Stock market earnings: Analysts are anticipating events that might spark the next stage of the rebound for bank equities after a few range-bound months. Wall Street anticipates that the big banks’ results will be influenced by loan growth, interest rates, and reserve releases.
This week, stocks were difficult to hold down, and if profits come in at par with expectations or higher, the earnings season will officially begin next week, supporting the recovery even more.
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The main averages recorded a positive week after overcoming the Washington debt ceiling impasse. Congress approved a short-term agreement that will push out the market’s concern over the debt ceiling overhang until December.
A poor employment report and rising oil prices were not enough to stop investors from buying banks and energy equities this week.
“You had to be pleased by how markets were able to come back this week in the face of Washington turmoil, delta fears, multiyear highs in crude oil, and a much lower than expected jobs figure,” said Ryan Detrick, chief market strategist at LPL Financial.
The S&P 500 dropped more than 5% from its peak on Monday due to a market correction that started in September, but then equities started to recover. The S&P 500 gained 0.8% for the week and is now only 3.4% from its record high, signaling stock market earnings potential.
This week, Goldman Sachs stood by its upbeat year-end projection, forecasting that equities would begin to climb the worry wall.
In a letter to clients, David Kostin, the top U.S. equity strategist at Goldman, stated in a letter that his S&P 500 price estimate for the year ending 2021 is still 4,700, or roughly 7% higher than its present level.
According to Scott Ellis, portfolio manager at Penn Mutual Asset Management, “this stock market earnings season will be an excellent test to assess what management teams say and how much insight they have” regarding future sales and profitability.
These blue chips will update Wall Street on their performance over the last three months, in addition to other things. They are also expected to provide some insight into what they anticipate for the key fourth quarter and perhaps even provide a sneak peek into their outlook. for 2023.
Focus on the dollar index in the Stock market earnings
Although banks may gain from higher interest rates, most investors and consumers are hopeful that inflation will eventually start to moderate sufficiently to allow the Federal Reserve to pause the pace of rate increases.
The Fed’s ability to consider a shift will primarily depend on the forthcoming inflation statistics. Next week, the US government will provide the most recent monthly readings on both consumer and wholesale prices.
The metric that investors will be paying the closest attention to is the consumer price index or CPI. Over the preceding 12 months through August, the CPI increased by 8.3%. According to economists, September’s growth will moderate somewhat to 8.1%.
The fact that wages make up a significant portion of the inflation picture and are still historically high, despite the fact that wage growth slowed somewhat in September to 5% year-over-year, presents a significant challenge for the Fed.
For the Fed to feel secure, wage growth “has to be lower,” according to Luke Tilley, the chief economist at Wilmington Trust.
Sheldon stated that before the Fed thinks that inflation is completely under control, wage growth should fall to roughly 3.5%.
Although the stock market earnings season should be robust, there may be some inflation and supply-related red flags that cause the market to get uneasy about the year-end scenario.
The dangers of increased inflation, Fed tapering, and an uncertain earnings season remain, according to Peter Boockvar, chief investment officer at Bleakley Advisory Group.
This was hinted at last week when Bed Bath & Beyond stock plunged 25% after the company reported a sharp decline in traffic in August, leading to a drop in its stock market earnings. Over the course of the summer, Bed Bath & Beyond had rising inflation prices, particularly at the conclusion of its second quarter in August, which harmed its stock market earnings.
