HG MARKETS:

Investors are gearing up for a data-heavy week as key economic reports, Federal Reserve statements, and major earnings announcements are expected to shape near-term market direction. With consumer sentiment showing signs of weakness and the Fed holding interest rates steady, the focus will be on whether upcoming economic indicators support a “soft landing” scenario or revive concerns over inflation and economic growth.

The centerpiece of the week is the February release of the Personal Consumption Expenditures (PCE) index, the Fed’s preferred measure of inflation, scheduled for Friday. January’s PCE data showed both overall and core inflation increasing by 0.3% month-over-month. Bank of America economists expect similar numbers for February, though there’s a possibility core inflation could tick up to 0.4%.

Personal income is projected to rise by 0.4%, and consumer spending is forecasted to grow by 0.7%, fueled by robust activity in the services sector. A higher-than-expected result could delay market expectations for potential rate cuts later this year.

Consumer sentiment will also be in focus, with Tuesday bringing the Conference Board’s Consumer Confidence Index and Friday seeing the final release of the University of Michigan’s March Sentiment Index. Preliminary results from Michigan showed a sharp decline in sentiment, dropping to 57.9, alongside an increase in short-term inflation expectations to 4.9%.

Meanwhile, the housing market remains under pressure, with affordability still a significant issue. Housing data, including the S&P Case-Shiller Home Price Index and new home sales (due Tuesday) and pending home sales (set for Thursday), will provide further insights into the sector. Earnings reports from homebuilder KB Home on Monday could shed light on buyer demand and pricing trends.

Fed officials’ speeches throughout the week will be closely watched, particularly remarks from New York Fed President John Williams, Richmond Fed President Tom Barkin, and Atlanta Fed President Raphael Bostic. Their comments on inflation, interest rates, and the balance sheet may influence sectors sensitive to rate changes and affect the broader risk outlook.

Retail and consumer earnings reports will take center stage, starting with GameStop’s earnings on Tuesday, which will be closely followed after the company’s unexpected profit last quarter. Dollar Tree is set to report on Wednesday, with analysts anticipating earnings per share (EPS) of $2.20 on $8.2 billion in revenue, while Lululemon’s report on Thursday is expected to show solid growth, with analysts forecasting $5.87 EPS and an 11.9% rise in revenue. Additional reports from Chewy, Cintas, Paychex, McCormick, and Oklo will provide further context across various sectors, including consumer staples, industrials, and energy.

The market is entering the week with a cautiously optimistic outlook. If the PCE inflation data meets expectations and Fed speakers maintain a balanced tone, strong retail earnings could bolster market confidence. However, higher inflation or more hawkish Fed comments later in the week may challenge this positive sentiment.