This week could be the week when Wall Street trading is shortened to a holiday. But these four days are packed with updates on the market’s biggest debate: Will AI eat software? Are American consumers okay? And what about inflation? Let’s get started. 1. Earnings: Salesforce reports Wednesday night. Unfortunately, the stock remains a hotly contested market since its last earnings report in late February. Concerns about artificial intelligence disrupting Bank of America’s business persist, as evidenced by Bank of America’s stock sale last week. This is also reflected in the stock price chart. The truth is, Salesforce won’t be able to erase these existential concerns with one strong earnings report on Wednesday. But a journey of a thousand miles begins with a step, and Jim Cramer said he’s happy to give CEO Marc Benioff a chance to show progress. So what does a step in the right direction look like? It starts with significant revenue growth for Agentforce, a platform for building AI agents that can act with limited human intervention. As of February, Agentforce had annual recurring revenue of $800 million, about 2% of its total, and had closed more than 29,000 deals since its launch. Where are these numbers now? Friday’s reaction to Workday’s quarter shows the market could celebrate a strong software quarter. At the same time, investors are concerned about slowing growth in Salesforce’s traditional business, which relies on seat-based licenses. As such, Salesforce must deliver adequate performance on other metrics, particularly current remaining performance obligations (cRPO), which measures contracted revenue expected to be realized within the next 12 months. Last quarter’s underlying cRPO growth of 9% was a bit disappointing. The outlook for the April quarter was also effectively 9%, or 13% including the 4% gain from the Informatica acquisition. Operating margins are another measure of the company’s overall health, and the FactSet consensus is 33.4%, suggesting a 1.2 percentage point year-over-year expansion. Another thing to note is that Salesforce is rolling out new reporting segments in this release, increasing from five to two. For now, the numbers will be published in both old and new formats, but analysts may ask management to explain the rationale during the company’s earnings call. The same thing happened last week when Nvidia made changes to its segment structure. Here’s what the Street expects, according to estimates compiled by LSEG: Revenue: $11.05 billion EPS: $3.12 Costco’s quarterly results are scheduled to be released Thursday night. The report does not focus on sales, as the company releases sales figures monthly. Instead, it’s all about what management has to share on the call about margins, profits, membership renewal trends, same-store sales, and changes in consumer shopping habits. The renewal rate in the United States is particularly noteworthy. That’s because renewal rates have declined in recent quarters as the company promoted online sign-ups that skewed younger. The problem is that the renewal fee for those who join digitally is lower than for those who register in-store. Costco is taking steps to improve customer retention, such as targeted marketing, and needs evidence that it’s working. While high oil prices weigh on consumers, Costco is unique in that this dynamic drives foot traffic to its stores, as it typically offers the lowest gas prices in its area. Costco’s membership model already helps ensure loyalty, and its high-volume sales strategy ensures members are getting the best value in town. Especially in times when gas prices are rising, people pursue value even more vigorously. As JPMorgan analysts said in a note last month, “As gas prices soar,[Costco]memberships become more attractive, similar to credit cards (5% or 4% cash back on gas purchases).” Of course, if you’re already heading to the Costco parking lot to fill up your tank, you can also stock up on a few pantry items and groceries while seeing what other deals are on offer. To be sure, rising fuel prices could put pressure on Costco’s profit margins, but that’s a dynamic that’s understood on Wall Street. It’s likely that your tax return brought in some profit this quarter, so you want to know about your purchasing patterns when that profit starts to decline. After all, the more nervous consumers become, the more value they seek. With Costco’s membership model and high-volume sales strategy, few companies, if any, can compete with Costco. The LSEG consensus is: Revenue: $69.73 billion EPS: $4.93 2. Economic data: Most of investors’ attention will be on Thursday’s Personal Expenditures and Incomes report, which includes the Personal Consumption Expenditures (PCE) price index. That’s the metric the Federal Reserve recommends when assessing inflation. As of Friday, economists expected the composite index to rise 3.8% from a year ago, according to FactSet. At a core level, which excludes the more volatile energy and food prices, a 3.3% rise is expected. With oil prices stuck in the $100 range, any chance the Fed will cut interest rates this year has disappeared. The question here is whether you