Stocks Slide Monday; CPI Expected to Rise 0.5% Once Again

Stocks fell to start the week despite the major indices opening higher Monday morning. Cryptocurrencies however surged today as Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB), Solona (SOL), and Cardano (ADA) all rose more than 5% in the past 24 hours.

Looking ahead, investors are in for another dense week of earnings with the likes of Disney (DIS), PepsiCo (PEP), BP (BP), Coca-Cola (KO), Honda (HMC), and leading healthcare firms set to report. Meanwhile, economic data is moderate this week with the most focus going to the Consumer Price Index (CPI) release scheduled for Thursday morning along with the weekly unemployment claims report.

Inflation Update

Inflation is obviously an ongoing concern for investors as prices have been surging during the recovery from the pandemic. Sadly the consensus estimates for January’s CPI report is another 0.5% increase in overall prices, the same growth experienced in December. Core CPI (less food and energy) is also expected to rise 0.5% last month, down slightly from the 0.6% jump in December.

Overall CPI is rising less than it had in October and November (0.9% and 0.8%) but is expected to be higher than numbers reported in August and September (0.3% and 0.4%). Meanwhile, core CPI has bounced between 0.5% and 0.6% since October despite previously rising only 0.1% and 0.2% in August and September, respectively.

The categories experiencing the largest price hikes have been motor fuel, transportation, vehicles, and apparel. Motor fuel prices in particular have risen 6.1% each of the past two months, leading all categories.

If the CPI report shows prices increasing at the same rate, then the annualized inflation rate would still be at least 6.0% for both core and overall CPI, far above the usual 2% target. The Fed is enacting policies to combat price pressures such as the accelerated tapering of asset purchases and an expected rate hike in March, but more could be needed should prices continue to rise at this rate.

Earnings

The leading soda (or pop/soft drink/tonic for those who don’t call water fountains “bubblers”) producers are set to report earnings this week with PepsiCo expected to surpass its year-ago earnings-per-share (1.52 versus 1.33) and Coca-Cola expected to report slightly below its year-ago quarter (0.41 versus 0.47). Meanwhile, analysts consensus for Disney is for the firm to nearly double its EPS (0.63 versus 0.32) as investors will be paying close attention to the growth of its streaming service, Disney+, and how its parks have performed during the spread of Omicron.

Finally, the biggest theme this week is healthcare with leading vaccine producers such as Pfizer (PFE) and AstraZeneca (AZN) set to report in addition to CVS Health (CVS) and Centene (CNC). Rounding out the big names reporting this week are BP, Chipotle (CMG), Uber (UBER) Sysco (SYY), and many others.

Economic Events this Week

Tuesday

– 8:30 a.m. – Trade Balance

Wednesday

– 10:30 a.m.- EIA Crude Oil Inventories

Thursday

– 8:30 a.m. – Initial & Continuing Claims

– 8:30 a.m.- CPI & Core CPI

Friday

– 10:00 a.m. – University of Michigan Consumer Sentiment – Prelim

Earnings Reports This Week

Tuesday:

Before the bell:

BP, CNC, PFE, SYY, CVE, CNHI, CARR, LEA, FISV, DD

After the bell:

OMC, XPO, CCK AIZ, YUMC, NCR

Wednesday:

Before the bell:

HMC, CVS, BG, PFGC, PAG, LAD, CDW, TEVA, FOXA, CME

After the bell:

PEP, DIS, PAA, MOH, UBER, LUMN, DCP, PPC, ORLY, IFF

Thursday:

Before the bell:

MT, AZN, KO, LIN, PM, PBF, DUK, PCG, TU, LH, GPI, K, DTE

After the bell:

EQH, DVA, ZG, RSG, FE, MHK, EXPE, BHF

Friday:

Before the bell:

MGA, ENB, CLF, GT, D, NWL, FTS, UAA, AXL

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