Here are the 2 big things we're watching in the stock market in the week ahead

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Here are the 2 big things we're watching in the stock market in the week ahead Published Sun, May 10 202611:46 AM EDTZev Fima@zevfima First-quarter earnings season is winding down, but one Club name is set to report this week and several pieces of important economic data are on deck. Let's take a closer look. 1. Earnings: Qnity Electronics is our only stock on the earnings calendar, with results due out before the open Tuesday morning. Analysts expect Qnity to report earnings of 92 cents per share on revenue of $1.27 billion. Spun off from DuPont last year, Qnity is a picks-and-shovels play for the data center buildout, supplying a number of specialized materials and products used to make and package semiconductors. Given all we've heard this earnings season about the demand for AI computing power, we feel good about the numbers Qnity is set to report. No matter where the demand is — be it for central processing units (CPUs), Nvidia's graphics processing units (GPUs), or memory chips — it all bodes well for Qnity. The one area where we're prepared to see some weakness is in consumer electronics, where demand could take a hit due to the rapid rise in memory prices. When Qnity reported fourth-quarter numbers earlier this year, management detailed a multiyear transformation plan intended to simplify operations, enhance productivity, and cut costs, leading to a $100 million boost to its EBITDA (earnings before interest, taxes, depreciation, and amortization) run rate by the end of 2028. On the call, we'll be interested to hear how the plan is progressing and if the team has uncovered any additional areas for improvement that could result in an increase to that $100 million target. Finally, we're mindful of the stock backdrop. Qnity shares are trading near all-time highs and up 80% year to date, so expectations are high, and any signs of imperfection could be met with profit-taking. Q YTD mountain Qnity's year-to-date stock performance. 2. Economic data: This week is all about affordability on Main Street. The April consumer price index (CPI) is out Tuesday. On the headline number, economists polled by FactSet expect to see a 3.7% year-over-year increase — a sizable acceleration from the 3.3% reading in March amid soaring energy prices tied to the Iran war. Core CPI, which excludes more volatile food and energy prices, is expected to be up 2.7% year on year. That would be a modest pickup from 2.6% in March. Drilling into the report, we'll be keeping a close eye on the shelter index as affordability continues to be an issue plaguing Americans. The March report brought some good news on this front. Shelter was up 3% annually, matching its lowest reading since August 2021, and 0.3% on a monthly basis. Shelter is important to watch because housing payments usually represent the largest, unavoidable cost taken out of consumer wallets. While higher prices are felt by everyone, it's the lower-income cohort that especially feels the impact because they end up spending a relatively higher percentage of their money on items like shelter, household staples, and other unavoidable costs, like gasoline. Nevertheless, even if higher-income folks can more readily absorb the costs, they aren't immune to the emotional swings of swift price increases. That was on display Friday, when the University of Michigan's consumer sentiment report fell to a record low in May. The morning after the CPI report, the April producer price index (PPI) is due out. It's not as closely scrutinized as the CPI report, but we always pay attention to PPI because it represents the change in prices that producers receive for the goods they sell. If a steelmaker is being paid more for its hot-rolled steel, that means its customers, such as a farm-equipment maker, are seeing their costs go up. The customer can deal with rising prices for its inputs in one of two ways. Generally, they will try to avoid passing costs through to the consumer for a while. But eventually, if the inflation is too much to bear, they will have to pass through those costs to protect profit margins. As a result, PPI can help determine the likelihood of higher consumer prices in the future, making it a leading indicator for the CPI. Remember, the Federal Reserve is mostly concerned with the consumer pays as it sets monetary policy. That's why the core CPI and especially the core personal consumption expenditures (PCE) index capture more of the market's attention. The PCE is the Fed's preferred inflation gauge and it typically comes out about two weeks after the CPI. The Fed is soon to undergo a change at the top with Kevin Warsh set to replace Jerome Powell as chair. The April jobs report on Friday came in stronger than expectations, and inflation is still running comfortably above the Fed'