The Week Ahead (NVDA, TD, and PANW Earnings; Canada April CPI and Fed's Minutes)

Deutsche Bank analysts have pointed out that the after-hours update will coincide with the one-year anniversary of NVIDIA's groundbreaking report from May 2023, which marked a significant shift in the market.

"We expect the company to continue its trend of delivering healthy multi-billion dollar beats [and] raises on still healthy demand for AI compute,"analysts said in a note.The bank acknowledged some may be putting off orders before the release of NVIDIA's latest Blackwell graphics processing unit, expected this year.

However, "we still expect aggregate demand trends to remain healthy," Deutsche added, likely meaning NVIDIA's near-term guidance will be unaffected. NVIDIA had guided in February for revenue to come in around US$24 billion this year, alongside gross margins of roughly 76.3%.

Following the publication of TD's US bank call report on May 1 and a Wall Street Journal (WSJ) report detailing US regulators' investigation of TD, investors will look for a concrete timeline for management to resolve the ongoing BSA/AML issue. "While we appreciate that management is limited by ongoing discussion with regulators, we believe clarity on the magnitude and timing of the regulatory impact would go a long way to reversing TD's year-to-date underperformance vs peers."

For fiscal 3Q, it has guided total billings in the range of $2.3 billion to $2.35 billion, representing year-over-year growth of 2% to 4%.Revenue is expected to grow 13% to 15% year-over-year to between $1.95 billion to $1.98 billion and adjusted earnings per share (EPS) is forecast to be in the range of $1.24 to $1.26.

The Bank of America analysts see Palo Alto Networks reporting solid overall results for the quarter on the back of reduced expectations and growth in Next Generation Security (NGS), likely offset by weak firewall trends.

"We divide up our expectations into three parts: we expect firewalls to be weak yet believe Street expectations are low," they wrote in a note to clients.

Heading into the last significant economic announcement before the Bank of Canada's upcoming rate decision on June 5th, the inflation report for April is anticipated to reflect a continued downward trend. Unless there is an unexpected rise, the prevailing weak economic and job market conditions are likely to justify a reduction in interest rates by 25 basis points at the Bank of Canada's June meeting.

For April, forecasts indicate that the annual Consumer Price Index (CPI) growth will ease to 2.8%, down from 2.9% in March, inching closer to the central bank's target of 2% despite an uptick in energy costs. Gasoline prices saw a significant monthly increase of 7.6% in April, partly due to the yearly hike in the federal carbon tax. Contrarily, the growth rate of food prices has been decelerating, and the expected year-over-year increase for the "core" CPI, which excludes food and energy, is to slightly decrease to 2.6% from March's 2.9%. Although mortgage interest costs soared by 25% on a year-over-year basis in March as a delayed response to earlier rate hikes, contributing to over one-fourth of the overall price growth, this upward trend is showing signs of moderation.

The Bank of Canada's policymakers will pay closer attention to the bank's preferred core inflation indicators, which are considered more reflective of the general inflationary pressures. For instance, the 'median' and 'trim' measures of the CPI, which provide a more precise representation, averaged 3.0% year-over-year in March. This marks the first return to the upper limit of the Bank's target range of 1% to 3% since 2021. Notably, more recent patterns have softened, with the 3-month rolling average of month-over-month increases in these core measures falling below the 2% target as of March. This slowdown has been widespread, with a greater number of items in the CPI basket experiencing lower rates of inflation this year.

It is highly probable that the minutes from the FOMC won't offer much fresh insight into the Federal Reserve's forthcoming decisions. Nevertheless, it remains an event of significance that demands attention. Their last minute reminded us that "members" wanted greater confidence that "inflation is moving sustainably towards 2%". We know that inflation came in slightly softer and in line with market expectations, but it hasn't come down quickly enough to provide the confidence for the Fed it seeks to signal a cut, as much as traders want them to.

We also have plenty of Fed speakers, but looking through many of the titles suggests they might not be the biggest drivers for market volatility. But like the minutes, traders need to have these on their radar. Just in case.