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What you need to know this week

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The stakes are high on Wall Street this week as quarterly reporting seasons heat up with key results expected from the likes of Netflix (NFLX), Tesla (TSLA) and Twitter (TWTR).

Investors rebounding from Wednesday’s CPI data could take another hit if corporate financials show a significant slowdown in profits, with higher costs, higher interest rates and a potential slowdown in consumer spending, all things to keep an eye on.

According to research from FactSet, S&P 500 companies are expected to increase earnings by about 4.0% annually in the second quarter, the slowest rate of growth since late 2020 if realized.

On June 30, the estimated earnings growth rate for the second quarter of 2022 was 4.0%.

The estimated net profit margin for the quarter is 12.4%, marking the second consecutive quarter in which the net profit margin for the index has declined year-over-year. However, despite the ongoing headwinds, analysts predict that S&P 500 net income will be higher through the end of the year.

“Throughout this reporting season, investors will be looking for clarity on how companies are coping with rising costs and wages,” Treasury Partners chief investment officer Richard Saperstein said in a note, adding that current earnings-per-share estimates are “overly optimistic, given the deterioration of the macroeconomic background”.

US stocks rose on Friday but failed to recover from a turbulent week triggered by the June inflation shock report. All three major benchmarks for the week ended lower.

In terms of earnings, big tech results will start rolling in next week, starting with Netflix’s post-market results on Tuesday.

The streaming giant is looking to report a loss of 2 million subscribers in the second quarter, a key metric for investors.

Shares are down 70% year-to-date amid broader declines in growth stocks.

The Netflix logo displayed on a phone screen and the Netflix website displayed on a laptop screen are seen in this illustration photo taken in Krakow, Poland on July 14, 2022.  (Photo by Jakub Porzhitsky/NurPhoto via Getty Images)

The Netflix logo displayed on a phone screen and the Netflix website displayed on a laptop screen are seen in this illustration photo taken in Krakow, Poland on July 14, 2022. (Photo by Jakub Porzhitsky/NurPhoto via Getty Images)

Tesla’s earnings will also be in the spotlight after Wednesday’s close.

Despite a factory shutdown in China due to COVID during the quarter, shipments from the Shanghai factory rose last month to a record high. However, last month, CEO Elon Musk warned of a “very bad feeling” about the economy and said the company intends to cut about 10% of jobs and “suspend hiring worldwide” as recession fears rise.

Tesla’s findings also come as Musk prepares to take legal action with Twitter after pulling out of a deal to buy the social media platform. Twitter is due to release quarterly results before the call on Friday.

Other big names due to release their results include Bank of America (BAC) and Goldman Sachs (GS), Monday’s bank earnings recap, Johnson & Johnson (JNJ), United Airlines (UAL), AT&T (T) and Snap (SNAP). ).

Economic concerns continue

Last week, inflation data showed that consumer prices rose 9.1% year-on-year in June, the fastest annual pace since November 1981.

On Wall Street, the figure sparked speculation that Federal Reserve officials might raise interest rates by 100 basis points at a meeting later this month. The move will be the biggest interest rate hike in three decades.

Analysts at Barclays, led by Ajay Rajadhyaksha, dismissed talk of a full percentage hike as an “overreaction” for customers on Wednesday.

“We also believe that if the Fed does want to raise rates by 100 basis points in July, they will need to signal it to the markets before the shutdown period begins on July 16,” Barclays said. “Yes, they blew the forecast at the June meeting by going up 75 basis points despite having given it up earlier, but this month’s CPI report went well beyond the blackout period and they felt they needed to take under the control of inflationary history.

If the Fed pays too much attention to the June CPI reading, the Fed “risks creating a sense of panic,” said Andy Sparks, head of portfolio management research at MSCI.

“It also risks going beyond the norm and pushing an economy that has been showing signs of weakness into a full-blown recession.”

Federal Reserve Chairman Jerome H. Powell arrives for a House Financial Services Committee hearing on Capitol Hill June 23, 2022 in Washington, DC.  (Photo by Brendan Smialowski/AFP) (Photo by BRENDAN SMIALOWSKI/AFP via Getty Images)

Federal Reserve Chairman Jerome H. Powell arrives for a House Financial Services Committee hearing on Capitol Hill June 23, 2022 in Washington, DC. (Photo by Brendan Smialowski/AFP) (Photo by BRENDAN SMIALOWSKI/AFP via Getty Images)

Economists at Bank of America said last week they now expect a “mild recession” this year. The firm’s equity strategists also updated their S&P 500 target, implying the index would fall 25% from its all-time high hit on Jan. 3, noting that the average stock market decline during a recession is 31%.

