Oct 9, 2022
VOT Research Desk
Key News – Insights and Analysis
The Market Perspective:
Big bank earnings, inflation measurements, and retail sales statistics will all be released the following week.
U.S. share markets fell on Friday as a stronger-than-expected jobs data increased the prospect of more aggressive Federal Reserve tightening, but following a strong two-day rally on Monday and Tuesday, they closed the week higher.
After a strong two-day rally on Monday and Tuesday, U.S. equity markets ended the week higher despite falling on Friday as a stronger-than-expected job report raised the likelihood of more aggressive tightening by the Federal Reserve.
The Dow rose by 2%, the S&P 500 by 1.5%, and the Nasdaq100 by 0.75 percent for the week. The 10-year Treasury note yield increased to 3.89 percent as yields on U.S. Treasury securities increased. After OPEC+ announced that it would reduce oil production by up to two million barrels per day to support prices—the largest supply reduction since early 2020—oil prices surged. This week, the price of West Texas Intermediate (WTI) crude reached $93 per barrel, marking the highest weekly gain since March.
Next week, several major financial institutions, including JPMorgan Chase, Morgan Stanley, BlackRock, and Citigroup, are scheduled to report earnings, kicking off the corporate earnings season. Results are also scheduled to be released by PepsiCo, TSMC, Delta Air Lines, and UnitedHealth, among other major companies. The next week will see the release of important reports on consumer and producer inflation, retail sales, and consumer confidence. Wednesday will see the release of the meeting minutes from the most recent FOMC policy meeting, held on September 20 and 21.
Due to the possibility of upcoming regulatory changes, the cryptocurrency markets may also experience a significant week next week. At the upcoming G20 meeting in Washington on Wednesday and Thursday, the Financial Stability Board (FSB) is expected to announce plans to regulate the crypto and decentralized finance (DeFi) industries. The U.S. Financial Stability Oversight Council (FSOC) called for tighter regulation of the cryptocurrency market, particularly of stablecoins, which are more volatile.
Key Considerations:
The quarterly results from major banks and financial institutions kick off the corporate earnings season;Companies scheduled to report include JPMorgan Chase, BlackRock, Morgan Stanley, and Citigroup. Other companies expected to report earnings include Taiwan Semiconductor (TSMC), PepsiCo, Delta Air Lines, and UnitedHealth Group. The Bureau of Labor Statistics (BLS) will release its September CPI and PPI, which track consumer and producer inflation, respectively. The U.S. Census Bureau will release September retail sales figures on Friday, indicating whether consumer spending held up last month. The University of Michigan will release the –
Consumer Inflation Expectations (Sep) Wednesday,
October 12 PepsiCo (PEP), Infosys Ltd. (INFY), and Wipro Ltd. (WIT) report earnings Producer Price Index (PPI) Inflation (Sep) FOMC Meeting Minutes (Sep. 20-21 Meeting) Thursday, October 13 TSMC (TSM), Wells Fargo (WFC), BlackRock (BLK), Progressive Corp. (PGR), Walgreens Boots AllianceBank of America and Goldman Sachs will report the following week, while JPMorgan Chase, Wells Fargo, BlackRock, Morgan Stanley, Citigroup, U.S. Bancorp, and PNC Financial Services are all scheduled to report. Due to their extreme sensitivity to changes in interest rates and broader economic conditions, stocks in the financial sector can serve as a harbinger for other industries.
Higher interest rates typically have a positive impact on net interest margins, which in turn benefits shares of banks and other financial institutions.
However, earnings in the financial sector could be negatively impacted by a slowdown in investment banking activity and lower refinancing demand for mortgages and other consumer loans as interest rates rise, according to FactSet analysts, who anticipate earnings to decrease by 13.5% on average this quarter. Compared to a decline of 23% experienced by the S&P 500 over the same time period, financial sector stocks have decreased by approximately 18% on average year to date.
Reports on Inflation On Wednesday, the Producer Price Index (PPI) for September, which measures inflation from the perspective of businesses that produce goods, will be released by the Bureau of Labor Statistics (BLS).After declining for the previous two months, producer prices are likely to have increased by 0.2 percent in September from a month earlier. From a 40-year high of 11.7% in March, producer price inflation has slowed significantly in recent months to 8.7% in August. After rising by 0.4 percent in August, core prices likely increased by 0.3 percent month-over-month or 7.1 percent year-over-year.
On Thursday, the Consumer Price Index (CPI) for September, which has been much anticipated, will be released. Last month, consumer prices are expected to have increased by 0.2 percent, compared to a flat reading in July and an increase of 0.1 percent in August. In September, headline CPI inflation is anticipated to have slowed to 8.1% on an annual basis, down from 8.3% in August. It is anticipated that core CPI inflation will have increased slightly to a rate of 6.5% annually, up from 6.3% in August.
September Retail Sales The U.S. Census Bureau will publish its monthly report on retail sales for the month of September on Friday, which will reveal whether or not consumer spending remained robust in September. Retail sales are expected to have increased by 0.2 percent month-over-month, as opposed to 0.3 percent in August and 0.4 percent in July. As consumer budgets have been impacted by rising inflation and higher interest rates—driven by the Federal Reserve’s tightening of monetary policy—retail sales growth has slowed significantly in recent months, decelerating from a peak growth rate of 2.7% in January. The Federal Reserve’s case for maintaining interest rate hikes could be strengthened by a retail sales reading that was higher than anticipated.
