The S & P 500 and Nasdaq managed to close higher for the week despite a pretty sharp pullback on Thursday ahead of Federal Reserve Chairman Jerome Powell’s speech at the annual central bank summit in Jackson Hole, Wyoming on Friday morning. The Powell address proved to be pretty uneventful but not before completely overshadowing blowout earnings from Nvidia, possibly the most anticipated release of the season. The Dow Jones Industrial Average , on the other hand, closed lower for the second straight week. As August is known to be, it’s been a rough month-to-date for all three of those stock market benchmarks so far. This past week, the overall market was oversold, according to Jim Cramer’s trusted S & P Oscillator. It prompted us to put some of our large cash pile to work and make strategic buys , per our discipline when the Oscillator flashes oversold. After Friday’s strong finish, we’ll see if the market’s oversold condition abates as two major themes play out in the week ahead: Earnings from two Club names — Salesforce (CRM) and Broadcom (AVGO) — and key economic reports ahead of September’s Fed meeting. 1. Next week’s economic agenda features the latest reports on jobs and inflation — all of which have the potential to be market movers after Powell said Friday that prices are still “too high” and the Fed is “prepared to raise rates further” if the incoming economic data warrants it. It all starts Tuesday, with the government’s Job Openings and Labor Turnover Survey (JOLTS), which provides a look at how tight the labor market is by analyzing the number of open jobs and how much job hopping is going on. More openings implies fewer available workers to fill them, indicating a tighter labor market. The rate of workers leaving their jobs (for various reasons) can speak to how confident people are about finding new jobs that may even pay more. Hot on the heels of JOLTS, It’s ADP’s monthly look at hiring trends at U.S. companies on Wednesday. The ADP numbers have had a spotty track record of predicting the government’s monthly employment report, which comes Friday, Sept. 1. As we’ve noted previously, the headline nonfarm payrolls number is sure to garner the most attention. But we’ll also watch the wage component, which can provide insight into the future path of inflation. The thinking here is the more flush the consumer feels, the better their ability to absorb higher prices — and therefore, the stickier inflation could prove to be. Of course, we can’t think of wage inflation in a vacuum. The consumer is only going to feel flush if wage inflation is able to outpace price inflation. After all, if prices are rising faster than wages, then the consumer is going to feel more pressed for cash as things become less affordable in spite of those higher wages. Fortunately, the Fed’s preferred measure of inflation is out Thursday: the core personal consumption expenditures (PCE) price index. Any further moderation in July from the 4.1% level we saw in June would be positive, especially with analysts expecting a slight tick higher to 4.2% year-over-year. Remember, the Fed is targeting a 2% inflation rate. Outside of the labor market and inflation, we’ll also get a look at the housing market with the pending home sales on Wednesday. As members will recall, shelter prices have been a real thorn in the Fed’s side as they represent a huge portion of the basket of goods used to calculate inflation and have proven sticky. While the rate of shelter cost inflation has been trending down slowly, too slowly, since peaking in March, it still remains way too high at 7.7%, according to the July consumer price index (CPI), another key inflation gauge. The problem is that a lack of housing supply is putting upward pressure on list prices that are, in turn, compounded by high interest rates on mortgages. So, we’ll be looking for any signs that housing demand is cooling or that more supply is coming to market. Other watch items include the second estimate on second-quarter gross domestic product (GDP), also on Wednesday, and a look at ISM manufacturing data on Friday. The GDP report is important for gauging the health of the overall economy. However, it’s very backward-looking – after all, we’re already two months into the third quarter. So unless there’s a major revision, expect the week’s other reports to take priority. Finally, the ISM will provide insight into not only the state of manufacturing but the rate of change. In addition to the numbers, we always like to take a look at the “what respondents are saying” section of the ISM report as this can provide additional, more qualitative insight into the dynamics impacting various manufacturing industries. 2. On the earnings front , the reporting season for the June/July quarter is winding down. The Club names largely performed well against the backdrop of continued elevated inflation and concerns the Fed may go too far with rate hikes to slow those price pressures and cause a recession. As we mentioned, Salesforce’s fiscal 2024 second quarter (July quarter) is out after the closing bell on Wednesday, and Broadcom, our newest holding, releases its fiscal 2023 third quarter after the close on Thursday. CRM YTD mountain Salesforce YTD peformance At Salesforce, it’s all about management’s ability to balance growth with profitability. The team has done a fantastic job so far with their increased focus on expanding profit margins. We’ll be looking for that to continue. Outside of the numbers, we’ll be listening closely to the post-July quarter earning call for insight into the state of new business activity. As we heard from fellow Club name Palo Alto Networks (PANW) last week, companies are growing more cautious and more closely scrutinizing large sales deals. Fortunately, Salesforce is a mission-critical asset for revenue generation. So, while closing sales may be taking longer, we expect management will figure out a way to work with customers to get them done. As we noted in a commentary about companies with pricing power , Salesforce announced last month price hikes on many of its products for the first time in seven years. The new pricing started in August. AVGO YTD mountain Broadcom YTD performance As for Broadcom, expect artificial intelligence to be the topic du jour. While many companies are, of course, leaning on Nvidia’s chips for their AI needs, Broadcom is the partner to many large tech companies when it comes to custom chips. We’ll be listening to the call to better understand how Broadcom is helping companies with their internal chip design initiatives. We’re also curious to hear management’s thoughts on what the age of AI means for the structure of data centers. Recall, AI networking solutions is a material part of our investment thesis , which we laid out this past Thursday when starting a position in the stock. Outside of the quarterly results, though commentary may be limited given efforts are still ongoing, we’ll be listening for any updates on the timing of the VMWare (VMW) acquisition to close. China represented a major final regulatory hurdle. For those looking to review the Club holdings’ last quarterly performances ahead of these releases, be sure to read our first-quarter earnings report card . Here’s the full rundown of all the important domestic data in the week ahead. Monday, Aug. 28 After the bell: HEICO Corporation (HEI) Tuesday, Aug. 29 10 a.m. ET: JOLTS Job Openings Before the bell: NIO (NIO), Best Buy (BBY), Pinduoduo (PDD), Big Lots (BIG), Bank of Montreal (BMO), Bank of Nova Scotia (BNS), Catalent (CTLT), J.M. Smucker (SJM) After the bell: Hewlett Packard Enterprise (HPE), HP (HPQ), Box (BOX), PVH Corp (PVH) Wednesday, Aug. 30 8:15 a.m. ET: ADP Employment 8:30 a.m. ET: Gross Domestic Product 10:00 a.m. ET: Pending Home Sales Before the bell: Patterson Companies (PDCO), Brown-Forman (BF) After the bell: Salesforce , CrowdStrike (CRWD), Okta (OKTA), Chewy (CHWY), Veeva Systems (VEEV), Five Below (FIVE), Pure Storage (PSTG), Victoria’s Secret (VSCO) Thursday, Aug. 31 8:30 a.m. ET: Initial jobless claims 8:30 a.m. ET: Personal Income & Spending Before the bell: Dollar General (DG), Polestar (PSNY), UBS (UBS), Academy Sports and Outdoor (ASO), Campbell Soup (CPB), Ciena (CIEN), Hormel Foods (HERL), Signet Jewelers (SIG) After the bell: Broadcom , VMWare (VMW), lululemon (LULU), MongoDB (MDB), SentinelOne (S), Dell Technologies (DELL), PagerDuty (PD) Friday, Sept. 1 8:30 a.m. ET: Nonfarm Payrolls 10 a.m. ET ISM Manufacturing (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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Traders work on the floor of the New York Stock Exchange during opening bell in New York City on August 21, 2023.
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