Stock investors will be turning attentions to US earnings this week with a slew of top companies set to release results. Bank of America today and Goldman Sachs on Tuesday (10/18) will cap off big Wall Street bank earnings this week following results from Citigroup, JPMorgan Chase, Morgan Stanley, and Wells Fargo last Friday.
Q3 earnings
Those numbers overall showed lower profits versus last year mostly due to a decline in IPO and corporate merger activity, though that was somewhat offset by sizable increases in interest income. Notably, banks also added more cash to reserves to guard against bad loans and other possible hits if the US economy falters further. Most banks said US consumers are generally holding up in the face of inflation and that bank customer health indicators still show few signs of stress.
Insiders now expect Q3 profits for S&P 500 companies to rise +3.6% from a year ago, down from an +11.1% increase expected at the start of July. Only about 7% of S&P 500 have reported so far with the majority of results filtering out over the next two weeks.
The bulk of big US tech companies report next week (10/24 – 10/28), which many Wall Street insiders think could limit upside potential this week.
Keep in mind, Alphabet. Apple, Amazon, Microsoft, and Tesla account for 21% of the S&P 500’s value so any big moves in those stocks can have an outsized influence on the overall market. This week’s earnings results will come from a broad cross-section of industries that should provide more clues as to where troubles may be lurking.
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The energy sector by far is expected to report the biggest annual gains while consumer discretionary and the tech sector are expected to be among those struggling the most.
US dollar
Stock investors are also very focused on the US dollar’s impact on profits with numerous multinationals (a company operating in several countries) having warned for months that the strong dollar was going to deal a blow.
Again, tech companies are among the most highly exposed to those headwinds, along with the materials sector. Unfortunately for multinationals, upward pressure on the US dollar is expected to continue as currency traders seek a “safe haven” amid the various headwinds circling the globe right now. While the US faces its own growth risks, the economy is nonetheless expected to hold up better than most other advanced economies.
A looming energy crisis in Europe, a faltering new government in Britain, and a deepening slowdown in China stemming from a collapsing property market and ongoing Covid-19 lockdowns are among just a few of the economic issues driving investors to the US currency.
The strong dollar is benefitting consumers somewhat as it helps to battle inflation and lower import prices, which fell for a third month in a row in September. That, however, was largely driven by a -7.5% drop in imported fuel prices, which many experts think is likely to reverse course after OPEC last week decided to cut crude oil production by -2 million barrels per day.
The White House is set to announce new plans this week to combat high pump prices which could include another release from the Strategic Petroleum Reserve or even a cap on US fuel exports.
If you are trading or investing in the energy markets get ready for another wild-ride.
The next big Fed meeting is just over two weeks away. Looking for the end of October and early-November to be extremely volatile.
Earnings Season To Set a Tone For The Week
Wishing you a great week!
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