A man with a protective face mask walks on 19 November 2020 along 14 Wall Street in the New York financial district.
Shannon Stapleton | Reuters
The earnings reporting season will kick off in the coming week, and it is expected to be a positive catalyst that could hold equities higher for the time being.
The week is also packed with Federal Reserve speakers and key data, including a much-anticipated inflation on Tuesday when the consumer price index is released. Fed Chairman Jerome Powell begins another busy week ahead of the Fed’s appearance with a Sunday night interview on ’60 minutes’.
Powell continued to comment in the past week that the Fed will continue its easy policy for a long time to come, and that the rise in inflation should be temporary. But higher inflation data than the expected producer price on Friday made the consumer price index all the more important on Tuesday. PPI rose 1%, double the expected rise.
Kevin Cummins, US economist at NatWest Markets, said he expects the core CPI to rise by 0.2% for March, or 1.5% year-on-year, but headline inflation should rise 0.5-year-on-year % or 2.5% range. Cummins said March was the beginning of a period in which inflation could occur greater, simply because of the comparison with the low levels last year when the economy closed.
“I think the Fed has already moved forward,” Cummins said. He said he expects the CPI to peak at 3.6% in May, but then calm down during the summer.
The other important data in the coming week is the March retail sales report, which Cummins said could show a 10% profit.
Cummins said sales in March should boost the $ 1,400 stimulus checks sent to individuals, which began reaching bank accounts in mid-March. More of the economy is also opening up as more people are vaccinated.
“The back of the month must be very strong,” he said. “If you look at car sales, it was the highest level in four years. It looks like restaurants are getting crowded with seats outside.”
Earnings season
But it may be the earnings season that is the right value for the economy.
“This is not what they are reporting,” said James Paulsen, chief investment strategist at Leuthold Group. ‘For the first time, we’re going to hear more and more companies commenting on the future. Are they going to review some of their prospects upwards, or is it noticeable? This is what the key to it will be. ‘
The big banks start Wednesday with JPMorgan, Goldman Sachs and Wells Fargo. Bank of America and Citigroup reported Thursday. Morgan Stanley reported Friday. PepsiCo and Delta Airlines are also among the first to report.
“The consensus for the first quarter is expected to increase by about 22%. We have an easy composition from last year. It could be closer to 30%,” said Brian Rauscher, head of Fundstrat’s global portfolio strategy.
Rauscher said he expects most earnings to be in the cyclical sectors, such as the consumer’s discretionary consumer, finance and materials, which are all sectors that benefit from the reopening economy.
“I think the earnings season is going to be constructive, and that will be good enough to keep the market higher,” he said.
Based on estimates and early reports, Refinitiv now expects earnings growth of 25% for the first quarter. Companies have beaten a rate of 81% so far. Earnings for the financial sector are expected to increase by 75%. The consumers’ discretionary sector was hit hard by closures a year ago, and according to Refinitiv, earnings are expected to bounce back by 98%.
“I think what we’re going to start seeing is that the tree-lined financing for these companies is really not appreciated. The earnings are going to start coming back faster than the revenue,” Rauscher said. “Corporate America has done a really good job over the past year with streamlining their operations, their cost structures and everything else. Revenue can come back 50%, and earnings can come back 100%.”
Major stock market indices have been higher over the past week, but small numbers lagged behind when the Russell 2000 lost ground.
Week calendar in advance
Monday
13:00 Boston Fed President Eric Rosengren
14:00 Federal budget
Tuesday
Earnings: Fastenal
06:00 NFIB Small Business Survey
8:30 CPI
12:00 Fed Panel on Race and Economy – President of the Atlanta Fed, Raphael Bostic, President of the Boston Fed, Eric Rosengren, President of Kansas City, Ester George, President of Minneapolis, Neel Kashkari, President of San Francisco, Mary Daly
12:00 pm Fed Fed, Patrick Harker of Philadelphia
Wednesday
Earnings: JPMorgan Chase, Goldman Sachs, Wells Fargo, Bed Bath and Beyond, Infosys, First Republic Bank
08:30 Import prices
14:00 Beige book
14:30 New York Fed President John Williams
16:00 Atlanta President Fed Raphael Bostic
Thursday
Earnings: Bank of America, Citigroup, UnitedHealth, PepsiCo, BlackRock, Alcoa, PPG Industries, US Bancorp, Charles Schwab, Delta Air Lines, Rite Aid, Wipro, Taiwan Semiconductor, Truist Financial, SunTrust
08:30 Initial claims
08:30 Retail Sales
08:30 Philadelphia Fed Recording
08:30 Empire State Production
09:15 Industrial production
10:00 Business Stocks
10:00 a.m. NAHB’s home builder sentiment
11:30, Atlanta Fed President Raphael Bostic
14:00 President San Daly of San Francisco
16:00 TIC-data
16:00 Cleveland Fed President Loretta Mester
Friday
Earnings: Morgan Stanley, PNC Financial, Kansas City Southern, Bank of NY Mellon, Citizens Financial, Ally Financial, State Street
08:30 Business Leaders Survey
08:30 housing starts
10:00 Consumer sentiment