A lower bar for the Fed, a higher bar for retailers

Trading Catalysts A lower bar for the Fed, a higher bar for retailers

FOMC minutes and retailers in focus 17 August 2026

A strong earnings season has continued to support US equities (see our strategists’ Equity and Quant Strategy Earnings Tracker), while next week brings two key catalysts: results from several major United States retailers and to a lesser extent the Aug. 19 FOMC minutes. Recent inflation, jobs and Paula Andrea Soto, CFA >> consumer data have sharply reduced Sep hike expectations, lowering the hurdle for the LatAm Equity Strategist Merrill Lynch (Brazil) minutes to deliver a negative market surprise. Still, we will be looking to get a sense of how many FOMC participants (besides the three dissenters) wanted a hike or would at Thomas (T.J.) Thornton least have been willing to go along with one. Head of Research Marketing BofAS Retailer earnings wave: WMT, TGT, HD, LOW Economics A wave of big retailers report this week, with BofA analyst Christopher Nardone most Stephen Juneau US Economist constructive into Walmart’s print. He expects WMT (Thu, before mkt) to beat estimates, BofAS driven by accelerating digital sales and profit margins. He has a cautious view on TGT Equity & Quant Strategy (Wed, before mkt) despite strong consumer trends, as he is wary about the pace of EPS Savita Subramanian Equity & Quant Strategist revisions and sustainability of strong comp. For HD (Tue, before mkt), he expects Pro BofAS exposure to drive outperformance, while LOW remains more exposed to DIY (which Jill Carey Hall, CFA should continue to face pressure). For the group, investors should monitor potential Equity & Quant Strategist BofAS margin pressure from supply chain/promotional headwinds once tariff refunds start to Fundamental Equity roll off. Note the BofA Securities trading desk has a basket that might be relevant to this Christopher Nardone idea: Brick & Mortar Retail (MLDIBMRT*). Research Analyst BofAS

Fed hiking soon? Own Quality & Value in SMID Madeline Cech Research Analyst Despite the soft July jobs/inflation data, BofA expects the Fed to hike 75bp by the end of BofAS this year. While small caps have the greatest risk from rate hikes given their debt Derivatives Strategy profiles/leverage, Jill Hall continues to see upside for small/mid caps on strong 2H Nitin Saksena Equity-Linked Analyst earnings/guidance and a continued manufacturing recovery, but with a preference for BofAS mid>small. Historically, Value and Quality were the best-performing small cap styles See Team Page for List of Analysts during hiking cycles since 1989, while Risk underperformed most. And when limiting to the 12m following the first hike, Cash Return was the top long factor (followed by Exhibit 1: Key near-term catalysts Quality & Value). Screen of High Quality Value small/mid caps in SMID PM’s Guide. SPX implied move Derivatives: Buy Sep SPX calls Imp. After a strong earnings season, our derivs team continues to see risks skewed to the Date move Potential catalysts 8/17 Mon 0.39% upside. Still, uncertainty remains around market leadership in the next potential leg 8/18 Tue 0.39% higher, including whether the rotation away from tech can persist. Against this backdrop, 8/19 Wed 0.40% FOMC minutes given the S&P ’s broad US equity exposure and its outright low level of vol, the team 8/20 Thu 0.45% WMT likes SPX Sep calls as a clean way to gain asymmetric upside exposure. 8/21 Fri 0.50% Source: BofA Global Research, Bloomberg. BofA GLOBAL RESEARCH

* Note: MLDIBMRT is a proprietary basket structured and maintained by the BofA Trading ideas and investment strategies discussed herein may give rise to significant risk and are not suitable for all investors. Investors should have experience in relevant markets and the financial Securities trading desk. resources to absorb any losses arising from applying these ideas or strategies. >> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analyst List of acronyms at the end of this report. under the FINRA rules. Refer to "Other Important Disclosures" for information on certain BofA Securities entities that take responsibility for the information herein in particular…