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August's dog days will be anything but for Wall Street with big earnings, economic data ahead

  • Retailers, media companies and some recent IPOs will release results in the week ahead, as earnings season begins to wind down.
  • Markets will be watching all of the week's data, but the most important report will be Friday's consumer price index.
  • Fed speakers will be important, and New York Fed President William Dudley could be most important when he discusses wage inequality Thursday.

Retail and media company earnings, inflation data and Fed speakers will keep investors busy as markets head into the dog days of August.

What has been a solid earnings season will begin to wind down in the week ahead, but first Disney and News Corp report, as do retailers Macy's, Nordstrom, Kohl's and JCPenney. Recent IPOs Snap and Blue Apron, both disappointing market performers, report their results on Thursday.

Producer and consumer inflation is reported at the end of the week, but it is the consumer price index Friday that markets will be most focused on after the July jobs report showed another month of soft wage growth and other inflation measures continued to look weak.

Core CPI is expected to rise 0.2 percent after moving up just 0.1 percent for June. Markets remain skeptical the Fed will raise rates in December but it is widely expected to start the process of reducing its balance sheet when it meets in August. The lack of inflation continues to make markets skeptical the Fed will meet its forecast for another interest rate hike by year end.

Fed speakers are out in force, with the most important likely to be New York Fed President William Dudley. He will be speaking Thursday morning about wage inequality in his region. That will be important because Dudley could discuss the lack of wage acceleration and the Fed's view on whether low inflation appears to be transitory or a longer term problem.

Focus will also remain on Washington, even as Congress slows down for August recess. In September, Congress is expected to tackle the budget and debt ceiling, which some strategist worry will not go smoothly.

"Now we're going into the earnings vacuum. What will take center stage will be discussion around the debt ceiling but I still think we have some time, and the obsession around the Republican agenda, tax reform, and if we have any movement on that," said Michael Arone, Chief Investment Strategist at State Street Global Advisors. "D.C., monetary policy will be the main drivers in the absence of earnings."

Earnings season has helped send stocks to new highs this summer. So far, about 85 percent of the S&P 500 companies have reported, and earnings growth is so far about 12 percent, according to Thomson Reuters.

Arone said he is keeping an eye on tech stocks and Nasdaq, which has lagged the other indices this week.

"I think it's a natural source for profit-taking, given the fact that stocks have done so well. If there are folks that are kind of concerned or beginning to reduce equity exposure, technology is a natural area to take some profits given the fact it's done so well. It is something to keep an eye on here," he said. "In a world, where you have very low interest rates, very low inflation and good but not great growth you need to invest in that part of the market that has very strong topline growth and tech tends to be that sector."

Arone said investors are confusing FANG—the acronym for Facebook, Amazon, Netflix and Google parent Alphabet with the broader tech sector, but they should look beyond those popular names.

In the past week, the Dow rose 1.2 percent, closing at its eighth straight record high Friday at 22,092. The S&P 500 was barely higher, up just 0.2 percent at 2476, eight points below its all time high. The Nasdaq was lower for the week, down 0.4 percent at 6,351. The VIX, CBOE's volatility index, meanwhile, fell more than 3 percent.

"I expect we'll get bouts of volatility for the balance of the year," said Arone, noting he's been concerned about the lack of volatility and investor complacency. But he said it would make sense if volatility picks up in the typically choppy months of August and September.

"I wouldn't be surprised if volatility picks up particularly as earnings season winds down," he said.

What to Watch

Monday

Earnings: Tyson Foods, Marriott, CBS, Twilio, Booz Allen Hamilton, La Quinta, Chicago Bridge, Manitowoc, Tenet Healthcare, Avis Budget

10:45 St. Louis Fed Pres. James Bullard

1:25 p.m. Minneapolis Fed President Neel Kashkari

2 p.m. Senior loan officer survey

3 p.m. Consumer credit

Tuesday

Earnings: Disney, SeaWorld, Dean Foods, Virtu Financial, Monster Beverage, Hertz Global, Malinckrodt, Dean Foods, International Flavors and Fragrances, Tesoro, Blue Buffalo, Hostess Brands, Lions Gate, CVS Health, Michael Kors, Norwegian Cruise Line, Ralph Lauren, Zillow, Sealed Air, Icahn Enerprises, Valeant Pharma, Wayfair, Hertz Global

6:00 a.m. NFIB survey

10:00 a.m. JOLTs

Wednesday

Earnings: Mylan Labs, Wendy's, Liberty Broadband, Agrium, Iamgold, Weibo, 21st Century Fox, Jack in the Box, EchoStar, Royal Ahold, Scripps Networks, Wolverine Worldwide, Avnet, Great Plains Energy, Flowers Foods, Ambac Financial

8:30 a.m. Productivity and costs

10:00 a.m. Wholesale trade

Thursday

Earnings: News Corp, Kohl's, Macy's, NVIDIA, Nordstrom, Blue Apron, Petrobras, Canada Goose, Snap, Wheaton Precious Metals, Camping World

8:30 a.m. Jobless claims

8:30 a.m. PPI

10:00 a.m. New York Fed President William Dudley briefing on wage inequality in region

2:00 p.m. Federal budget

Friday

Earnings: Acushnet, JC Penney

9:40 a.m. Dallas Fed President Rob Kaplan

11:30 a.m. Minneapolis Fed President Neel Kashkari

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