Earnings season will be in full swing next week.
The findings from Bank of America (BAC) and Goldman Sachs (GS) will provide another look at how the financial system will handle the fallout from a series of bank failures in the spring.
On Wednesday, Netflix (NFLX) and Tesla (TSLA) will be the first tech giants to fuel this year’s market recovery to report second-quarter results.
On the economic data front, June Retail Sales, Homebuilding Sentiment, and the latest reading on Home Starts will all show a calmer economic calendar.
Last week, the US economy ticked all the right boxes as data showed inflation increased at the slowest pace since March 2021 while consumer confidence reached the highest level in nearly two years.
Those positive readings, along with strong earnings from JPMorgan (JPM), Wells Fargo (WFC) and Delta Air Lines (DAL) helped stocks rally.
The tech-heavy Nasdaq (^IXIC) had its best week since March, rising more than 3.3%. Meanwhile, the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) rose about 2.3%.
Finance kicked off earnings season on Friday telling two different stories about the banking system. Large organizations like JPMorgan (JPM) and Wells Fargo (WFC) beat analyst expectations as JPMorgan reported a 67% increase in earnings in the second quarter.
But as Yahoo Finance’s David Hollerith points out, both institutions have significant consumer perks and benefit from things like increased credit card borrowing. Meanwhile, Citigroup (C), which relies more on investment banking, saw revenue drop 1% from a year ago. Citi stock fell more than 4% on the news.
“The long-awaited recovery in investment banking has yet to materialize, making for a disappointing quarter,” Citigroup CEO Jane Fraser said in a statement.
Deal-making on Wall Street will be in focus this week as Bank of America (BAC), Morgan Stanley (MS), and Goldman Sachs (GS) will all report on results. All of them are expected to show a decline in investment banking and trading from the first quarter.
Investors will be especially eager to hear from David Solomon, CEO of Goldman Sachs, amid concerns about the health of Wall Street after the job cuts and Reports of internal opposition to the bank’s strategy.
“It’s the body language from David Solomon, whether he can show that the strategy they have is going to work,” Ken Lyon, director of CFRA Research, told Yahoo Finance Live. “They will acquire portfolio stake in the core business. There is no doubt about that.”
On the tech front, Tesla and Netflix will kick off a busy few weeks for the sector at the center of the market recovery this year.
With its stock up nearly 130% this year, Tesla has seen investors react to both the AI-related hype around its self-driving capabilities as well as strong vehicle delivery numbers and the rapid expansion of its Supercharger network with competitors in the industry.
Goldman Sachs analyst Mark Delaney noted in a note Thursday that “the primary focus will be on non-GAAP auto gross margin” as investors weigh how Recent price cuts affect Tesla’s profits.
With inflation moderate, margins are likely to be a cross-sector focus as companies struggle with inflation no longer boosting earnings growth.
Margins [are] Something we really want to pay attention to in terms of companies’ pricing power,” Victoria Fernandez, chief market strategist at Crossmark Global Investments, told Yahoo Finance Live.
Netflix stock is up a relative 50% this year, but investors will be keen for feedback from company executives about how any fallout from the Hollywood hiatus affects the company’s plans as the streaming business appears to be at an inflection point.
Overall, earnings for the S&P 500 companies are expected to decline 7% this quarter, which some analysts believe will mark the bottom of the current earnings recession.
And despite the small sample size, the companies appeared to pass the initial test last week.
Delta, PepsiCo (PEP), JPMorgan and Wells Fargo all beat analyst expectations, but none saw significant moves in stocks following their results.
This could be the trend for the quarter, Ross Mayfield, investment strategist at Baird, told Yahoo Finance Live. He said Beating Street’s estimates may be good enough to help stocks sustain gains but not necessarily push stocks higher.
“Unless you’re seeing big beats, double strikes on the line, it probably isn’t enough to trigger the next beat up for a market that’s standing at the bull market’s highs or the highs of this cycle,” Mayfield said. “So I think it’s going to take a little more than beating these riskless estimates to spark a new move higher.”
Weekly calendar
Monday
economic data: Empire Fed Manufacturing, July (-3.4 expected, +6.6 previously)
Earnings: There are no noticeable profits.
Tuesday
economic data: National Association of Home Builders Sentiment Index, July (56 expected, 55 previously); Industrial Production, MoM, June (+0.1% expected, -0.2% prior) Retail Sales MoM, June (+0.5% expected, -0.3% prior); Retail Sales MoM, Excluding Automotive & Gas, June (+0.4%, Previous 0.4%)
Earnings: Bank of America (BAC), BNY Mellon (BK), Charles Schwab (SCHW), Interactive Brokers Group (IBKR, JB Hunt (JBHT), Lockheed Martin (LMT), Morgan Stanley (MS), PNC Financial Services (PNC), Pinnacle Financial Partners (PNFP), Western Alliance (WAL)
Wednesday
economic data: Building Permits, June, MoM (0.2% expected, +5.6% prior); Housing Starts, June, MoM (-9.7% expected, +21.7% prior); MBA Mortgage Applications, July (0.9% Previous)
Earnings: Netflix (NFLX), Tesla (TSLA), Goldman Sachs (GS), Alcoa (AA), Ally Financial (ALLY), ASML (ASML), Citizens Financial Group (CFG), Discover Financial Services (DFS), Halliburton (HAL) , IBM (IBM), Las Vegas Sands (LVS), Nasdaq (NDAQ), United Airlines (UAL), Zions Bancorporation (ZION)
Thursday
economic data: Initial Jobless Claims, week ending July 15 (244,000 expected; 237,000 previously); Philly Fed Business Forecast, July (-10 forecast, -13.7 prior); Existing Home Sales, June, MoM (-2.0% forecast, +0.2% prior); Leading Index of Economic Indicators, June (-0.6% expected, -0.7% prior)
Earnings: Abbott Laboratories (ABT), American Airlines (AAL), Blackstone (BX), CapitalOne (COF), DR Horton (DHI), Freeport McMoran (FCX), Johnson & Johnson (JNJ), KeyBank (KEY), PPG (PPG) , TSMC (TSM)
Friday
economic data: There are no notable economic releases.
Earnings: American Express (AXP), Comerica (CMA), Huntington Bancshares (HBAN)
Josh is Yahoo Finance Correspondent.
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