What to Expect in the Week Ahead (DIS, SHOP, BABA Earnings; US CPI and PPI)

Home Depot and Shopify are scheduled to report earnings on Tuesday. Home Depot’s same-store sales are anticipated to decline for the eighth consecutive quarter due to sluggish existing home sales, according to Bloomberg Intelligence. However, the impact of recent hurricanes may provide a temporary boost in revenue and also lead to increased costs in the upcoming quarters.

Disney is set to report quarterly results on Thursday. The company's total streaming subscribers likely increased by 16% last quarter, which may have contributed to the unit achieving its second-ever profit, according to estimates. Bloomberg analysts suggest that continued momentum could be sustained through upcoming price hikes and the introduction of ESPN streaming next year. This progress is expected to help compensate for the diminishing demand at theme parks, where sales are predicted to plateau after two years of growth. Although foot traffic at the parks has decreased, Piper Sandler noted that increased spending per customer has supported sales.

On Friday, Alibaba’s Taobao-Tmall customer management revenue might fall short of consensus expectations due to subdued business and consumer sentiment in China, according to BIoomberg. Investors will be keenly observing the adoption of its newly introduced advertising tool for merchants, as well as the effects of a new vendor fee, as reported by Citi.

Macroeconomic Events

President-elect Donald Trump's decisive election win has sparked a surge of enthusiasm in the stock market over the past week. This uplift in mood is expected to be reflected in upcoming sentiment data, particularly among small businesses.

However, the immediate effect of the "Trump Trade" — a rise in long-term US Treasury yields driven by higher inflation expectations — is likely to weigh on the economy. Amid the election fervor, a critical piece of data that went unnoticed by Wall Street last week was an 11% drop in mortgage applications for the week ending November 1. This, coupled with a significant negative surprise in October's nonfarm payrolls reported a week earlier, serves as a stark reminder that the near-term economic outlook is still heavily influenced by the lagged effects of the Fed's restrictive rates. It is unlikely that Trump’s proposed tax and tariff policies will be implemented before late 2025, and even then, it's possible that only parts of his agenda will be enacted.

Looking ahead, the upcoming CPI (Wed.) and PPI (Thurs.) are expected to come in hot, pushing long-end rates even higher and further dampening economic activity in the coming months. In October, the market consensus anticipates a slight increase in the U.S. headline consumer price index, with growth rising to 2.6% year-over-year, up from 2.4% in September. While average gasoline prices declined in October, food prices remained close to the Fed's 2% target rate. However, persistent core inflation is expected to remain stable at 3.3% annually and is the main driver of price growth. Through September, high home rents were a major factor preventing the core inflation rate decrease. However, in the last month, there was an increase in the proportion of CPI basket items (excluding shelter) that reported price growth exceeding 3%, compared to September.

Retail sales (Thurs.) are projected to decelerate, and the unemployment rate is projected to continue its upward trajectory, potentially reaching 4.5% by year's end.