Coming up next week: big banks' earnings, inflation readings, retail sales data

U.S. equity markets tumbled on Friday as a stronger-than-expected jobs report raised the likelihood of more aggressive tightening by the Federal Reserve, but ended higher for the week after a strong two-day rally on Monday and Tuesday. For the week, the Dow gained 2%, the S&P 500 rose 1.5%, and the Nasdaq climbed 0.75%. U.S. Treasury yields climbed, with the yield on the 10-year Treasury note rising to 3.89%. Oil prices rallied after OPEC+ announced it would cut oil production by up to two million barrels per day to support prices, marking the biggest supply cut since early 2020. The price of West Texas Intermediate (WTI) crude soared over 15% this week—its largest weekly gain since March, closing Friday’s session at $93 per barrel.

Corporate earnings season kicks off next week with several big banks and financial firms, including JPMorgan Chase, Morgan Stanley, BlackRock, and Citigroup, set to report earnings. Other major firms such as PepsiCo, TSMC, Delta Air Lines, and UnitedHealth are also scheduled to release results. Key reports on consumer and producer inflation, retail sales, and consumer confidence will become available next week. Meeting minutes from the FOMC’s latest policy meeting, held September 20-21, will be released Wednesday.

Next week could also be a big one for cryptocurrency markets, as regulatory changes may be on the horizon. The G20’s Financial Stability Board (FSB) is expected to unveil plans to regulate the crypto and decentralized finance (DeFi) industries at the coming G20 meeting in Washington on Wednesday and Thursday. This week, the U.S. Financial Stability Oversight Council (FSOC) called for greater oversight of cryptocurrency markets, particularly more volatile stablecoins.

KEY TAKEAWAYS

Corporate earnings season begins with quarterly results from big banks and financial firms; JPMorgan Chase, BlackRock, Morgan Stanley, and Citigroup are among the companies scheduled to report
Other companies expected to report earnings include Taiwan Semiconductor (TSMC), PepsiCo, Delta Air Lines, and UnitedHealth Group, among others
The Bureau of Labor Statistics (BLS) will release its CPI and PPI, tracking consumer and producer inflation, respectively, for the month of September
The U.S. Census Bureau will release September retail sales figures on Friday, indicating whether consumer spending held up last month
The University of Michigan will release the preliminary October reading of its Consumer Sentiment Index (MCSI) on Friday, providing a key measure of consumer confidence

Big Banks' Earnings

Next week, corporate earnings season kicks off with earnings reports from some of the world’s largest banks and financial institutions. JPMorgan Chase, Wells Fargo, BlackRock, Morgan Stanley, Citigroup, U.S. Bancorp, and PNC Financial Services are all scheduled to report, while Bank of America and Goldman Sachs will report the following week. Financial sector stocks can act as a bellwether for other sectors, as they are highly sensitive to changes in interest rates and broader economic conditions. 

Shares of banks and other financial firms tend to benefit from rising interest rates, as higher rates yield higher interest income, positively impacting net interest margins. However, analysts at FactSet are projecting financial sector earnings will fall 13.5% on average this quarter, as earnings could be negatively impacted by a slowdown in investment banking activity and lower refinancing demand for mortgages and other consumer loans as interest rates rise. Financial sector stocks have fallen about 18% year-to-date on average, compared with a 23% decline for the S&P 500 over the same period.

Inflation Reports

On Wednesday, the Bureau of Labor Statistics (BLS) will release the September Producer Price Index (PPI), tracking inflation from the standpoint of goods-producing businesses. Producer prices likely rose 0.2% from a month earlier in September, after declining over the previous two months. Producer price inflation has slowed markedly in recent months, decelerating to an 8.7% annual rate in August, down from a 40-year high of 11.7% in March. Core prices, which exclude food and energy components, likely rose 0.3% on the month or 7.1% year-over-year, after rising 0.4% in August.

The widely-anticipated Consumer Price Index (CPI) for September will follow on Thursday. Consumer prices are projected to have risen 0.2% last month, compared with a 0.1% gain in August and a flat reading in July. On an annual basis, headline CPI inflation is expected to have moderated slightly to 8.1% in September, down from 8.3% in August. Core CPI inflation is projected to have accelerated slightly to a 6.5% annual rate, up from 6.3% in August.

September Retail Sales

On Friday, the U.S. Census Bureau will release its monthly report on retail sales for the month of September, indicating whether consumer spending remained strong last month. Retail sales are projected to have risen 0.2% month-over-month, compared with a 0.3% increase in August and a 0.4% decline in July. Retail sales growth has slowed sharply in recent months, decelerating from a peak growth rate of 2.7% in January, as rising inflation and higher interest rates—driven by the Federal Reserve’s tightening of monetary policy—have weighed on consumer budgets. A stronger-than-expected retail sales reading could further support the Fed’s case for continued interest rate hikes.

Events Calendar:

Tuesday, October 11

Pinnacle Financial Partners (PNFP) reports earnings
NFIB Business Optimism Index (Sep)
IBD/TIPP Economic Optimism Index (Oct)
Consumer Inflation Expectations (Sep)

Wednesday, October 12

PepsiCo (PEP), Infosys Ltd. (INFY), and Wipro Ltd. (WIT) report earnings
Producer Price Index (PPI) Inflation (Sep)
FOMC Meeting Minutes (Sep. 20-21 Meeting)

Thursday, October 13

TSMC (TSM), Wells Fargo (WFC), BlackRock (BLK), Progressive Corp. (PGR), Walgreens Boots Alliance (WBA), Fastenal Co. (FAST), Delta Air Lines (DAL), and Domino’s Pizza (DPZ)
Consumer Price Index (CPI) Inflation (Sep)

Friday, October 14

UnitedHealth Group (UNH), JPMorgan Chase (JPM), Morgan Stanley (MS), Citigroup (C), PNC Financial Services (PNC), U.S. Bancorp (USB), and First Republic Bank (FRC) report earnings
Retail Sales (Sep)
Import & Export Prices (Sep)
Business Inventories (Aug)
Michigan Consumer Sentiment Index - Preliminary Reading (Oct)