For a week that was filled with news and earnings, the market failed to react in any major fashion. The S&P 500 ($SPX) (SPY) finished the week 0.80% lower. Watching the Goliath Apple (AAPL) report better-than-expected earnings helped to buoy the market along with a stronger-than-expected NFP report.
The week wasn’t all positive news though with Shopify (SHOP) laying off roughly 20% of its workforce to be replaced with AI and FRC being taken over by the FDIC. This upcoming week will for sure have more in store with several other banks on the brink and many more earnings reports.
Here are 5 things to watch this week.
FRC/Banking
Another bank fell to the FDIC this week with First Republic needing to be taken over to help stave off a crisis for their depositors. In addition to this Toronto Dominion (TD) canceled its merger with First Horizon Corp (FHN) citing “regulatory timelines” as a concern.
These past events are important for the upcoming week because they set a tone and trend. Over the past few weeks, there have been several higher-profile issues with banks. Match this with the strong jobs report and the apparent need to continue to raise rates this could put significant pressure on the banking sector as a whole. While the big boys like JP Morgan (JPM) and Goldman Sachs (GS) will more than likely move through unscathed, the smaller regional banks may see some downward pressure as investors spook.
CPI
It's that time of the Month again, CPI is back. The month to month number could give us some insight if the current rates are enough to stall out inflation. The Fed Funds are up over 5% at this point and if inflation stalls out here, it's possible they may stop hiking. This could be seen as bullish by the markets, especially banks. Coming out before the NYSE opens, it's possible that any move associated with any of the 3 CPI numbers happens in the premarket trading.
PPI
Next up On Thursday is the PPI, CPI’s close cousin. Just as with CPI, it will be essential to see how much of a change PPI has had over the last month to see if manufacturing prices have started to fall. This is obviously great for the consumer, which has been beleaguered by higher prices since the Covid outbreak. A decrease in PPI could be seen as positive and the rates have reached a significant level to help tamper out inflation. As with CPI, this is premarket on Thursday so any move could happen before the open.
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Earnings
As with the last few weeks, earnings are an ever-present threat in the market, especially in equities. With some of the monsters like AAPL and Meta Platforms (META) behind us, there may be a less systemic risk with a poor earnings report. Not many other companies can move the entire market with a poor report. That said, we still have some highly traded names this week like Dish (DISH), Under Armor (UA), Disney (DIS) and PayPal (PYPL). It's always important to know when companies that you hold report.
Consumer Sentiment
Friday we have University of Michigan consumer sentiment come out. These releases have been all over the place over the past few months. As a leading indicator, it can be used as part of a more holistic approach to creating an investment thesis. At this point in time though it's possible that a strong number is seen as a negative because the entire goal of the Fed is to slow down the market. If sentiment remains high and the economy is continuously seen as positive then they may have to take more austere measures.
Best of luck this week and don’t forget to check out my daily options article.
On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
