What to Expect in the Week Ahead (HD, BABA, and WMT Earnings; CPI data and Powell speaks)

On Tuesday, Home Depot is slated to release its quarterly results. Investors are hoping the retailer will announce some price reductions as a countermeasure against inflation. Alibaba is also scheduled to report on the same day.

The U.S. stock market is bracing for a significant test with the release of the U.S. CPI data for April scheduled for next Wednesday. With inflation remaining stubbornly high during the first three months of the year, several Federal Reserve officials have adopted a cautious stance on future monetary policy. Some hawkish members have ruled out rate cuts for the year, and further rate hikes have not been discounted. Should the U.S. CPI for April exceed expectations and show an increase from the previous figure, this could severely impact market bets on the number of Fed rate cuts for the year.

Before the CPI data release, the U.S. Producer Price Index (PPI) for March, announced on Tuesday, could provide an early indication of inflation trends. Also set to be released on Wednesday alongside the U.S. CPI data is the so-called "scary data" of April's retail sales figures, which will offer clues as to whether the U.S. economy's strength remains robust. Additionally, the weekly initial jobless claims will be announced on Thursday.

Since the Federal Reserve adopted a dovish stance at its recent policy meeting and Chair Jerome Powell ruled out the possibility of rate hikes, a series of data suggested a cooling U.S. labor market, providing grounds for market expectations of a Fed rate cut in September. However, against a backdrop of stubborn inflation, several policymakers this week have called for maintaining higher interest rates for an extended period.

Analysts note that signs of weakness in the U.S. labor market could indicate a slowing of economic growth, posing a challenge to the Fed's policy outlook. Furthermore, a decline in consumer confidence could also influence the Fed's decision-making.

Amid rising attention to the yen's weakness and the Bank of Japan's policy stance, Japan is set to release its preliminary GDP figures for the first quarter. Investors will be watching the data closely to determine whether the Japanese economy is maintaining growth or slipping back into contraction. For the yen to stage a notable rebound, the GDP data may need to demonstrate an acceleration in economic growth, encouraging market participants to increase their bets on a summer rate hike by the Bank of Japan.