Wall Street is gearing up for a big week of key economic data and big bank earnings. Investors are keeping their eye on two key events: the Consumer Price Index (CPI) report on Thursday and the earnings releases of big banks like JPMorgan Chase (JPM) and Wells Fargo (WFC) on Friday. These reports will help investors gauge the potential direction of the Federal Reserve’s monetary policy.
Morning Brief co-hosts Shauna Smith and Brad Smith break down the week’s top market news.
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This article was written by Angel Smith
Video Transcript
Wall Street is gearing up for a busy week, with stocks remaining relatively flat after stocks closed near record highs for the first week of July, the second half and the third quarter last week.
And with job growth starting to slow, inflation is now a top concern, with investors looking to Fed Chairman Powell and the release of the June Consumer Price Index (CPI) on Thursday to gauge whether the Fed might cut interest rates in September.
Of course, this is the earliest possibility that we’re looking at and leaning towards a possible rate cut, and then as we look to the second half of the year, what December holds is still very much in investors’ minds at this point.
Now that we have the economic calendar out of the way, let’s move on to the earnings calendar, which has been top of mind for investors this week as they digested the latest inflation numbers and figured out exactly what that means for the Federal Reserve.
Of course, attention will be focused on the company’s performance results.
The health of American companies, that’s exactly what we’re seeing there.
And then we’ll really kick off with Delta Pepsi Company on Thursday, and then we’ll start with the big banks on Friday. Brad, I have a chart here, just looking at revenue growth and expectations for this quarter and beyond. You can see here the 8.8% jump in the second quarter.
But as we look ahead to the fourth quarter of this year and into 2025, we see even higher hurdles that companies must clear, and this perspective has been driving the market.
And if last quarter was any indication of what we can see in terms of that reaction, companies that beat market expectations only outperformed the S&P by an average of 3 basis points the next trading day, well below the historical average.
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In other words, the bar is high for companies, and we’re talking about what companies need to achieve and exceed in this fiscal year’s financial results.
The question is, how big a boost will it be, or how big a lift will it provide?
These earnings results will likely spur broader market action.
That’s right, the top three companies by market cap that are reporting this are JPMorgan, PepsiCo, and Wells Fargo, with the combined assets of the companies that will be reporting exceeding $1 trillion.
Of course, beyond the top three, if you look at the calendar and logos, there are plenty of familiar names, including Delta, Citigroup, Bank of New York and Mellon Bank.
And then there’s the ConAgra brand, but two interesting statistics that the folks at FactSet put out jumped out to me in this latest report on earnings growth for the second quarter of 2024. The S&P estimated growth rate is 508.8%.
Now, if that’s a quarterly growth rate, guess what?
This would be the highest year-over-year profit growth reported by the index since the first quarter of 2022.
And you asked the question of how expensive things are now.
Now, speaking of valuation, here is the next 12-month P/E ratio for the S&P 521.2.
Why is that important?
This is above the five-year average and above the 10-year average.
So, ultimately, that’s something we’ll be tracking as we go through this earnings season.
