Following last week's selloff, equity futures are in the red here on Monday morning. The dollar's continued strength and the pound hitting record lows against that currency is raising concern once again over corporate profits while a two-year Treasury yield near 4.3% is providing investors with an alternative to what has been the TINA (there is no alternative) stock market of the last few years. Add in worries over slower spending by consumers and businesses as well as cost-reduction efforts and we continue to see a risk-off attitude when it comes to equities, with investors looking for safer haven investments, including cash.
The dollar's strength reinforces our view that currency headwinds will weigh on September quarter earnings and forward guidance, especially for those companies with pronounced international exposure. As we continue to assess both the pace of the economy and those currency headwinds, the prudent path is the one we will remain on as we continue to favor domestic, defensive and dividend-paying companies. In particular, we are examining domestic-focused REITs, particularly non-consumer, non-retail ones.
Among the economic items coming at us this week, the two that are likely to grab the most attention will be the August Personal Income and Spending report. This is important because of what it will tell us not only about the health of consumers but also because it will contain the latest reading on the PCE (Personal Consumption Expenditures) Price Index, one of the Fed's preferred inflation metrics. Exiting last week, the latest poll by Reuters calls for an uptick to 0.3% month over month for the headline PCE Price Index after July's 0.2% figure, while the core reading is projected to heat up even further to 0.4% vs. July's 0.1% reading. Should the data match those expectations or suggest inflation pressures remain stubborn, we'll look for the market's reaction in the Fed futures curve, which is conveniently translated by the CME FedWatch Tool showing expectations for the November and December Fed meetings.
The second set of economic data we'll be watching closely is the data out of China late in the week. In addition to what we have been learning about the impact of recent Covid-related lockdowns, we'll also be assessing to what degree energy-related problems impacted the economy and supply chains to the west.
Turning to corporate events this week, Intel (INTC) will hold its annual innovation conference on Sept. 27, which will include a keynote address by CEO Pat Gelsinger and updates on the 13th Gen Intel Core series. Given the reported weakness in the PC market despite an uptick in Graphic Processing Unit (GPU) sales, we would look for an update on what Intel is seeing for that as well as the data center market. We'll also be curious to hear what Intel has to say about its developing foundry business and about spending associated with the recently passed CHIPS Act.
A day later, on Sept. 28, Amazon (AMZN) will hold an event to announce new devices, feature, and services, including a rash of new Echo and Ring offerings. Sticking with Amazon, the company formally announced an event about which there has been much chatter -- Prime Early Access Sale, a new two-day global shopping event exclusive to Prime members. The event begins Oct. 11 at 12 a.m. PDT and runs through Oct. 12 in 15 countries: Austria, Canada, China, France, Germany, Italy, Luxembourg, the Netherlands, Poland, Portugal, Spain, Sweden, Turkey, the UK and the U.S.
Rounding out this week, on Sept. 30 Tesla (TSLA) will hold its AI Day event with updates expected on fully self-driving cars, the Dojo supercomputer and its robo-taxi program.
In terms of earnings reports over the coming days, the releases that are likely to receive close attention are those from Cintas Corp. (CTAS) , CarMax (KMX) , Micron Technology (MU) and Nike (NKE) given what is likely to be said about hiring expectations and cost cutting, auto demand, the PC and larger consumer electronics markets, consumer spending and dollar headwinds. We'll also be digging into the one from BlackBerry (BB) given its exposure to the cybersecurity market but also to compare what it has to say on the automotive front versus the wins Qualcomm (QCOM) reported last week at its Automotive Analyst Day.