June 25, 2022

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What do you know in the markets this week

What do you know in the markets this week

after US stocks rebounded last week In the wake of the Federal Reserve’s long-awaited monetary policy decision, this week investors will be looking forward to a somewhat calmer slate of corporate earnings and economic data releases.

One closely watched earnings report will come after the market close on Monday from Nike (NKE). As one of the few companies to report earnings covering performance for the year, Nike’s third-quarter financial results will provide an update on how the multinational has performed in the early months of 2022 against the backdrop of the ongoing pandemic and war in Ukraine.

Nike shares are down more than 20% year-to-date to Friday’s close, sending the S&P 500 down more than 6% over the same period. Investors have heightened caution that stocks are highly exposed to international headwinds and ongoing supply chain issues. Nike joined a number of other US-based companies earlier this month in announcing that they would scale back their business in Russia, amid the country’s war in Ukraine, saying it would He no longer takes orders online and will close stores in Russia.

“We expect the focus in 3QF22 to be on: 1) the supply chain, including stock available for transportation; 2) China, as the political backlash and COVID-19 continue; 3) wholesale distribution, and plans to streamline it furthermore; and 3 ) Demand That Remains High in Narcotics Anonymous [North America] and EMEA [Europe, the Middle East, and Africa]Telsey Advisory Group analyst Christina Fernandez wrote in a note on Friday.

“Although Nike’s near term is volatile until inventory flow becomes normal, Nike should continue to benefit from improved communications with consumers through its membership program, higher full price selling, increased data usage across the enterprise, and more strategic wholesale trading. Integration through the One Nike Marketplace initiative.

Nike basketball shoes worn by Los Angeles Clippers guard Eric Bledsoe (12) during the second half of an NBA basketball game on Wednesday, Jan. 19, 2022, in Denver. The Nuggets won 130-128 in overtime. (AP Photo/David Zalubowski)

Back in December during Nike’s last earnings call and call day, the company said it expects third-quarter sales to grow at a low single-digit rate, and full-year sales to grow at a mid-single-digit rate. Fernandez said she expects Nike to repeat that guidance on Monday.

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Overall, Nike is expected to generate $10.6 billion in sales for the quarter ending February, according to Bloomberg consensus data. This represents a growth of 3% compared to the same period last year. Adjusted earnings per share are expected to be 72 cents per share, compared to 90 cents per share last year.

Sales in Greater China, one of Nike’s key markets, are expected to rise above $2 billion after falling below that limit in the second quarter of the fiscal year, as COVID-19 cases in China affected consumer mobility and spending. However, the country is struggling with a new outbreak of coronavirus, which may happen It presents some downside risks to both sales and supply to Nike’s recent and future results.

In December, Matthew Friend, Nike’s chief financial officer, said the company was growing “increasingly confident that supply will return to normal heading into fiscal year 23”.

However, for many other large companies, supply chain concerns remained at the forefront of their concerns. According to a report from FactSet, 358 S&P 500 companies cited “supply chain” during their fourth-quarter earnings calls, with that number well above the five-year average of 187.

“This is the second-highest number of S&P 500 companies citing ‘supply chain’ in earnings calls going back to at least 2010 (using current index components going back in time),” Facttest’s John Batters said in a note. “The current record is 362, which occurred in the previous quarter (Q3 2021).”

Consumer confidence

On the economic data front, this week’s Consumer Confidence report due out from the University of Michigan on Friday will provide an updated snapshot of the state of the consumer. In the midst of high inflation The geopolitical crisis in Ukraine.

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The institution’s revised consumer survey index is expected to come in unchanged from the preliminary index for March at 59.7 – the lowest level since 2011. This result should reinforce the deterioration of consumers’ assessments of current and future conditions amid rising prices and turmoil abroad. It might also indicate whether inflation expectations have been readjusted to historically high rates: Earlier this month, consumers said they expected inflation to rise 5.1% next year, the highest projected since 1981, according to the University of Michigan . .

More importantly, the Consumer Confidence Index will serve as an indication of whether the drop in optimism may eventually lead to a measurable decrease in consumer spending, thus putting the brakes on US economic activity. US consumer spending makes up more than two-thirds of total economic activity, and early indications are already that higher prices are curbing at least some of the demand. Commerce Department data last week showed that retail sales rose only 0.3% in February, missing Wall Street expectations. Excluding gas and auto sales – mainly boosted by higher energy prices – retail sales actually declined during the month.

“Consumer sentiment, the Treasury yield curve, economists’ growth forecasts, and investor sentiment are all showing signs of fatigue and underscore the potential for a looming recession,” Lindsey Bell, chief financial and markets analyst at Ally, wrote in an email Friday. . “According to the University of Michigan, consumer sentiment has been on the decline since August and in February it posted its lowest reading since 2011 at 62.8. Readings at 65 or lower often coincide with recessions.”

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“We’re definitely going to need to watch the consumer because their confidence has gone down,” Bell added. “But I think that given their still strong financial position, and the strength of the labor market, this could be a temporary indicator of confidence. As we can put some of these near-term concerns behind us, hopefully the second half of 2022 will feature a more stable global economy. and reduce inflationary pressures.

Economic calendar

  • Monday: Chicago Fed National Activity Index, February (0.69 in January)

  • Tuesday: Richmond Fed Manufacturing Index, March (2 expected, 1 in February)

  • Wednesday: MBA Mortgage Applications, week ending March 18 (-1.2% over the previous week); New Home Sales, February (expect 815,000, January 801,000)

  • Thursday: Initial Jobless Claims, week ending March 19 (211,000 expected, 214,000 over the previous week); Continuing Claims, week ending March 12 (1.481 million expected, 1.419 million over the previous week); Durable Goods Orders, Primer for February (Expect -0.5%, 1.6% in January); Non-defense capital goods orders excluding aircraft, preliminary February (0.5% expected, 1.0% in January) Non-defense capital goods orders excluding aircraft, preliminary February (0.5% expected, 1.9% in January); US S&P Global Composite PMI, preliminary to March (expect 54.2, 55.9 in February); Kansas City Fed Manufacturing Activity Index, March (Feb 29)

  • Friday: Pending Home Sales, February (1.0% forecast, -5.7% in January); University of Michigan Morale, March Final (59.7 expected, 59.7 in February)

earnings calendar

Monday

After market close: Nike (NKE)

Tuesday

Before market open: Carnival Corp. (CCL)

After market close: Adobe (ADBE)

Wednesday

Before market opening: General Mills Company (GIS)

Thursday

After the market closes: Darden restaurants (DRI)

Friday

There are no notable reports scheduled for release

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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