Stock bulls are trying to maintain control with all three major indexes off to good start to the new year. Investors are highly anxious to see earnings results today from big Wall Street banks and a few other big names as we kick off Q4 earnings season. Bank of America, BlackRock, Citigroup, JPMorgan Chase, and Wells Fargo all report before stock markets open this morning. Investors are particularly interested in big bank insights into the health of the US consumer and overall economy.
Investors may also be extra sensitive to any increases that banks make to their loan-loss provisions, which some may view as a warning sign of looming defaults.
CPI
Bulls were bolstered yesterday by a decline in the December Consumer Price Index, which fell to 6.5% from 7.1% in November.
Importantly, the month-over-month change in headline CPI was negative (-0.1%), the first monthly decline since May 2020 when consumer demand collapsed at the beginning of the Covid-19 pandemic. Bears, however, are pointing to several areas of concern that they say indicates a long battle with inflation still lies ahead. Of note, the monthly “core” rate, which excludes food and energy, rose +0.3% in December, faster than the +0.2% rate in November.
Shelter was the “dominant” factor in that increase and bears warn it will take several more months for slowly falling rent and home prices to filter through to inflation data. In fact, shelter prices are expected to continue climbing in the first half of the year.
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It’s also worth noting that the annualized food-price inflation rate was +10.4% in December. While this was a move down from November’s +12%, there are worries that food prices will remain stubbornly high in 2023, possibly even rising. That’s largely because of several ongoing issues that have long-term impacts on global food supplies, including the war in Ukraine, avian influenza, and weather extremes.
Keep in mind that global grain and oilseed stockpiles are expected to remain tight, which means any production shocks could potentially send food prices skyrocketing even higher.
Data To Watch
Economic data today includes Consumer Sentiment and Import/Export Prices. Turning to next week, stock, bond, and commodity markets are closed on Monday for the Martin Luther King Jr. holiday.
The shortened week has a ton of critical data and earnings crammed into it though, so things could get volatile. Key data to watch next week includes Empire State Manufacturing on Tuesday; the Producer Price Index, Retail Sales, Industrial Production, Business, the NAHB Housing Market Index, and the Fed’s Beige Book on Wednesday; Housing Starts and the Philadelphia Fed Index on Thursday; and Existing Home Sales on Friday.
Earnings are equally busy with results from Goldman Sachs, Interactive Brokers, Morgan Stanley, and United Airlines on Tuesday; Alcoa, Charles Schwab, Discover, JB Hunt, Kinder Morgan, and Prologis on Wednesday; American Airlines, Concentrix, Fastenal, Neflix, and Procter & Gamble on Thursday; and Ally Financial, Ericsson, Schlumberger, and State Street on Friday.
Additionally, investors next week will be monitoring the headlines out of the World Economic Forum’s Annual Meeting in Davos, Switzerland, which runs January 16-20 with the theme “Cooperation in a Fragmented World.”
Traders Are Looking For Banks Earnings Today
Wishing you a great week!
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