Wall Street Brunch: All About Inflation (Again)

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The core PCE price index for April hits Friday. (0:14) Salesforce, Best Buy and Chewy highlight earnings. (0:55) GameStop cashes in on meme resurgence. (3:02)

The holiday-shortened week will have a familiar theme: inflation. The sticky vs. non-sticky (or is it smooth) camps will have their eyes on the Federal Reserve’s favorite inflation gauge.

The April personal consumption expenditures deflator excluding food and energy – or the core PCE index – arrives on Friday, along with consumption and income numbers. Economists expect that the index rose 0.2% last month.

Economists at Citi say their team “looks for consumption to continue to decelerate, with PCE growth remaining below the pre-Covid 2.5% trend due to elevated interest rates, tight lending standards, and a cooling labor market.”

Along with income and spending, the second measure of Q1 GDP arrives on Thursday, with the Fed Beige Book out on Wednesday.

Among notable earnings this week

On Tuesday Box (BOX), CAVA Group (CAVA) and Bank of Nova Scotia (BNS) report.

Salesforce (CRM), DICK’S Sporting Goods (DKS), Agilent (A), Chewy (CHWY), HP (HPQ), Pure Storage (PSTG), Capri Holdings (CPRI), Okta (OKTA), C3.ai (AI) and Abercrombie & Fitch (ANF) report results.

Thursday sees Best Buy (BBY), Birkenstock (BIRK), Royal Bank of Canada (RY), Dollar General (DG), Foot Locker (FL), Costco (COST), Gap (GPS), Marvell (MRVL), Dell (DELL), NetApp (NTAP) and Nordstrom (JWN) on the calendar.

Genesco (GCO) and Frontline (FRO) wrap things up on Friday.

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In the news this weekend

Influential proxy advisory firm Glass Lewis has urged Tesla (TSLA) shareholders to reject a proposed $56 billion compensation package for boss Elon Musk that was voided by a U.S. court earlier this year.

The EV giant is set to hold its annual shareholder meeting on June 13, where participants will get a chance to vote on the compensation package comprising stock option awards.

Glass Lewis made its recommendation in a report published on Saturday that was viewed by Seeking Alpha. The advisory firm cited the “excessive” dilutive impact of the package.

Musk’s pay package was voided by Delaware Judge Kathaleen McCormick in late January after a shareholder lawsuit claimed that the package was unduly approved.

And GameStop (GME) said it had raised $933.4 million through an equity offering, cashing in on last week’s epic short squeeze.

The video game retailer said it had sold 45 million shares of its common stock through an at-the-market equity offering program, selling the maximum number of shares registered under the ATM program.

Last week, the company had disclosed that it had entered into an open market sales agreement with Jefferies to offer and sell up to 45 million shares.

GameStop has forecasted first-quarter net sales in the range of $872 million to $892 million, compared to the consensus expectation of $1.05 billion (that’s on only three estimates). That would be down from $1.237 billion a year ago.

The surge in GameStop’s (GME) shares early last week brought memories of 2021 back into the spotlight. The action was sparked by none other than retail investor Keith Gill, known online as Roaring Kitty, who had been one of the instrumental players in the saga three years ago.

And in the Wall Street Research Corner,

Active fund manager Cathie Wood says the top-heavy equity market has spurred a hunt for safety by investors similar to that during the worst economic crisis in the U.S.

“In our view, the search for cash and safety in the equity markets today is as intense as that during the Great Depression in the early 1930s,” Wood said. “When fear dissipated, the market broadened out and rewarded risk-taking once again.”

Her comment appeared above a video in which she discusses a “striking” Goldman Sachs chart about periods over the past century when the equity market was driven by just a few stocks. The concentration of market capitalization in the largest U.S. stocks is currently the highest in decades, at 33%.

“In ‘32, the peak, really there was massive fear and a crowding into the same stocks just because they seemed so safe,”. Then from 1939 to 1946, the largest-cap stocks underperformed relative to gains in the broader market, she said.



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