U.S. Stock Futures Edge Lower After Hitting Fresh Records

U.S. stock futures traded lower on Monday morning, pointing to yet another disappointing start to the trading week. This came as investors weighed an uneven global economic recovery from the pandemic against the latest comments from Jerome Powell. During an interview on Sunday, Powell reiterated that the Fed wants to see inflation rise above its 2% for an extended period before raising interest rates.

A positive fiscal shock, strong housing tailwinds, a large stock of savings, and the Fed letting inflation run above 2% mark a fundamentally different economic backdrop,” Evercore ISI equity strategist Dennis DeBusschere wrote in an email. “US data is expected to be strong this week and US vaccinations are increasing. Real rates are still too negative and are headed higher, supporting risk-on factor outperformance.

The stock market continues to hit fresh records with the Dow and S&P 500 traded at their all-time highs. With strong economic data backing the recovery of the U.S. economy, Wall Street could kick off the second quarter with a strong rally. Or could they? The futures market appears to be telling a different story. The Dow, S&P 500, and Nasdaq futures are all trading in the negative territory, falling 0.18%, 0.19%, and 0.35% as of 6:51 a.m. ET.

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Retail Sales 

One of the key economic reports to watch will be the retail sales number this Thursday. Consensus estimates expect the Commerce Department’s March retail sales report to show a monthly gain of 5.4% in March, according to data from Bloomberg.

The latest round of stimulus checks, $1,400 per qualified individual totaling $410 billion, started to go out in mid-March, supporting another surge in spending,” Nomura economist Lewis Alexander wrote in a note Friday. “For non-core components, credit card data for foodservice spending suggests a sharp acceleration as warmer temperatures swept across the U.S. and state and local governments eased restrictions on activity.

The expectations seem to be in line with some of the retail data from corporations. For instance, Costco (NASDAQ: COST) recently announced robust sales in March. The company said sales in the month ended April 4 grew 17.6% year over year to $18.21 billion from $15.49 billion in the same period a year ago. If this is any indication, it appears to me that we could see stronger retail numbers in the near term. After all, a stronger economic recovery and stimulus checks are likely to go hand in hand. 

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Alibaba Accepts China’s Fine, Promises To Ensure Compliance

After China imposed a record antitrust fine on Alibaba Group Holdings (NYSE: BABA), many feared that it would put pressure on BABA stock in the short term. While that sure is negative news to investors, investors can breathe a sigh of relief as Alibaba stock jumps in Hong Kong even after the antitrust fine. There’s no reason to panic, as BABA stock jumps nearly 6% during pre-market trading as of 7:01 a.m. ET. So what happened?

Something unusual happened, Alibaba thanked the Chinese regulators. Expressing public gratitude after getting slapped with an antitrust fine is rather unusual. You wouldn’t expect Mark Zuckerberg or Tim Cook to express such gratitude if they were to hit Facebook (NASDAQ: FB) or Apple (NASDAQ: AAPL) with record antitrust fines. However, for one thing, the $2.8 billion fine was less severe than many feared. More importantly, it helps lift a cloud of uncertainty hanging over the e-commerce giant. This could put the company’s ordeal in the rear-view mirror. And Alibaba can then move on to focus on growing the company’s business. 

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PepsiCo’s Earnings

PepsiCo’s (NASDAQ: PEP) is slated to report its earnings results before the opening bell on Thursday. The consumer staples giant has been quite resilient over the course of the pandemic. It has been beating Coca-Cola (NYSE: KO) in the soda industry. That’s besides enjoying strong growth in the snack and food segment. Taking a glance at PEP stock price might lead you to think that there are no attractive growth prospects. I don’t blame you for that. After all, it is the stark price movement that snatches investors’ attention in the first place.

Now, PEP stock price has been losing ground since the start of the year. Therefore, it sure isn’t anyone’s favorite consumer discretionary stock to buy. But what if I tell you its business could be stronger than its stock price implies? The company’s ability to grow through the pandemic is what makes PEP stock worth watching. Its soda sales volume continues to hold up strongly while its packaged food segment also continues to outperform.

With all that in mind, anyone thinking of buying PEP stock has some good reasons to be bullish as the company heads into its new fiscal year. Judging from its first 2021 outlook, PepsiCo certainly has the potential to bring respectable gains to shareholders. We will have to see for ourselves on Thursday for signs of a further rebound. 

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Bank Earnings

The first-quarter earnings reporting season begins this week with many of the nation’s largest banks reporting results. The banks reporting quarterly results this week include Bank of America (NYSE: BAC), BlackRock (NYSE: BLK), Goldman Sachs (NYSE: GS), JPMorgan Chase (NYSE: JPM), and Wells Fargo (NYSE: WFC). They will report results for the three months ended March 31. However, with the recent increase in rates, banks will need a new revenue driver to improve their business performance. That’s likely to come from their loan business. 

The next big catalyst for bank stocks is likely to be the return of loan growth. Many view loan growth as one of the biggest long-term drivers of bank earnings and of higher quality than the boost from higher interest rates…”Loans are coming in weaker than expected in 1Q… and maybe sluggish again in 2Q given likely further deleveraging from fiscal stimulus (and tax returns) and as [the] COVID-19 vaccine rollout will take a good portion of the quarter (likely pushing the expected surge of investment into 3Q or even 4Q).“- Matt O’Connor, Deutsche Bank Analyst

There are also other notable names from other sectors reporting this week. They include Bed Bath & Beyond (NASDAQ: BBBY), Delta Air Lines (NYSE: DAL), Fastenal Co (NASDAQ: FAST). So, whether it is retail sales numbers, Alibaba antitrust fines, or a string of earnings, there is a lot to digest as the week gets underway.

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