What to Expect in the Week Ahead (PCE Index and GDP data; Earnings from KB Home and Micron Technology)

KB Home (KBH) is a strong candidate for investors seeking stocks with a solid history of beating earnings estimates. The company has consistently surpassed expectations, notably reporting $2.15 per share against an estimate of $1.78 in the most recent quarter, resulting in a 20.79% surprise. With a positive Earnings ESP of +0.08% and a Zacks Rank of #3 (Hold), KB Home appears poised for another earnings beat in its upcoming report on September 24, 2024. Research shows that stocks with a positive Earnings ESP and a favorable Zacks Rank achieve positive surprises nearly 70% of the time, making this an opportune moment to consider KB Home ahead of its earnings release.

Micron Technology (MU), a leader in the semiconductor industry, is set to report earnings on September 25, 2024, and investors are keenly awaiting this update. The company, known for its DRAM and NAND memory products, has experienced significant volatility due to global semiconductor shortages and competitive pressures from rivals like Samsung and SK Hynix. Analysts project an earnings per share (EPS) of $7.23 and revenue of $34.6 billion, reflecting a stabilization in memory chip prices. Key factors influencing Micron's earnings include production capacity, supply chain dynamics, and strategic investments in advanced memory technologies and AI markets. Investors should closely monitor management’s guidance during the earnings call, as insights on pricing trends and future demand will be crucial for evaluating Micron's stock performance.

Next week could be pivotal for the stock market as it tests the sustainability of recent highs following the Federal Reserve's half-percentage-point interest rate cut. As the Federal Reserve's "blackout period" comes to an end, several officials from the Fed will be delivering speeches. With inflation on the decline, guiding the U.S. economy toward a "soft landing" has become a primary goal for the Fed. However, the recent rate cut has left several questions unanswered: to what level will rates be lowered, what might the neutral interest rate be, and how quickly will the cuts occur?

This week, a number of Fed officials, including Chairman Jerome Powell, will be speaking frequently, potentially offering some clues. Analysts generally believe that if Fed officials downplay market expectations for a 50 basis point rate cut in November, the dollar may rebound, putting pressure on gold prices. Conversely, if they express openness towards a 50 basis point cut in the November meeting, the dollar is likely to decline further, boosting gold and other non-U.S. currencies.

In addition to the Fed officials' speeches, a range of data is set to be released next week, including the final GDP data for the second quarter and the final consumer confidence index from the University of Michigan for September. Notably, the August Personal Consumption Expenditures (PCE) price index, which is the Fed's preferred inflation measure, will be released on Friday. While a rate cut in November seems certain, the PCE inflation data could influence the extent of the Fed's rate cuts and its subsequent policy path.

Currently, analysts generally expect that the core PCE price index for August will show a month-on-month growth rate of 0.2%, with a slight year-on-year rebound from 2.6% last month to 2.7%. Meanwhile, the market anticipates that the month-on-month growth rate of personal consumption expenditures in August may slow to 0.3% from 0.5% the previous month. If personal consumption expenditures meet expectations, it may alleviate market concerns about an impending recession in the U.S., but it could also dampen hopes for a significant rate cut by the Fed in November.