can at least avoid hiking. The Fed is in a tough position as fuel costs rise and bond yields rise accordingly. That’s because these inflation signals indicate that central banks need to keep rates high, if not raise them, to prevent inflation from getting out of hand again. Inflation was already above the Fed’s 2% target before the war, and given that the post-pandemic inflation spike is still recent, it’s likely to be even worse this time around. Just last week, we heard from several major retailers that consumers are already under stress, and it’s showing in changes in their purchasing behavior. Therein lies the Fed’s conundrum. Consumer tensions point to a possible economic slowdown, given that consumer spending accounts for about two-thirds of the U.S. gross domestic product. A slowing economy necessitates a rate cut, while rising inflation traditionally necessitates a rate hike. For now, we’re fine. Unemployment remains low and consumers are getting by. However, this means that the move will be heavily influenced by next week’s inflation report. As of Friday, the market sees a 42% chance of no rate cut by year-end, a 41% chance of a quarter-point rate hike and a 15% chance of two rate hikes, according to the CME FedWatch tool. A hot inflation report next week will make a rate hike even more likely, which is the last thing anyone wants to see. It’s not the investors on Wall Street who are pricing assets, or the Americans on Main Street who just want mortgage rates and oil prices to ease. That’s why the most important thing for both Wall Street and Main Street is for the Strait of Hormuz to reopen. This unique event could be the catalyst needed to bring oil prices down again, and bond yields to follow suit, giving Fed Chairman Kevin Warsh the freedom to cut interest rates. Warsh was sworn in on Friday. The good news is that President Donald Trump said this weekend’s talks with Iran were proceeding in a “constructive” manner, and oil prices were falling accordingly on Monday (commodities are trading even though US stock markets are closed for Memorial Day). The other economic report we’re watching is Thursday’s second release of first-quarter GDP. Because it looks backwards, it is less impactful than the PCE report. But it helps us better understand the economic starting point before the war with Iran (technically speaking, the war was underway during March, the last month of the first quarter, but the impact of April and now May is more significant). Thursday’s new home sales report will also be closely watched. At our club, we like to say that housing has more weight in the economy than it does because of all the other purchases that come with purchasing a new home, such as services, appliances, and furniture. Signs of increased inventory or rising prices are welcome. Unfortunately, it will be of little use until mortgage rates ease substantially. Home Depot is the club stock most tied to the housing market. Last week’s earnings report showed that the company’s performance is not too bad, but it won’t be good until housing turnover recovers. 3. Conference Updates: Investor conference season is here on Wall Street. This season takes place between quarterly results, not a slow period for companies, and banks invite executives and their customers for Q&As and presentations. A big event for our club is the Bernstein Strategic Decision Meeting. Boeing, Johnson & Johnson, GE Vernova and Wells Fargo are scheduled to attend Wednesday, according to the conference website. Eli Lilly and Starbucks will also open stores Thursday. We will continue to keep an eye out for notable disclosures and headlines. Even if you don’t get a ton of substantive updates from management, the questions analysts ask during Q&A can indicate the kinds of discussions and conversations they’re having with customers. It’s worth it too. 1 week ago Monday, May 25th U.S. stock market closed for Memorial Day Tuesday, May 26th FHFA Home Price Index at 9am ET Before the bell: Elbit Systems (ESLT), AutoZone (AZO) After the bell: Z Scalers (ZS), Chemical & Mining (SQM), BOX (BOX) Wednesday, May 27th Bernstein Strategic Meeting Before the bell: Bath & Body Works (BBWI), Bank of Nova Scotia (BNS), Capri Holdings (CPRI), Dick’s Sporting Goods (DKS), Pinduoduo (PDD), Abercrombie & Fitch (ANF), Bank of Montreal (BMO), Dycom (DY) After: Salesforce (CRM), Marvell (MRVL), Snowflake (SNOW), HP (HPQ), Synopsys (SNPS) Thursday, May 28th Bernstein Strategic Decision Meeting Personal Consumption Expenditures (PCE) Index at 8:30 a.m. ET, New Unemployment Insurance Claims at 8:30 a.m. ET, Second Quarterly GDP Release at 8:30 a.m. ET, New Home Sales at 10 a.m. ET Before the bell: Best Buy (BBY), Hormel Foods (HRL), Canadian Imperial Bank (CM), Kohl’s (KSS), XPeng (XPDV), Burlington (BURL), Royal Bank of Canada (RY) After the bell: Costco (COST), Dell Technologies (DELL), UiPath (PATH), MongoDB (MDB), Autodesk (ADSK), SentinelOne (S), Okta (OKTA), Gap (GAP), NetApp (NTAP), American Eagle Outfitters (AEO) Friday, May 29 (Jim Cramer’s Charitable Trust See here for a complete list of stocks.) 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