The S&P 500 index experienced a downturn on Friday amid growing worries about the US economy, causing a dip in investor confidence. The University of Michigan's preliminary consumer sentiment index reading dropped to a six-month low of 57.7, falling short of the anticipated May reading of 63.0 predicted by Dow Jones economists.
Furthermore, expectations for inflation in the upcoming five years escalated to 3.2%, a figure not seen since June 2008.
Debt ceiling negotiations in Washington have also become a focal point for investors. A key meeting scheduled between President Joe Biden and congressional leaders to discuss this issue was deferred until the following week, adding to the unease.
In an interview with CNBC, Joe Cusick, a senior vice president at Calamos Investments, noted a general lack of market conviction, with no sectors making decisive moves in any direction. This lack of confidence contributed to a second consecutive week of losses for the S&P 500 and Dow Jones, dropping by 0.29% and 1.11%, respectively. Conversely, the Nasdaq managed a slight gain of 0.4%.
Despite Thursday's lower-than-expected wholesale prices data, which ordinarily signals easing inflation, investor concerns over a potential downturn remain high as the market continues to be carried by a select few stocks.
Retail earnings to drive S&P 500 index
Next week, key retailers such as Walmart (NYSE: WMT), Target (NYSE: TGT), Home Depot (NYSE: HD), and Alibaba (NYSE: BABA) are set to announce their earnings. Walmart is predicted to record adjusted earnings per share (EPS) of $1.19 per share, compared to its year-ago earnings of $1.3 per share. Comparatively, earnings for Target are also forecast to narrow from $2.19 per share to $1.77 per share.
We can see that big-box discount retailers are still reeling under pressure due to rising costs, inflation, and high inventory levels due to a sluggish economy.
The U.S. Census Bureau will also reveal April's retail sales on Tuesday, reflecting consumer spending. After a 0.6% decrease in March, retail sales are anticipated to have grown by 0.7% in April, yet the year-over-year increase could be just 1.4%, marking the slowest rate since the pandemic began three years ago.
Consumers' outlook on the economy has soured due to increasing interest rates, continuous high inflation, and recession fears. In fact, the University of Michigan’s Consumer Sentiment Index (MCSI), an essential indicator of consumer confidence, hit its lowest point since November in early May.
Housing market data
Next week will bring fresh data on the housing market. The NAHB Housing Market Index for May will kick off the updates on Tuesday. Following this, on Wednesday, the Census Bureau will present figures on April's housing starts and building permits, which provide insights into home construction and supply.
Predictions suggest a minor dip in housing starts to 1.4 million units in April, from 1.42 million in March. On Thursday, the National Association of Realtors (NAR) will release data on existing home sales for April. The numbers are anticipated to show a decrease to 4.3 million units, from 4.44 million in March, and are down significantly from the January 2022 peak of 6.34 million units.