As of Friday’s close, the benchmark was down about 19.5%.

On Thursday, Federal Reserve Board member Christopher Waller said he was ready to support a one percentage point hike if upcoming economic reports point to strong consumer spending, but kept his support for the rate at 0.75%.

The comments follow a similar signal Wednesday from Atlanta Fed President Rafael Bostic, who told reporters in St. Petersburg, Florida that “everything is in the game” when asked about the possibility of a full percentage point hike.

However, Friday’s retail sales and inflation data appeared to dampen some investors’ confidence in a 1% rate hike later this month. According to CME Group data, markets are currently priced at a 29% chance of a 100 basis point move this month; Thursday morning the figure was north of 80%.

Economic calendar

Monday: NAHB Housing Market IndexJuly (expected 66, 67 previous month), Net long-term TIC churnMay ($87.7 billion in the previous month), Total net churn of TICMay (1.3 billion in the previous month)

Tuesday: Housing startJune (expected 1.590 million, 1.549 million in the previous month), Building PermitsJune (expected 1.673 million, 1.695 million in the previous month), Housing starton a monthly basis, June (expect 2.7%, -14.4% in the previous month), Building Permitson a monthly basis, April (expecting -1.3%, -7.0% in the previous month)

Wednesday: MBA Mortgage Applicationsweek ended July 15 (-1.7% for the previous week), Sale of existing housesJune (expected 5.40 million, 5.41 million in the previous month), Sale of existing houseson a monthly basis, June (expect -0.2%, -3.4% in the previous month)

Thursday: Philadelphia Fed Business Outlook IndexJuly (expectation -1.0, -3.3 in the previous month), Initial Jobless Claimsweek ending July 16 (expected 240,000, 244,000 the previous week), Continuing claimsweek ending July 9 (expected 1.345m, 1.331 the previous week), Lead indexJune (expectation -0.5%, -0.4% in the previous month)

Friday: S&P Global PMI in the US manufacturing sectorJuly provisional (51.8 expected, 52.7 the previous month), US S&P Global Services PMIJuly preliminary (expected 52.4, 52.7 the previous month), S&P Global US Composite PMI, Preliminary for July (52.3 in the previous month)

income calendar

Monday:

Before the market opens: Bank of America (TANK), Goldman Sachs (GS), Charles Schwab (SHV), Synchrony Financial (CIF), Prologis (PLD)

After market close: IBM (IBM)

Tuesday:

Before the market opens: Johnson and Johnson (JN), Trust Financial (TFK), Interactive Brokers (IBKR), JB Hunt Transport (ZhBHT), Kal-Man Foods (CALM), Ally financial (ALLY), Lockheed Martin (LMT), Hasbro (IT HAS), Halliburton (HAL)

After market close: Netflix (NFLKS)

Wednesday:

Before the market opens: Biogen (BIIB), Baker Hughes (BKR), America (CMA), Nasdaq (NDAK), Abbot Laboratories (ABT), northern trust (NTRS)

After market close: Tesla (TSLA), United Airlines (UAL), Knight-Swift Transport (KNKS), Steel dynamics (STLD) Discover financial (DFS), Equifax (EFS), Health (ELV), Alcoa (AA) FNB (FNB)

Thursday:

Before the market opens: AT&T (T), Travelers (TRV), Dr. Horton (DHI), Black stone (BH), Union Pacific (UNP), american airlines (AAL), Doe (DOE), Nokia (Nor. kroner), Danaher (DHR), Fifth Third Bancorp (FITB), Supply of tractors (TSCO), Marsh McLennan (MMS), Interpublic (IPG)

After market close: Click (CLICK), Mattel (MAT), PPG Industries (PPG), Dominoes (DPZ), Tenet Healthcare (THC) Boston beer (SAM),

Friday:

Before the market opens: Twitter (T.W.T.R.) American Express (AKP), Verizon Communications (VZ), HCA Healthcare (HKA), Schlumberger (SLB), Regions Financial (RF), Cleveland Cliffs (CLF)

After market close: There are no important reports scheduled for release.

Alexandra Semyonova, correspondent for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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