S&P 500 Forecast: Index loses ground on Monday following four-week advance

• Standard & Poor’s 500 index has advanced 10.7% over the previous four weeks but opened lower on Monday.
• Market offers plenty of earnings releases this week, including Snowflake, Crowdstrike, SalesForce, Kroger and Dollar Tree.
• New Homes Sales Change for October came in at -5.6%.
• US Treasury yields are receding on Monday across the yield curve.
• Thursday’s October PCE report on inflation is the most-watched data release of the week.

The S&P 500 index closed down 0.2% on Monday, the worst performing of the three major US indices. The S&P 500 slide follows four weeks of gains.

The index spent most of the day in negative territory, while the NASDAQ Composite lost its initial advance to close down 0.07%. The Dow Jones slipped 0.16% on the day as well. The 4,560 level continues to work as stubborn resistance for the S&P 500 for the third straight session.

The index has gained 10.7% over the course of these previous four weeks, and last week it proved to be the fastest reversal out of a correction since the 1970s, according to data from Dow Jones.

While US Treasury yields wound lower across the yield curve to start the week, New Homes Sales tumbled in October to 679K, down 5.6% from the previous month’s 719K print. Consensus was 725K. This may be part of the reason for stock market reticence on Monday.

Good news arrived on Shopify’s (SHOP) data for Black Friday shopping, but much of the market is focused on Thursday’s Personal Consumption Expenditures (PCE) data, which has traders expecting a further reduction in the growth of inflation.

S&P 500 News: Earnings this week showcase enterprise software and retail

Salesforce (CRM) is the biggest earnings focal point for S&P 500 components this week. Released in Wednesday’s post-market, the enterprise software company has seen unanimity among analysts in raising earnings per share (EPS) forecasts for the fiscal third-quarter 2024 results. Consensus sees the company founded and still run by CEO Marc Benioff earning $2.06 in adjusted EPS on $8.72 billion. Profits are expected to decline slightly from the most recent quarter’s $2.12 adjusted EPS, but sales are supposed to climb 1.4% from fiscal Q2.

Zscaler (ZS), Crowdstrike (CRWD) and Snowflake (SNOW) – appearing on Monday, Tuesday, and Wednesday, respectively – will be the most-watched releases in the tech space, but none of the three are components of the S&P 500. 

Instead, Intuit (INTU), Hormel Foods (HRL), Kroger (KR) and Dollar Tree (DLTR) will be watched by index traders. 

Intuit is expected to report $1.98 in adjusted EPS on $2.88 billion in sales on Tuesday. 

Analysts are quite pessimistic on Hormel Foods’ release on Wednesday. The owner of dozens of supermarket brands is expected to earn $0.45 in adjusted EPS on $3.27 billion in sales, but it has missed revenue consensus for four consecutive quarters.

Dollar Tree is another retail-focused company with results out Wednesday. The downscale retailer is expected to witness a quarterly rise in results to $1.01 in EPS on $7.43 billion, but most analysts are skeptical of the company. The DLTR stock price is down nearly 17% year to date.

On Thursday, Kroger will add to the week’s retail survey. The market will mostly want to hear about how the Albertsons acquisition is panning out, but analysts take a dim view as the grocery chain has missed the mark on revenue for three quarters running.

Thursday’s PCE is expected to show more good news on inflation front

The October PCE data on Thursday will likely move the market, which desires further confirmation that inflation is indeed stalling out. Any reading above consensus could drive a market sell-off as well. Reduced inflation readings will tell the market that Fed rate cuts could be moved up on next year’s calendar. Currently, the market expects the first cut to arrive at the May 2024 meeting.

Monday’s consensus, which sometimes changes closer to the release, calls for monthly Core PCE to fall from 0.3% to 0.2%. The annual Core PCE consensus is expected to fall from 3.7% to 3.5%. 

Headline PCE, which includes food and energy prices, is expected to drop from 0.4% in the previous month to 0.1% in October. Annual headline PCE is forecast to decline from 3.4% last month to 3%. Core PCE is much more important to Fed officials though.