That was some wild week for stocks last week, wasn't it?
The major stock indexes suffered their worst one-day losses on Tuesday since September 2022 when the Federal Reserve was aggressively raising interest rates.
And then, markets recouped most — if not all — their losses by the end of the week.
The Nasdaq-100 index, in fact, finished the week up 0.4%. The Standard & Poor's 500 Index was down all of 2.4 points. The Dow Jones industrials were off 0.6%, while the Nasdaq Composite Index slipped 0.6%.
It was that kind of week.
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The causes for last week's drama were:
- Overbought stocks, especially tech stocks.
- Turmoil in Japanese markets.
- The rising tensions over the U.S. Presidential election.
- Growing worries about war breaking out between Israel and Iran.
- The continuing war between Ukraine and Russia that helped set off the inflation wave of 2021 and 2022.
So what about the week ahead?
There's the potential for more volatility. Indeed, futures trading late Sunday suggests U.S. stocks will open lower on Monday, perhaps because some investors are skittish.
The new week will feature several important economic and earnings reports. Meanwhile, speculation is already building over the Aug. 28 report from chip giant Nvidia (NVDA) .
At the same time, talk about when or if the Federal Reserve will cut interest rates will grow this week. On Aug. 22-24, most of the world's central bankers will gather in Jackson Hole, Wyo., for an annual confab. Fed Chairman Jerome Powell will address the meeting and may offer a hint on rates.
Whether the volatility is as big as what roiled global markets this past week is not yet clear.
One indicator to watch is what happens to the CBOE Volatility Index, otherwise known as VIX and sometimes called the Fear Index.
The VIX measures the flows of money from investors trying to shelter themselves from crazy volatility.
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For much of the year, VIX was at 12 to 14, which means there was no great investor worry that markets would suddenly go haywire.
But as soon as tech stocks and markets started to drop, investor fear exploded, and VIX levels shot up. Above 30 is concerning, but the index hit nearly 66 on Aug. 5 as the Dow was losing 1,000 points. VIX is now back at 20, but that's still a bit high.
(You can find a quote on VIX here. A number of exchange-traded funds track the VIX, including the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) .)
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So, here are the keys to watch this week.
First up: The economic reports
Producer Price Index, due Tuesday. This measures July price changes of goods and services produced. In June, the Bureau of Labor Statistics reported the index was up 2.6% year-over-year, with services producing the most price pressure. The estimate for the July report is also a 2.6% annualized gain.
Consumer Price Index, due Wednesday. This measure of prices consumers pay for all expenditures is expected to be nearly unchanged in July. The CPI hit as high as 8.6% year-over-year in May 2022, thanks to soaring gasoline prices and rising rents. Prices have come way down. On Saturday, AAA's daily report showed prices are down 6.2% since peaking at $3.679 a gallon on April 19.
Retail sales, due Thursday from the Commerce Department. This is the report Wall Street is pointing to — the consensus is for a 2% increase for July over July 2023. There may be some effect from gasoline prices which have fallen since peaking in April. Lower gas prices means more cash to spend.
Also due: Housing starts and building permits and the Michigan Consumer Sentiment Survey, both Friday. Housing starts are waiting for lower mortgage rates. So, don't look for a big number. The University of Michigan consumer sentiment survey tries to quantify consumer worries. So watch that one.
More Economic Analysis:
- 4 Reasons Why the Worst May Not Be Over for the Market
- Stock Market Today: Stocks end higher after rollercoaster week
- Mortgage rates hit lowest level since May 2023
The week's big earnings reports
The second-quarter earnings season has peaked with most of the biggest of tech companies already reported. An exception is Nvidia, due Aug. 28.
This week has reports that can move markets.
Home Depot (HD) , due Tuesday. The building materials retailer is expected to report $4.56 a share in second-quarter earnings, down slightly from $4.65 a year ago. Home Depot caters to the do-it-yourself market. But its sales to builders and contractors is huge and has been weighing on results. Shares are flat this year and down 5.3% in August.
Cisco Systems (CSCO) , due Wednesday. Earnings estimate: 70 cents a share, down from $1.01 a year ago. Dow component Cisco has been struggling in the era of artificial intelligence. Reuters has reported the company will announce thousands of job cuts soon. Cisco announced 4,000 job cuts earlier this year. The shares are down 6.2% in August and 10% in 2024.
Walmart Inc. (WMT) , due Thursday. The retail behemoth is seen reporting 65 cents a share in second-quarter earnings, up from 61 cents a year ago. Walmart's franchise of offering just about everything to a broad swath of customers is still working. Down 1% in August, the shares are up 29% in 2024.
Applied Materials (AMAT) , due Thursday. The company makes and services equipment for chip manufacturing. The estimate: $2.01 a share, up from $1.90 a year ago. The shares have been sucked into the downturn among tech stocks since Nvidia peaked. They're off 9.9% in August, after a 10.1% decline in July.
Deere & Co. (DE) , due Thursday. The farm equipment maker is expected to earn $5.85 a share, down from $10.20 a year ago. Reason: Corn prices are down 16% this year. Soybeans are down 22.8%. Wheat's down 13.6%. Deere shares are off 7% in August and 13.5% in 2024.
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