Walmart and inflation — What you need to know Thursday in markets

The biggest corporate news of the week is due up on Thursday, and that’s earnings out of Walmart (WMT).

The economic calendar is also busy with inflation, the US housing market, and the US labor market all in focus.

We’ll also see if markets rebound after the Dow broke its 7-day winning streak on Wednesday.

Walmart

Retail behemoth Walmart is set to report earnings before the bell Thursday, and the company should give us a good reading on the state of the US consumer.

Analysts expect the company to report earnings per share of $0.96 on revenue of $118.7 billion, according to estimates from Yahoo Finance.

Same-store sales are expected to rise 1.3% at Walmart’s US sales.

The company is also likely to give investors an update on the status of its Jet.com acquisition, a move targeted at bolstering Walmart’s e-commerce operations. Groceries, which accounts for about half of Walmart’s revenue, is a space Amazon (AMZN) has aggressively moved into.

In a note out ahead of Walmart’s earnings, Bloomberg Intelligence also noted that food deflation remains robust and when combining this with wage growth and the impact of the Jet deal, Walmart’s results could be pressured.

As of Wednesday’s close, Walmart shares were up 16.5% year-to-date.

Economy

It’s been a busy week in economic data and most of the action will wrap up Thursday.

The October report on consumer prices should show “core” inflation rose 2.2% over the prior year, north of the Fed’s 2% goal, though the Fed does prefer the PCE number which is tabulated from GDP. Core PCE prices were up 1.7% year-on-year at last check.

In the housing market, the October report on housing starts and building permits is due out at Thursday morning, and the focus on this report will be single-family residences, which have not been built at a pace keeping up with market demand.

The weekly report on initial jobless claims is also due out at 8:30 a.m. ET, and should show claims totaled 257,000 last week, which would mark the 89th-straight week this number has come in below 300,000.

Markets

The Dow broke its 7-day winning streak on Wednesday, falling 54 points to log its first decline since Donald Trump’s election.

But markets are still grappling with the implications of not only a Trump administration but a potential end to the Washington gridlock that has defined the last several years, as Republicans now control the White House, the Senate, and the House of Representatives.

In The Wall Street Journal on Wednesday, Greg Ip argued the bond market has gotten too excited by the prospects of more growth, and more inflation, from a Trump administration.

On a related note, Bill Gross wrote Wednesday that markets — and voters — are likely to be disappointed by policies pursued by a Trump administration, writing, “[Trump’s] tenure will be a short four years but is likely to be a damaging one for jobless and low-wage American voters.

Gross adds: “They were the force for Trump’s flipping the Midwest into a Republican Electoral College victory. But while the Fox promised jobs and to make America great again, his policies of greater defense and infrastructure spending combined with lower corporate taxes to invigorate the private sector continue to favor capital versus labor, markets versus wages, and is a continuation of the status quo.”

Howard Marks at Oaktree Capital, however, puts what we think is the finest point on how investors are digesting the post-Trump reaction in a recent note to clients. And the lesson, once again, is that no one knows anything until after it happens.

“The market often fails to act rationally in the short run, primarily because of the role played by people in determining its course,” Marks writes.

“Thus, two key observations can be made based on last week’s developments:

• First, no one really knows what events are going to transpire.

• And second, no on knows what the market’s reaction to those events will be.

These observations reinforce my belief that it’s a mistake to base investment decisions on macro forecasts. But you knew that.”

Further Reading

Maria Bartiromo reports Jamie Dimon has a “big meeting” with Donald Trump on Thursday, and Dimon could be named Treasury Secretary (Reuters)

Donald Trump looks doomed to inherit the next recession (Yahoo Finance)

Tiffany & Co.’s flagship store is next to Trump Tower, and that could be a big problem (Bloomberg)

The Minneapolis Fed’s plan to end too big to fail (Medium)

Ben Thompson on fake news (Stratechery) Related: Izzy Kaminska on fake news (FT Alphaville)

The simple reason Snapchat is going public (Yahoo Finance)

DraftKings and FanDuel are merging (LinkedIn)

Subway fares could increase to $3 in New York City (WSJ)

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Myles Udland is a writer at Yahoo Finance.

Read more from Myles here; follow him on Twitter @MylesUdland