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The Week Ahead: US PCE inflation; Nike, Micron results

The Week Ahead from CMC Markets: Our pick of the key upcoming economic and company events to watch.

Welcome to Michael Kramer’s pick of the top three market events to look out for in the week ahead. 

The final week of June looks light on macroeconomic data, though the US personal consumption expenditures (PCE) price index data for May could have a bearing on US interest rates and, by extension, dollar pairs. Meanwhile, the latest earnings announcements from Micron [NASDAQ: MU] and Nike [NYSE: NKE] also stand out. Micron’s results represent an opportunity for investors to assess whether demand for AI components is broadening out, while Nike’s results should offer insights into the strength of US and Chinese consumers.

Micron Technology Q3 results

Wednesday 26 June
Analysts estimate that Micron, which is set to report fiscal third-quarter 2024 results after the close of trading on Wednesday, will report earnings of $0.50 a share, up from a loss of $1.43 a share in the year-ago period. Revenue in Q3 is expected to have grown 77.5% year-on-year to around $6.7bn, while adjusted gross margin is forecast to have expanded to 27.3%, up from 20% in the previous quarter. 

Currently, the market expects a roughly 12% move in the stock after the results. This means the share price, up 13% in the past month at $144.19 as of Thursday’s close, could move within the $127 to $162 range. The expected trading range is wide because the implied volatility levels in the options expiring on 28 June are over 110%, making the option premiums expensive. Additionally, most of the option positioning in the stock is for further upside, based on call delta and call gamma values, with the strike price at $155 serving as resistance. This means that a move above $155 could send the stock sharply higher, while a failure to push beyond $155 could result in many sellers entering the market.

Technically, the stock has a bump-and-run pattern, which suggests that the next potential move in the shares could be lower. A break of support around $140 would likely set up a steeper drop to $130 and potentially a near-term move back to the gap at $115.

Nike Q4 results

Thursday 27 June
Nike is expected to report after markets close that its Q4 earnings grew 14.3% year-on-year to $3.69 a share, with revenue up less than 1% year-on-year at $51.6bn. Gross margin is expected to improve to 44.8%, up from 43.5% last quarter.

As for the shares, which had risen 3% in the past month to $95.57 by Thursday’s close, the market expects an implied move of just 6.8% following the results. Option positioning appears to be more bearish for Nike, with significant levels of gamma built up around $83 and $84 a share. This suggests that Nike may be more likely to move higher following the results as implied volatility levels and gamma values decline, as long as the stock doesn’t drop below $84. 

Nike’s technical chart, shown below, reveals that although the stock has trended lower since late-2022, it has found support at around $88 on several occasions. If the stock can break this year’s downtrend by rising above the $96 area, it could make a substantial move higher, especially as implied volatility levels fall and put holders are impelled to sell. This could result in the stock filling a gap at around $101. Additionally, the relative strength index (RSI) is rising towards a reading of 60, a bullish signal.

Nike share price, October 2021-present

Sources: TradingView, Michael Kramer

 

US May PCE inflation

Friday 28 June
The PCE price index, said to be the Federal Reserve’s preferred inflation gauge, is expected to have remained flat month-on-month in May, while rising by 2.6% year-on-year, easing from an increase of 2.7% in April. Meanwhile, core PCE – which excludes volatile food and energy prices – is expected to have increased 0.1% month-on-month, cooling from 0.2% in April, while increasing 2.6% year-on-year, slowing from 2.8% in April. 

Analysts have become fairly accurate at predicting the PCE data – we’ve seen few surprises in recent months. While an upside surprise would be a shock, analysts’ low forecasts make such a surprise possible. 

One financial instrument that could be affected by an upside surprise is EUR/USD. The euro has weakened against the dollar to $1.0697, and a hotter-than-expected PCE report – signalling that US interest rates may stay higher for longer – could weaken the euro further versus the dollar. This might result in the euro sinking to the $1.06 support level, a prospect that has been on our radar since mid-May.

Key economic and company events

Here’s our rundown of notable economic announcements and company reports scheduled for the coming week:

Monday 24 June

• Germany: June IFO business sentiment index 
• Results: Enerpac Tool (Q3)

Tuesday 25 June

• Australia: June Westpac consumer confidence
• Canada: May consumer price index (CPI)​
• US: April housing price index, June Conference Board consumer confidence
• Results: Carnival (Q2), FedEx (Q4), TD Synnex (Q2)

Wednesday 26 June

• Australia: May CPI
• Japan: May retail trade
• US: Bank stress test results, May new home sales
• Results: AO World (FY), General Mills (Q4), Jefferies Financial (Q2), Levi Strauss & Co. (Q2), Liontrust Asset Management (FY), Marks Electrical (FY), Micron Technology (Q3), Paychex (Q4)

Thursday 27 June

• Australia: June consumer inflation expectations
• Eurozone: EU leaders summit, June business climate, June consumer confidence
• Japan: June Tokyo CPI
• US: Q1 gross domestic product (GDP), weekly initial jobless claims
• Results: Acuity Brands (Q3), Currys (FY), Halfords (FY), McCormick & Company (Q2), Moonpig (FY), Nike (Q4), Walgreens Boots Alliance (Q3)

Friday 28 June

• France: June CPI
• Germany: May retail sales June unemployment rate
• UK: Q1 GDP
• US: May personal consumption expenditures (PCE) price index
• Results: Science In Sport (FY)

Note: While we check all dates carefully to ensure that they are correct at the time of writing, the above announcements are subject to change.

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Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

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