Wall Street heads into the week ahead on edge as traders brace for a raft of earnings, economic data

Published Fri, Apr 12 20243:06 PM EDTUpdated Fri, Apr 12 20244:16 PM EDT

How corporate America is handling sticky inflation and the prospect of higher interest rates will be top of mind for investors in the week ahead, after this week's choppy moves. The bull market is on edge. The Dow Jones Industrial Average and S & P 500 registered their second straight losing week after a hotter-than-anticipated March consumer price index report weighed on the interest rate outlook for investors. Markets are now pricing in two rate cuts starting in September, CME FedWatch Tool shows, instead of the three rate cuts starting in June investors held in their base case prior to the CPI report. Troubling signals are abounding as well. Treasury yields are surging, with the benchmark 10-year yield back above 4.5%. Oil prices are on the rise, with Exxon Mobil hitting an all-time high amid escalating tensions in the Middle East. Safe haven gold is spiking, with consumers heading to their local Costco stores to snap up gold bars . The Cboe Volatility Index (VIX) , commonly referred to as the fear gauge, has crept back up to levels last seen in October 2023. Parts of tech are outperforming, though, with Apple notably closing out the week with a 4% advance. .VIX YTD mountain VIX Next week will bring more information that could add to the recent choppiness. The first-quarter earnings season, which kicked off Friday, will give Wall Street insight into how businesses expect to weather an environment of elevated interest rates. Elsewhere, more macro data, such as U.S. retail sales, will give insight into how the consumer is handling the pressure of higher prices. "I'm a little concerned with all the cross currents," Bob Doll, chief executive of Crossmark Global Investments, told CNBC's "Squawk on the Street" on Friday. "When the [price-to-earnings ratios] are over 20, things better be nearly perfect. And when you're not getting the rate cuts, you can't sustain the PE, and then if earnings become a question mark, that will cause a lot more people to ask questions," Doll added. To be sure, many investors expect that markets can absorb the likelihood of fewer rate cuts this year so long as the Federal Reserve does not take a suddenly hawkish view and decide to put rate hikes back on the table. As it is, markets have managed to rally this year, even as the expectations for rate cuts have eased. First-quarter earnings season underway The corporate earnings season kicks into high gear in the week ahead. Investors are expecting this first-quarter earnings season will show which businesses are able to continue withstanding higher pricing pressures, as well as the upcoming refinancing cycle. "Earnings, this quarter, next, will be so telling," said Wolfe Research's Rob Ginsberg. "If they show no signs of deterioration, we probably just consolidate and power on, but if they start to exhibit some weakness, that's when you worry about stagflation." "That's not a great backdrop for stocks," he added. Ginsberg, who anticipates a 4% to 6% consolidation in equities, said the pullback could be worse if fundamentals show signs of weakening. Investors broadly anticipate larger companies with robust balance sheets will weather the pricing pressure, but many worry that small-cap companies that may have more debt on their balance sheets could get hurt by elevated interest rates. This week, the small-cap Russell 2000 is on track for a losing week, down by more than 1%. Next week's results from major banks Bank of America , Goldman Sachs and Morgan Stanley will likely take on greater significance for investors given JPMorgan's disappointing net interest income guidance this week. Results from a succession of regional banks, which may have higher credit reserves and greater exposure to real estate, will also attract scrutiny. Dow component UnitedHealth will also be reporting results next week. Overall, analysts expect S & P 500 companies to have grown earnings by more than 3% from the year-earlier period, FactSet data shows. If that's the case, it will mark the third straight quarter of earnings growth for the benchmark. Consumer in focus Next week will also bring a raft of economic data that could give insight into how the consumer is holding up — following the hotter-than-expected CPI for March as well as signs of weakening consumer sentiment. The March U.S. retail sales data set to release Monday is expected to show a deceleration from the prior month. Economists polled by FactSet anticipate a rise of 0.4% last month, down from a 0.6% increase in the previous reading. "[Consumer health] is a big thing for us. It's something we think looks OK, but if we see a change in employment trends, or if we see that the consumer does fall behind because their weighted average cost of debt really starts to impair their spending, that could have kind of broader consequences, we think, for the market," said Robert Haworth, senior investment strategist at U.S. Bank. "And so, we remain hyper-focused there." Elsewhere, Haworth said he will be reviewing the first-quarter growth data out of China to gain insight into the state of global manufacturing. An improvement there, he anticipates, will add credence to higher-for-longer interest rates from the Fed. "So, the market will be paying attention to that," he said. Week ahead calendar All times ET. Monday, April 15 8:30 a.m. Empire State Index (April) 8:30 a.m. Retail Sales (March) 10 a.m. Business Inventories (February) 10 a.m. NAHB Housing Market Index (April) Earnings: Goldman Sachs , Charles Schwab , M & T Bank Tuesday, April 16 8:30 a.m. Building Permits preliminary (March) 8:30 a.m. Housing Starts (March) 9:15 a.m. Capacity Utilization (March) 9:15 a.m. Industrial Production (March) 9:15 a.m. Manufacturing Production (March) Earnings: J.B. Hunt Transport Services , United Airlines , Morgan Stanley , Johnson & Johnson , Bank of America , Bank of New York Mellon , UnitedHealth Group , Northern Trust Wednesday, April 17 2 p.m. Fed Beige Book Earnings: Las Vegas Sands , CSX , Discover Financial Services , Prologis , U.S. Bancorp , Citizens Financial Group Thursday, April 18 8:30 a.m. Continuing Jobless Claims (04/06) 8:30 a.m. Initial Claims (04/13) 8:30 a.m. Philadelphia Fed Index (April) 10 a.m. Existing Home Sales (March) 10 a.m. Leading Indicators (March) Earnings: Blackstone , D.R. Horton , KeyCorp Friday, April 19 Earnings: American Express , Procter & Gamble , Fifth Third Bancorp , Schlumberger NV