Earnings may be a bigger catalyst for stocks after a wild ride in the market due to price fears

Traders on the floor of the New York Stock Exchange, July 12, 2022.

Source: NYSE

Investors are likely to turn their focus to earnings season, after the wild ride of the market with up and down expectations of a Fed rate hike.

Stocks have been volatile last week. The three major indices posted sharp gains on Friday, after fears of a full point rate hike by the Federal Reserve this month faded away. However, stocks posted weekly losses, with the S&P 500 down nearly a percentage point at 3,863.16.

A surprising 9.1% year-over-year jump in consumer inflation in June on Wednesday led to speculation that the Federal Reserve would be willing to fight price hikes by exceeding the increase by three-quarters of a point, expected on July 27.

But by Friday, comments from Federal Reserve officials, a surprise 1% gain in June retail sales, and some better data on consumer inflation expectations mirrored those expectations in the futures market.

said Art Hogan, chief market strategist at National Securities. 100 basis points equals one percentage point.

By Friday, strategists said there was a roughly 20% chance of a market price increase of 100 basis points.

Next week, earnings news could set the tone for a variety of companies’ report. Major banks continue their reports on Monday, with releases from Bank of America and Goldman Sachs. Johnson & Johnson, Netflix and Lockheed Martin published the results on Tuesday. Tesla and United Airlines release their quarterly numbers on Wednesday. AT&T, Union Pacific and Traveler are among those reports Thursday. Both American Express and Verizon release earnings on Friday.

Besides earnings, there are a few major data releases, mostly about housing. The National Association of Home Builders (NAHB) / Wells Fargo Housing Market Index will be released on Monday. Housing starts on Tuesday, and existing home sales start on Wednesday. On Thursday, there is the Federal Manufacturing Survey in Philadelphia. Finally, the Manufacturing and Services PMI will be released on Friday.

“Every data point matters and also what companies say. Next week…it’s a much broader picture in terms of earnings and the economy,” said Quincy Crosby, chief equity strategist at LPL Financial. “If there are negative reviews and heightened concerns about guidance, I think you will see questions about how the Fed will interpret that…the other point is whether or not the market can build a rally today.”

profit forecast

Strategists had expected the second-quarter earnings season to contain disappointments and downward revisions, as companies grapple with inflation, supply chain issues and staff shortages — and now a slower economy.

“We can turn to profits and that will use up all the oxygen in the room,” Hogan said. “There’s a chance that this is where the market can gain some momentum.” “We haven’t really heard from anyone but the big banks. There’s a chance that expectations are too low, and the narrative around the guidance is that it’s going to have to go down. If it doesn’t, there’s a chance we’ll see a positive reaction to that.”

Earnings for S&P 500 companies are expected to gain 5.6%, based on actual reports and estimates, according to I/B/E/S data from Refinitiv. As of Friday morning, 35 companies reported by Standard & Poor’s, and Refinitiv found that 80% of those companies posted earnings above expectations.

Hogan noted that by the end of earnings season, companies typically outperform an average of 65%. “It’s just a job to keep your guidance. The same guidance would be good enough,” he said. “We saw it with PepsiCo first out of the gate, leaving the forward steering as is, and the stock was welcomed for that. This could be the rule, not the exception.”

Crosby said investors will also be watching housing data, following the rapid jump in mortgage rates.

“It’s a series of focus on real estate, which is important because we want to see how the housing market holds up,” she said. “It’s the Fed’s focus on slowing the housing market. We’ll see how that unfolds.”

Next week’s calendar

Monday

gains: Bank of America Goldman Sachs IBM Synchrony Financial Prologis Charles Schwab

8:30 am Business Leaders Survey

10:00 AM NAHB مسح Survey

4:00 pm TIC بيانات data

Tuesday

gains: Johnson & Johnson, Netflix, Trust Financial, Interactive Brokers, JB Hunt Transport, Cal-Maine Foods, Ally Financial, Lockheed Martin, Hasbro, Halliburton

8:30 am housing starts

2:35 pm Fed Vice Chair Lyle Brainard on the Community Reinvestment Act

Wednesday

gains: Tesla, Elibility Health, Biogen, Baker Hughes, Comerica, Nasdaq, Abbott Labs, Alcoa, Northern Trust, United Airlines, Knight-Swift Transportation, Steel Dynamics, Wipro, Discover Financial, Equifax, FNB

10:00 am Existing home sales

Thursday

gains: AT&T, Travelers, DR Horton, Blackstone, Union Pacific, American Airlines, Snap, Mattel, Dow, SAP, Nokia, Roche Holdings, Danaher, Fifth Third, Tenet Healthcare, Boston Beer, PPG Industries, Domino’s, Tractor Supply, Marsh McLennan, Interpublic

8:30 am Initial claims

8:30 a.m. Federal Manufacturing in Philadelphia

Friday

gains: American Express, Verizon, HCA Healthcare, Schlumberger, Norsk Hydro, Financial Districts, Cleveland Cliffs

9:45 am S&P Global Manufacturing PMI

9:45 AM S&P Global Services PMI

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