Economy and Markets: The Week Ahead
The main investor focus this week will be the start of the Q2 2023 earnings season, as the largest U.S. banks begin reporting this coming Friday. Reports from several non-financial companies from different economic sectors will add to the first impression of the earnings picture in the second quarter.
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According to FactSet research, the S&P 500 companies are projected to report an average decline of 6.8% in the second quarter’s earnings. If the reports support the outlook, this will mark the steepest decline since the onset of the COVID-19 pandemic. While in Q1 2023 the actual earnings were much better than forecasted, giving hope that the second quarter’s earnings will also defy grim expectations, FactSet bases its outlook on companies’ guidance. Of all U.S. companies that have issued financial results outlook for Q2 2023, 67% issued negative guidance, supporting the analysts’ pessimism towards the coming earnings season.
This week will also feature several very important economic reports, with the most influential of them being the CPI report, which will come out on Wednesday. The weaker-than-expected jobs report last week failed to dissipate the markets’ projections of another interest-rate hike at the Federal Reserve’s July rates meeting; now all eyes are on inflation data which is expected to have a large influence on the policymakers’ decisions.
In this uncertain environment, investors are advised to base their decisions on trustworthy data and analysis.
Equities – Last Week’s Performance & Outlook
Stocks fell last week, breaking their winning streak, after the Federal Reserve’s June meeting minutes revealed a much more hawkish Fed than expected. According to the minutes, a minority of FOMC members favored raising key interest rates in June, citing a tight labor market, strong economic activity, and continued high inflation. The records of the June meeting showed a high likelihood of more rate hikes in the coming months, with the highest probability given to a 0.25% rate increase in July. Policymakers also reaffirmed their expectation of a mild recession later this year.
As a result of the pessimism resurgence, the S&P 500 (SPX) lost 0.90% on the week, the Dow Jones Industrial Average (DJIA) fell by 1.79%, and the Nasdaq Composite (NDAQ) declined by 0.82%.
The Healthcare sector led the declines with a 1.82% weekly drop, followed by a 1.10% loss in Materials. The Financial sector led the gainers with a 1.88% weekly jump, as deep-buyers loaded on banks’ stocks in anticipation of strong earnings. The Energy sector rose 1.37% on the week, followed by the Consumer Discretionary sector’s 1.04% increase.
Upcoming Earnings and Dividend Announcements
Although the markets are fixated on the banks’ reports, the Q2 2023 reporting season kicks off on Thursday with the non-financial companies, with the most anticipated reports being those of PepsiCo (PEP), Delta Air Lines (DAL), and Conagra (CAG). On Friday, the most important non-financial report will be that of UnitedHealth Group (UNH). On the same day, the largest U.S. financial institutions will begin their sector’s reporting season. The reports scheduled for this day are those of JPMorgan Chase & Co. (JPM), BlackRock (BLK), Citigroup (C), State Street (STT), and Wells Fargo (WFC).
Companies’ reporting dates, consensus EPS forecasts, past data, analyst ratings, and price targets can be found on the TipRanks Earnings Calendar.
This week, Ex-Dividend dates are coming for the payouts of Dollar General (DG), General Electric (GE), InterDigital (IDCC), Oracle (ORCL), Accenture (ACN), Abbott Labs (ABT), AbbVie (ABBV), Foot Locker (FL), and other dividend-paying firms.
Companies’ Ex-Dividend and Dividend Payment dates, analyst ratings, and price targets can be found on the TipRanks Dividend Calendar.
Upcoming Economic Calendar Events
There are several very important reports scheduled to be published in the next few days:
» On Monday, we’ll receive the data on May’s Consumer Credit Change.
» On Tuesday, we’ll see published June’s NFIB Business Optimism Index, which shows trends in the Small Business sentiment and outlook.
» On Wednesday, we’ll see published June’s Consumer Price Index (CPI) and CPI Ex Food & Energy, directly affecting the Federal Reserve’s rate outlook.
» On Thursday, we’ll receive a reading on June’s Producer Price Index (PPI), a leading indicator for the next month’s CPI.
» On Friday, we’ll receive the preliminary July’s Michigan Consumer Sentiment Index, which is used to forecast changes in household consumer spending.
Current and scheduled economic reports, Fed statements, and other releases, as well as their level of impact on stock markets, can be found on the TipRanks Economic Calendar.
Major Economic Events of the Past Week
» June’s S&P Global Manufacturing PMI remained unchanged from its preliminary estimate of 46.3, versus May’s 48.4.
» June’s S&P Global Services PMI increased to 54.4 from May’s 54.1; it was expected to remain unchanged.
» June’s ISM Manufacturing PMI fell to 46, its lowest since May 2020, from the previous month’s reading of 46.9. However, the ISM Manufacturing New Orders sub-index notched up to 45.6 from May’s 42.6, pointing to a somewhat improved business sentiment regarding future market conditions.
» June’s ISM Services PMI rose to 53.9 from May’s 50.3; analysts expected it to increase to 51.
» Initial Jobless Claims for the week ending June 23rd came in at 239K versus the expected 265K. Continuing Jobless Claims for the week ending June 16th were at 1.742M, lower than the expected 1.765M.
» June’s ADP Employment Change showed a surge in private jobs creation, with an increase of 497K versus May’s 267K and the expectations of just 228K.
» June’s Nonfarm Payrolls rose by 209K, much less than the expected 225K and down from last month’s 306K. June’s numbers reflected the weakest pace of job creation since December 2020. However, the Unemployment Rate declined to 3.6% from May’s 3.7%. The Average Weekly Hours increased to 34.4 from last month’s 34.3. The Average Hourly Wages rose at a faster-than-expected pace of 4.4% year-on-year and 0.4% month-on-month, the same as in May, hinting that the job market isn’t cooling as fast as the Fed would like it to cool.
