cliff, this week will give them a glimpse at whether that is going to happen or not.

So where does all of this leave us? How do you position yourself?

Long-Term Investors First

Stocks have spent the last three weeks rallying from their recent lows, making some investors feel like the market is revved-up for another surge higher. Don’t buy into that just yet.

Sentiment is extremely bullish again as the CBOE Volatility Index (VIX), otherwise known as the “Fear Gauge,” is trading back at its lows around 13.

Stocks are starting to look like a carbon copy of the pattern that they drew in June of 2023. Down 5%, then up 4%, then down 7%, then up 3% then down 8%. I’ll sum up the math: It’s a bad chart.

Any number that doesn’t soothe the inflation “hawks” will trigger immediate selling from Wall Street, especially if that is accompanied by a slowdown in retail sales.

Oh, and if it wasn’t enough, this guy is back!roaring kitty

That’s right, the “One and Only” Roaring Kitty appears to have submerged back into his mother’s basement to start trading again.

If there’s anything that tells you there’s a froth on this market it’s the fact that Roaring Kitty’s return has sparked a 35% spike in Gamestop (GME) shares.

This and the fact that zero-day-to-expiration options (0DTE) have seen 50% growth from retail investors should make even the most optimistic investor or traders stop and think about how the market may be at a top for a minute.

Here’s what you do.

Investors should keep their powder dry here. Resist the urge to buy into the market as it sits near its highs. Sure, you may miss a few percentage points to the upside, but the downside risk for the S&P 500 and other stock indices is 8-10% from where the market sits today. It’s better to buy at that level rather than the highs. That’s how you make money in this market.

Traders should be considering some downside protection in the form of tight stop-loss levels on open positions or protective puts. We’ll talk more about other ways to hedge your portfolio later this week. It’s a skill every investors should develop. We’ll help.

I’ll be back shortly with another story stock for you. Until then I wish you the best trading success.

About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

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