Here are 3 big things we’re watching in the stock market next week
It could be a week shortened by a trading holiday on Wall Street. But the four days are full of updates on some of the market’s biggest debates: Is AI eating software? Is the American consumer right? And what about inflation? Let’s get into it. 1. Earnings: Salesforce reports Wednesday night. Unfortunately, the stock has not been a battleground since its last earnings report in late February. Fears that artificial intelligence will disrupt its business are alive, as Bank of America’s sell price in the stock last week. The stock chart also shows it. The truth is, Salesforce isn’t going to end these concerns with one strong earnings report on Wednesday. But a journey of a thousand miles begins with a single step, and Jim Cramer said he’s willing to give CEO Marc Benioff a chance to show progress. So, what would a step in the right direction look like? It starts with strong revenue growth for Agentforce, its platform for building AI agents that can take action with limited human intervention. As of February, Agentforce was doing $800 million in annual recurring revenue, about 2% of its total, and more than 29,000 deals had been closed since launch. Where are these numbers now? Friday’s reaction to the Labor Day quarter shows that the market is able to celebrate a good software quarter. At the same time, investors are worried about slowing growth in Salesforce’s legacy business, where it relies on seat-based licenses. For that reason, Salesforcce will need to deliver adequate performance in other metrics, especially the remaining operational obligation (cRPO), which measures the contract revenue expected to be received in the next 12 months. Last quarter’s organic growth of 9% in cRPO was a bit of a disappointment. Its guidance for the April quarter was also 9% organically, or 13% overall when you include a 4% gain from its acquisition of Informatica. Operating margins will be another measure of the company’s overall health, the FactSet consensus came in at 33.4%, which means 1.2 percentage points of expansion year over year. Another thing to shout about: Salesforce is rolling out new reporting components with this release, from five to two. It will provide numbers in both the new and old formats for now, but analysts may ask management to explain their reasoning for the earnings call. That was the case last week when Nvidia made a change in its component design. Here’s what the street expects, according to estimates compiled by LSEG: Revenue: $11.05 billion EPS: $3.12 Costco’s quarterly results are due Thursday night. The company releases sales numbers every month, so the top line isn’t focused on when it reports. Instead, it’s all about profit margins, salaries, membership renewal trends, same-store sales, and what executives have to share on the phone about any changes in consumer buying habits. The renewal rate in the US, in particular, is something to watch because it has slipped in recent quarters as the company likes to register online, making it smaller. The problem is people who sign up digitally renew at a lower rate than those who sign up in store. Costco has taken steps to improve its retention, such as targeted marketing, and we want proof that it’s paying off. High oil prices weigh on consumers, but Costco is unique in that it can dynamically drive traffic to its locations because the company often offers lower gas prices at its locations. Costco’s membership model already helps ensure loyalty while the wholesale strategy ensures those members get the best value in town. In times of rising gas prices especially, people are looking for value with increasing power. As JPMorgan analysts put it in a note last month, “Whenever gas rises, [Costco] membership is very attractive, like a credit card (5%/4% cash back on gas purchases).” Yes, if you’re already headed to the Costco parking lot to fill up the tank, you might as well stock up on some food and groceries while you see what other items are on sale. To be sure, rising gas prices may undercut Costcos, but Wall Street’s profits are understandable. Provided some quarterly profit, so we’ll be interested to hear about buying patterns as that advantage begins to dwindle Finally, if the consumer struggles, that’s where they’ll hunt for value between Costco’s membership model and the wholesale strategy, which few, if any, can pass on value. Data: Much of the attention of investors will be on the personal expenses and income report, which contains the price index for personal consumption expenditures (PCE) That is the Federal Reserve’s preferred proxy for inflation. economists expect to see a 3.8% annual increase in the headline index, according to FactSet, the price of food is expected to increase 3.3% as oil holds around $100, the probability that the Fed rate will be cut this year: can we avoid the increase in fuel costs and bond yields, it is in a difficult situation because these signs of inflation indicate that the central bank needs to increase the time given by inflation we were already above the Fed’s 2% target before the war and post-pandemic inflation is still recent history, we heard from several major retailers that the consumer is still under pressure, and that translates into a change in behavior where the Fed’s conundrum is, the supply of consumer spending is slowing. of price – For now, we’re right – unemployment is still there and consumers are in control. A 15% chance of two price increases, according to the CME FedWatch Tool The hot inflation report next week represents an even higher increase – something that no one wants to see on Wall Street, or Americans on Main Street who want nothing more than to see some relief in the prices of the most important Wall Street The Strait of Hormuz can be is the necessary trigger for oil to return to the bottom and the next bond yield, to release Fed Chairman Kevin Warsh to reduce the prices included on Friday on our radar is the second reading of the first quarter of GDP on Thursday Looking back, so it will not have an impact like the PCE report However, it will help us better understand the first place of the economy before the war with Iran (technically, the war was going on in the middle of March, the last month of the first quarter, but the results are in April and now is very important for home sales Punching above its weight in the economy, because of all the other purchases that come with buying a new home such as services, appliances, furniture and more will not be good until the real estate boom starts. 3. Conference updates: We are entering the investor conference season on Wall Street – which is in the middle of the quarterly earnings season, when companies are not in quiet periods, and banks bring their executives and clients with Q & As and our Big Presentations at the Club by Berstein Strategic Decisions, Johnson of Decisions Set for Wednesday makes an appearance, according to the conference website . Eli Lilly and Starbucks are scheduled to attend Thursday We’ll keep an eye out for any notable disclosures and headlines The US stock market is closed for Memorial Day Tuesday, May 26 FHFA House Price Index at 9 a.m. ET Before the bell: Elbit Systems (ESLT), AutoZone (AZO) After the bell: ZScalers (ZS), Chemical & Mining (SQM), BOX (BOX) Wednesday, May 27 Bernstein Strategic Decisions Conferenceth & Notia Bank BBS (Work Body) Capri Holdings (CPRI), Dick’s Sporting Goods (DKS), Pinduoduo (PDD), Abercrombie & Fitch (ANF), Bank of Montreal (BMO), Dycom (DY) After the bell: Salesforce (CRM), Marvell (MRVL), Snowflake (SNOW), HP (May 8) Personal Conference, Snowflake (SNOW), HP (MayQPS8) consumer spending index (PCE) at 8:30 am ET Initial jobless claims at 8:30 am ET Second Q1 GDP reading at 8:30 am ET New home sales at 10 am ET Before the bell: Best Buy (BBY), Hormel Foods (HRL), Canadian Imperial Bank (CMXB)), XPENG Imperial Bank (CMXPD), Canada’s XPWURL (RY) After the bell: Costco (COST) , Dell Technologies (DELL), UiPath (PATH), MongoDB (MDB), Autodesk (ADSK), SentinelOne (S), Okta (OKTA), Gap (GAP), NetApp (NTAP), American Eagle Outfitters (AEO) Friday, May Cramer’s full list See Charmer’s long list 29 of the stocks.) 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