Walmart, Home Depot Earnings Amid Mixed Inflation Signals

Markets might turn to major earnings early this week to gain better insight into tariff pressures on inflation, following mixed signals from CPI and PPI that leave uncertainty about a second rate cut this year.

Key Developments in the Markets

• CPI showed less pressure from tariffs, but PPI showed rising wholesale prices, providing a mixed picture on the inflation outlook.
• While expectations for a September rate cut remain intact, markets are uncertain about whether to expect a cut in October.
• Home Depot is expected to see improvement on the top and bottom line but is still affected by high interest rates.
• Walmart is also expected to see earnings improvement with a focus on customer volumes.

Uncertain Tariff Pressures on Inflation

Last week, markets got mixed signals on inflation, with CPI showing less growth than expected in areas affected by inflation. Markets moved to price in a second rate cut, but this cheer didn't last. Two days later, , which weighed on the Nasdaq and DJIA. The S&P 500 still managed to stay in the green and score its third consecutive record high. Rising wholesale prices would likely contribute to inflationary pressure, even if the contribution from tariffs were not as much as initially thought. The data comes at a crucial point ahead of the Jackson Hole Symposium at the end of the week, in which FOMC officials have an opportunity to give more insight into what they think is driving inflation. The before the data came out but fell to 48% in the aftermath.

Home Depot and Walmart Earnings

The home improvement store is expected to report Q2 earnings before the market opens on Tuesday, with a year ago. Sales are projected to rise 4.9% to $45.3 billion in the same period. Traders are likely to be looking at the company's key metric of of the year. High interest rates have led homeowners to differ in their investment in projects, which has put downward pressure on Home Depot's sales. However, the company observed solid consumer demand, particularly in the larger ticket segment, as the company's average customer has above-average income. Analysts project the company will see an uplift in SSS by 1.1% compared to a year ago.

Walmart is scheduled to report its Q2 earnings on Thursday before the markets open, with the from $0.67 last year. Sales are expected to increase by 3.9% in the same period to $174.2 billion, with the markets focusing on the company's comparable store sales and footfall traffic. Budget-focused stores like Walmart tend to see an increase in traffic when consumers feel constrained by higher prices. Last quarter, the company warned that . Other major retailers reporting earlier in the season said they hadn't seen a major shift in consumer behaviour because of tariffs, so investors will be keen to see if the largest retailer in America echoes that sentiment.

S&P 500 at Bottom of Channel

The benchmark US stock index has been trending higher through a channel since the start of the month, buoyed by generally solid earnings. However, Friday's pullback left it at the bottom of the channel, which coincides with the lower Bollinger Band near 6400. With the RSI just above 50, it suggests a potential breakdown, opening the door to 6370, which is followed by last week’s low of 6310. If the channel holds, a retest of the all-time high at 6,480 could ensue, with a higher move bringing into focus 6500.

Source: SpreadEx | SPX 500