Earnings season will be in full swing in the coming week.
Results from Bank of America (BAC) and Goldman Sachs (GS) will provide deeper insight into how the financial system is handling 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 rally to report their second-quarter results.
On the economic data front, retail sales data for June, homebuilder sentiment and the latest housing starts readings will feature on a calmer economic calendar.
Last week, the US economy ticked all the right boxes, with data showing inflation rising at the slowest pace since March 2021, while consumer sentiment hit its highest level in nearly two years.
These positive readings, coupled with strong earnings from JPMorgan (JPM), Wells Fargo (WFC) and Delta Air Lines (DAL) helped push stocks higher.
The tech-heavy Nasdaq (^IXIC) had its best week since March, up more than 3.3%. Meanwhile, the benchmark S&P 500 (^GSPC) and the Dow Jones Industrial Average (^DJI) each rose about 2.3%.
Financial services kicked off earnings season on Friday by telling two different stories about the banking system. Major institutions like JPMorgan (JPM) and Wells Fargo (WFC) beat analysts’ expectations, with JPMorgan reporting a 67% increase in second-quarter earnings.
But as Yahoo Finance’s David Hollerith points out, both of these institutions have large consumer franchises and benefit from things like increased credit card borrowing. Meanwhile, Citigroup (C), which relies more on investment banking, saw its revenue fall 1% from a year ago. Citi shares fell more than 4% on the news.
“The long-awaited rebound in investment banking has yet to materialize,” Citigroup CEO Jane Fraser said in a statement, “for a disappointing quarter.”
Wall Street trading will be in focus this week as Bank of America (BAC), Morgan Stanley (MS) and Goldman Sachs (GS) each release their results. All are expected to show declines in investment banking and trading starting in the first quarter.
Investors will be especially keen to hear from Goldman Sachs CEO David Solomon amid concerns about the health of the Wall Street institution after job cuts and internal pushback reports on the bank’s strategy.
“It’s David Solomon’s body language, if he can show that whatever strategy they have is going to work,” Ken Leon, director of research at CFRA Research, told Yahoo Finance Live. “They will gain wallet share 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 this year’s market rally.
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 industry competitors.
Goldman Sachs analyst Mark Delaney noted in a note Thursday that “primarily the focus will be on its non-GAAP automotive gross margin” as investors assess the impact of recent price declines on Tesla profits.
With inflation moderating, margins are likely to be the focus of concern across all industries as companies struggling with inflation no longer sustain revenue growth.
“Margins [are] something we really want to pay attention to when it comes to corporate pricing power,” Victoria Fernandez, chief market strategist at Crossmark Global Investments, told Yahoo Finance Live.
Netflix stock has risen a relatively more measured 50% this year, but investors will be pleased with comments from company executives on how the fallout from Hollywood work stoppages is weighing on the company’s plans, l streaming activity appearing to be at an inflection point.
Overall, earnings for S&P 500 companies are expected to fall 7% this quarter, which some analysts say will mark the bottom of the current earnings recession.
And although it was a small sample size, the companies appeared to have passed the initial test last week.
Delta, PepsiCo (PEP), JPMorgan and Wells Fargo all beat analysts’ expectations, but none saw outsized stock moves after their results.
Ross Mayfield, investment strategy analyst at Baird, told Yahoo Finance Live that could be the trend of the quarter. Beating Street’s estimates could be good enough to help stocks sustain their gains, but not necessarily push stocks higher, he said.
“Unless you see big beats, double line beats, maybe that’s not enough to trigger the next leg higher for a market that’s at the bull market highs or the highs of this cycle,” Mayfield said. “So I think it will take a little more than just beating those risk-free estimates to trigger a new leg higher.”
Weekly schedule
Monday
Economic data : Empire Fed Manufacturing, July (-3.4 expected, +6.6 previously)
Earnings: No notable gains.
Tuesday
Economic data : National Association of Home Builders Sentiment Index, July (56 expected, 55 previously); Industrial production, month-over-month, June (+0.1% expected, -0.2% previously) Retail sales, month-over-month, June (+0.5% expected, 0 .3% previously); Month-to-month retail sales excluding autos and gasoline, June (+0.4%, 0.4% previously)
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, month-on-month (0.2% expected, +5.6% previously); Housing starts, June, month on month (-9.7% expected, +21.7% previously); MBA Mortgage Applications, July (0.9%, previously)
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 Outlook, July (-10 expected, -13.7 previously); Existing home sales, June, month-on-month (-2.0% expected, +0.2% previously); Leading Index of Economic Indicators, June (-0.6% expected, -0.7% previously)
Earnings: Abbott Labs (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 : No notable economic releases.
Earnings: American Express (AXP), Comerica (CMA), Huntington Bankshares (HBAN)
Josh is a reporter for Yahoo Finance.
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