Week Ahead on Wall Street: Pandemic savings are gone

A Tough Choice

For many households in America, the immediate economic impact of the pandemic was more positive than predicted. Between very limited discretionary spending, increased government support, and a roaring stock market as the recovery kicked off, household wealth grew substantially in 2020 and 2021.

But much of this accumulated wealth has now dissipated, according to a new report from The Brookings
Institution . Heavy stock market losses, low savings rates in the face of persistently elevated inflation, and sluggish income growth in the first quarter of 2023 led to a reduction in household wealth, wiping out most of the gains from the past few years.

Now, many households face a tough choice: slow down spending or take on more debt. Thursday’s report on personal income and spending should give some insight whether this trend will continue. Here’s what else to watch in the week ahead on Wall Street.

Economic Data

On Tuesday, investors will get an update to the home price index from June. The housing market metric increased 1.5% month-over-month in May, marking a fourth straight month of increases. Additionally, the Labor Department will release its monthly report on job openings. In June, the number of available jobs fell to 9.5 million, the lowest level since April 2021 but still well above the pre-pandemic level.

On Wednesday, the focus will be on US economic growth in the second quarter with a second estimate of the GDP growth rate. The advanced estimate showed the US economy expanded at an annualized rate of 2.4% between April and June, 0.4% higher than the previous period. Additionally, there will be an update to the 30-year fixed-rate mortgage, which currently sits at 7.31%, the highest level since 2000.

On Thursday, investors will get a look at July inflation via the personal consumption expenditures index, which is the Fed’s preferred measure of inflation. In June, the core PCE measure rose 4.1% year-over-year.

On Friday, the Labor Department will release the jobs report with its update to the unemployment rate, and investors will get a look at the manufacturing sector. Additionally, an August update for workers’ hourly earnings will be released, which rose 4.4% in July.

Earnings

Best Buy (BBY), along with tech giant HP (HPQ) and semiconductor company Ambarella (AMBA) are kicking off this week’s notable earnings on Tuesday. On a whole, the retail sector has suffered recently. Investors will hope Best Buy can buck this trend.

Wednesday will be the busiest earnings day of the week, with reports coming from cybersecurity firm CrowdStrike (CRWD), discount retailer Five Below (FIVE), petcare ecommerce company Chewy (CHWY), and software giant Salesforce (CRM). Salesforce shareholders will be eager to learn about the company’s investment in the $4.5 billion AI startup Hugging Face.

On Thursday, Dollar General (DG), Lululemon (LULU), Dell (DELL), and chipmaker Broadcom (AVGO) will all hand in report cards. Investors will look to see if the wave of organized theft plaguing the retail sector has impacted Dollar General or Lululemon’s bottom lines.

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