New week: All eyes on Fed, retail earnings

Last week was dubbed the “Retail Wreck” by Wall Street commentators. Back-to-back-to-back bad news on sales, profits and the future outlook for consumer spending from retail heavyweights such as Macy’s, Kohl’s and Nordstrom put a scare into investors, sending the Dow Jones industrial average to its third straight weekly decline.

The parade of retail earnings continues this week with results from heavy hitters, ranging from home improvement retailers Home Depot and Lowe’s to giant retailers Target and Walmart. Investors will try to glean from the coming earnings reports whether the recent string of high-profile profit misses in the retail space is a problem confined to department stores and apparel makers – or whether it is a broader problem signaling economic troubles ahead for the consumer-driven U.S. economy.

That question remains unanswered after the broader retail sales number for April came in stronger than expected at +1.3% on Friday. Strong sales in the first month of the second quarter, many economists suggest, could signal that the U.S. economy and consumers are making a comeback following a weak first quarter.

Wall Street will also closely scrutinize the minutes of the Federal Reserve’s April 26-27 meeting, when the U.S. central bank opted to keep interest rates unchanged. Investors will be looking for any clues that could hint at a possible rate hike at the Fed’s June meeting. A hike next month is definitely not priced in to asset prices as investors think it is a low-probability event.