Investing.com -- In the holiday shortened week ahead investors will be looking to the latest Federal Reserve minutes for any new insights on the direction of monetary policy. Earnings from chipmaker Nvidia (NASDAQ:NVDA) will be a critical test of the artificial intelligence fever that has helped power gains for U.S. stocks in recent months. Walmart (NYSE:WMT) kicks off earnings from the biggest U.S. retailers, Chinese markets return, and PMI data will shed light on the strength of the global economy. Here’s what you need to know to start your week.
1. Fed minutes
The economic calendar is quiet for the holiday shortened week ahead with Wednesday’s minutes of the Federal Reserve’s January meeting the highlight.
Policymakers kept borrowing costs unchanged at their January 30-31 meeting and indicated that a cut at their upcoming meeting in March is unlikely.
Several Fed officials, including Fed Chairman Jerome Powell have indicated more time is needed to make sure inflation is on a sustainable path back to the Fed’s 2% target.
Markets are currently pricing in four quarter point rate cuts this year, starting in June, after scaling back rate cut bets in the wake of recent strong jobs, GDP and inflation data.
Investors will also get a chance to hear from Fed officials during the week, including Atlanta Fed President Raphael Bostic, governors Lisa Cook and Christopher Waller, along with Vice Chair Philip Jefferson.
The economic calendar also features data on existing home sales and initial jobless claims.
2. Nvidia earnings
Nvidia will report earnings after the U.S. market close on Wednesday in what could be a pivotal test of market sentiment given the size of the company and its place at the center of excitement over the financial promise of AI.
Shares of Nvidia, whose chips are considered the gold standard in the artificial intelligence industry, more than tripled in 2023 and have soared around another 50% so far this year to make it the third largest U.S. company by market cap after Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL).
Nvidia’s gains have accounted for more than a quarter of the S&P 500's increase this year.
Positive updates to Nvidia's corporate outlook could fuel enthusiasm over AI and extend a market rally, but any disappointment potentially has broad implications for markets.
"When people say that the market is doing well this year, they really mean that tech is doing well, and Nvidia is at the core of that," Keith Lerner, chief market strategist at Truist Advisory Services told Reuters. "There is excitement within AI and if that optimism is not fulfilled by earnings then you could see that reverberate quickly and weigh on sentiment."
3. Retail earnings
Earnings season for major U.S. retailers gets underway this week with Walmart expected to strike a cautious tone for 2024 when it reports results ahead of the market open on Tuesday.
Walmart is expected to post a roughly $11 billion rise in sales for the quarter spanning Nov. 1 to Jan. 31, or up 4%, according to LSEG estimates cited by Reuters.
Inflation remains a burden for many U.S. households facing a high cost of living and consumer prices rose more than expected in January, eroding hopes for imminent interest rates cuts from the Federal Reserve.
With grocery prices still well above pre-pandemic levels, more shoppers are gravitating to Walmart because of its food costs.
Due to its heft in grocery, Walmart is expected to report sales of $645 billion for fiscal 2024, more than double its closest competitor.
Analysts cited by Reuters also expect Walmart to show stronger profitability thanks to lower supply chain costs and the falling price of gas since November. Net income is expected to rise 8%.
4. PMI data
Fears over the prospect of a global recession have eased as the U.S. economy, with its strong labor market has remained resilient.
And even with China’s economy in the doldrums and Germany’s economy expected to slump this year PMI data out globally from Thursday should show that the picture beyond the U.S. is not all bleak.
While in contraction territory, the January euro zone PMI hit six-month highs and the bloc avoided a recession late last year, the latest GDP data suggests. German Q4 GDP data and the Ifo business climate index are out Friday. Note, German business morale brightened last month.
Emerging markets outside China, notably India and the Middle East, are strong and the U.S. PMI likely remains in expansionary territory after reaching six-month highs in January.
5. China markets return
Markets in China return from the week-long Lunar New Year holiday on Monday with investors waiting to see what Beijing does next to shore up its battered stock market.
In the run-up to the festive period, authorities scrambled to pull out all the stops to stem losses in mainland shares that had cratered to five-year lows.
That included appointing a new head of the country's market regulator, known for his tough stance on containing risks.
Earlier Sunday, China’s central bank left a key policy rate unchanged as expected with uncertainties around the timing Fed rate cuts limiting Beijing's room to maneuver on monetary policy.
Meanwhile, the latest data on new home prices, due out on Friday, will show just how deep the downturn in the country’s beleaguered property sector is.
--Reuters contributed to this report