CPI And Bank Earnings Highlight This Week

Key Takeaways

• Yields Rising
• CPI Report On Wednesday
• Banks Begin Reporting Friday

On a holiday-shortened week, both the S&P 500 and Nasdaq Composite were down around 1% last week. Bonds were also down as yields increased in anticipation of a Fed rate hike later this month. For the first time since the beginning of March, the yield on the 10-year note topped 4%, closing the week at 4.05%. This week, we’ll get more economic data and earnings season will also kick off with some of the major banks reporting on Friday.

Last Friday’s jobs report, while slightly weaker than expected, still showed a tight labor force with rising wages and a low overall unemployment rate of just 3.6%. The continuing strength in the economy has confounded many observers who expected the economy to slip into a recession. That same strength has all probabilities pointing to a quarter-point interest rate hike when the Federal Reserve Open Market Committee (FOMC) meets in just over two weeks. While the Fed has signaled two potential rate hikes in the second half of the year, currently, markets are only forecasting one.

Factoring into the Fed’s decision will be Wednesday’s Consumer Price Index (CPI) report. July’s report is expected to show an increase of 0.3% on a month-over-month basis and down slightly from last month’s 0.4%. On a yearly basis, prices are expected to have increased 5%, down from the 5.3% reported in June. Following the CPI report, all eyes will turn to earnings which will kick off Friday.

Citigroup
C
, JP Morgan and Wells Fargo
WFC
are all scheduled to report 2Q earnings before the market opens on Friday. Then next week, things will heat up with Netflix
NFLX
and Tesla
TSLA
scheduled to report. Overall, earnings for the second quarter are expected to be down 7.2% year-over-year. An interesting aspect to this is the price multiple at which stocks are trading. At the beginning of 2023, the S&P 500 was trading with a price to earnings multiple of 17. That number has since increased to 19. While that isn’t significantly above its mean of 18.6, the fact that the multiple has increased while earnings are expected to decrease is worth noting.

Lastly, in addition to banks beginning to report on Friday, we’re already starting to get some earnings reports trickling out. Taiwanese Semiconductor reported earnings this morning that beat expectations; however, the company warned they expect a more difficult second half of the year. A couple other companies will also report this week before Friday. Delta Airlines and PepsiCo
PEP
will both report earnings on Thursday before the market opens. I’m particularly interested to hear what Delta has to say about consumer demand for travel and whether or not people have cut back on vacation plans. As always, I would stick with your investing plan and long term objectives.

tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.