Big Bank Earnings Under the Radar as S&P 500 Remains Volatile
09 Outubro 2022 - 6:55PM
Finscreener.org
A stronger-than-expected jobs
report ensured the equity markets tumbled last Friday, which meant
the Federal Reserve would continue to maintain a hawkish stance
with a focus on quantitative tightening. However, major indices
ended the week in the green after they experienced a strong rally
in the first two days of the last week.
In the week ended on October 7,
the
Dow Jones Industrial Average Index surged by 2%, while the
S&P 500 and
Nasdaq Composite index gained 1.5% and 0.75%, respectively.
The 10-year Treasury yield rates
stood at 3.9% while oil prices rallied after the OPEC+ disclosed
they would cut oil production by two million barrels each day to
support higher prices. It is the largest supply cut since early
2020. It led to a 15% hike in prices of the West Texas Intermediate
(WTI) crude, the largest weekly gain in more than 6%, closing the
week at $93 per barrel.
As we head into Q4 of 2022, all
eyes will be on corporate earnings for the quarter that ended in
September. LetU+02019s see what stock market investors
should expect in the upcoming week.
Big Banks to report earnings
The upcoming week will see big
banks, including JPMorgan Chase
(NYSE:
JPM),
Wells Fargo (NYSE:
WFC),
Morgan Stanley (NYSE: MS), and Citigroup
(NYSE: C), release Q3 earnings this week, while
Bank of America (NYSE:
BAC) and Goldman Sachs
(NYSE:
GS) will report earnings
in the following week.
The financial sector will provide
Wall Street analysts and investors a peek into the health of the
economy as it is sensitive to changes in interest rates and
macroeconomic conditions.
In a period of rising interest
rate hikes, banks and financial institutions benefit from widening
profit margins due to rising interest income. But, it will result
in lower demand for loans across verticals due to the higher cost
of debt for individuals, households, and
corporates.
A FactSet report projects
financial sector earnings to fall by 13.5% year over year due to
refinancing demand for mortgages and a slowdown in investment
banking activity. The financial sector is down 18% in 2022,
compared to the 23% decline of the S&P 500.
Will inflation cool down?
The Bureau of Labor Statistics
(BLS) will report the PPI (producer price index) for September on
Wednesday. The PPI tracks inflation from the viewpoint of
goods-producing businesses. Economists expect producer prices to
rise by 0.2% in September after it fell in the two prior
months.
Further, producer price inflation
has slowed significantly and decelerated to 8.7% in August,
compared to a 40-year high of 11.7% in March. Core prices, which
exclude food and energy, rose 0.3% on the month or 7.1% year over
year after it gained 0.4% in August.
Additionally, the consumer price
index (CPI) for September will be released on Thursday and is
forecast to rise 0.2%, compared to a 0.1% gain in August. On a
year-over-year basis, CPI inflation might moderate to 8.1% from
8.3% in August. Finally, core inflation is estimated to accelerate
to 6.5% annually from 6.3% in August.
Retail sales for September
The U.S. Census Bureau will
release its report for retail sales in September on Friday, which
is an indicator of consumer spending. Retail sales are projected to
rise 0.2% sequentially compared to 0.3% in August and a fall of
0.4% decline in July.
Retail sales growth slowed down
in July to 0.4% after peaking at 2.7% in January. A
stronger-than-expected retail sales might also support the Fed’s
case for interest rate hikes.
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