The U.S. consumer will be in focus in the holiday-shortened week ahead with retail sales and bank earnings on deck, as stocks digest this week’s slightly hotter inflation print and teeter near record highs. Stocks are headed for their 10th winning week in 11 even after the December consumer inflation report came in stronger than expected, as tech shares surged. The tech-heavy Nasdaq Composite is on pace for its best week since November, last up by more than 3%. The S & P 500 also climbed back to within striking distance of its record closing high that was reached in January 2022. The broad market index is up 1.7% for the week, and the Dow Jones Industrial Average was on pace for a slight one-week gain. Next week will be lighter in terms of economic data, but stocks could be volatile as Wall Street gets further insight into the state of the American consumer. One thing that can kind of delay recession, if not cancel delayed recession, is the strength of consumer spending. … And I think retail sales will give us a glimpse of the willingness and ability of Americans to spend. chief U.S. equity strategist at BCA Research Irene Tunkel Retail sales, bank earnings Retail sales data for December are slated for release Wednesday. Economists polled by FactSet expect an increase of 0.2% for the month, representing a slight cooling from the 0.3% increase in November. Market bears calling for a recession argue that spending by U.S. consumers — who have thus far remained resilient in the face of rising inflation — will unravel soon after their savings deplete. These investors say that earnings growth is unlikely to accelerate this year if the economy is slowing. Irene Tunkel, chief U.S. equity strategist at BCA Research, expects retail sales data to show how consumers — and by extension, the economy — is continuing to hold up. “One thing that can kind of delay recession, if not cancel delayed recession, is the strength of consumer spending,” Tunkel said. “And I think retail sales will give us a glimpse of the willingness and ability of Americans to spend.” However, Tunkel sees the economy falling into a recession and the S & P 500 tumbling below 4,000 this year. “In a sense, it will not change the trajectory that I have sort of outlined for 2024, but perhaps it will give us a little bit more insight into the timing: How long is the runway?” Tunkel added. A still healthy consumer could suggest investors can take a more risk-on stance toward equities, while the opposite would be true if any weakness is detected, she said. December housing starts and building permits data will also be released Thursday, giving insight into whether activity in the sector has increased as mortgage rates declined. Housing starts, or the construction of new homes in the U.S., are expected to have dropped by 7.1%, according to a FactSet consensus estimate. That would be down from a rise of 14.8% the prior month. Building permits, the number of new housing units authorized in the U.S. is set to have risen to 1.476 million units, according to economists polled by FactSet. That’s up from 1.467 million units in the prior month. “We need to see if this dip in rates and dip in mortgage rates is going to be enough to kind of spark the more cyclical rate sensitive sectors of the economy,” said Ross Mayfield, investment strategy analyst at Baird. More bank earnings are also on deck, which could also give insight into how consumers are spending, and whether there are elevated delinquencies. Big banks Goldman Sachs and Morgan Stanley will report Monday, as well as a slew of regional banks such as Citizens Financial and M & T Bank . “I think that that information will be highly complementary to what we hear in terms of the retail sales,” BCA’s Tunkel said. Looming concerns Other concerns loom on the horizon next week for markets including a possible government shutdown if the House and Senate do not reach a funding decision by the Jan. 19 deadline. This week, congressional leaders reached a $1.59 trillion deal on top-line spending . A failure to reach a deal would spark a major risk-off move for markets, but a shutdown is unlikely, according to Troy Gayeski, chief market strategist at FS Investments. “I think as usual, markets are accurate in ignoring it as a meaningful driver of market performance,” Gayeski said. Instead, Gayeski will continue to watch the activity in Treasury yields after this week’s inflation data. The consumer price index rose more than expected last month, but the producer price index unexpectedly fell. For now, stocks appear to be shrugging off those concerns of higher rates, continuing to rise higher on expectations that the Fed will eventually cut rates later this year. But many investors question how long that can continue. “I think that the benign outcome for the market is almost priced in so I think that at the moment risk-return for U.S. equities is not positive,” BCA’s Tunkel said. “This can change at some point during the year but I think that if we talk about now, this is it.” Week ahead calendar All times ET. Monday Jan. 15, 2024 Market Luther King Jr. Day Tuesday Jan. 16, 2024 8:30 a.m. Empire State Manufacturing Survey (January) Earnings: Morgan Stanley , Goldman Sachs Wednesday Jan. 17, 2024 8:30 a.m. Export Price Index (December) 8:30 a.m. Import Price Index (December) 8:30 a.m. Retail Sales (December) 10 a.m. Business Inventories (November) 10 a.m. NAHB Housing Market Index (January) 2 p.m. FED Beige Book 3 p.m. New York Federal Reserve Bank President and CEO John Williams delivers an opening remarks in an event “An economy that works for all: Measurement Matters”, New York Fed Earnings: Discover Financial Services , U.S. Bancorp , Citizens Financial Group , Charles Schwab Thursday Jan. 18, 2024 8 a.m. Building Permits preliminary (December) 8:30 a.m. Housing Starts (December) 8:30 a.m. Initial Claims (week ended Jan. 13) 8:30 a.m. Philadelphia Fed Index (January) Earnings: J.B. Hunt Transport Services , PPG Industries , Fastenal , KeyCorp , M & T Bank , Northern Trust , Truist Financial Friday Jan. 19, 2024 10 a.m. Existing Home Sales (December) 10 a.m. Michigan Sentiment NSA preliminary (January) Earnings: State Street , SLB , Fifth Third Bancorp , Regions Financial , Huntington Bancshares , Comerica — CNBC’s Alex Harring contributed to this report.
