Tom Lee, head of research at Fundstrat, provides a positive analysis of U.S. corporate earnings at the halfway point of the fourth-quarter results reporting season, highlighting that earnings per share estimates are understated due to financials' drop caused by a $23 billion fee. He also notes that companies beating estimates are seeing one-day stock-market gains, the percentage of companies reporting double-digit earnings per share growth has increased, and draws inspiration from the Chinese stock market showing signs of bottoming. Additionally, U.S. stock index futures rose, and the yield on the 10-year Treasury was 4.12%.
The earnings season is in full swing as the S&P 500 reaches new highs, with mixed Q4 results so far, particularly in the financial sector. This week, key companies like Tesla, Netflix, and Intel are set to report earnings, potentially impacting the market. Investors are closely monitoring these reports as they could influence the market's upward momentum.
The upcoming week on Wall Street will be marked by the start of the corporate earnings season, with reports from major financial institutions and key inflation data releases. The Consumer Price Index (CPI) and Producer Price Index (PPI) for December will provide insights into inflation trends, which are crucial for the Federal Reserve's interest rate decisions. Investors are anticipating earnings reports from JPMorgan, Wells Fargo, Bank of America, BlackRock, and Citi. The market is currently debating when the Fed will cut interest rates, with Goldman Sachs predicting cuts starting in March. The financial sector's performance in the fourth quarter will be closely watched, especially as estimates for S&P 500 earnings have seen a significant decline since September.
Jim Cramer previews the week ahead on Wall Street, emphasizing the JPMorgan Healthcare Conference where major industry CEOs will discuss earnings guidance and clinical trials. Cramer will interview CEOs from companies like Walgreens, Amgen, and Bristol Myers, focusing on topics such as drug development and company transitions. The week will also feature the Consumer Price Index release and the start of the earnings season with reports from major banks and companies like BlackRock, UnitedHealth Group, and Delta.
As the banking industry approaches a potential turnaround, bank stocks have seen a rise in anticipation of positive changes. Analysts predict that banks' net interest margins will bottom out in the first half of 2024 and improve thereafter. The upcoming earnings reports from the "big six" U.S. banks will provide insights into their fourth-quarter performance, with JPMorgan Chase and Capital One expected to report increases in net interest income. Despite the optimism, some analysts caution that the fourth-quarter results may be impacted by one-time events and restructuring, which could distort earnings.
As the fourth-quarter earnings season approaches, investors are bracing for a reality check after a year-end market rally fueled by hopes of lower interest rates. Wall Street's optimism has waned, with analysts expecting only a 1.3% growth in S&P 500 companies' per-share profits, a significant drop from the previously anticipated 8%. Companies are likely to continue cost-cutting measures, as seen with Nike and FedEx, amidst concerns over high prices, selective consumer spending, and economic uncertainty. The Federal Reserve's mixed signals on interest rate cuts versus hikes add to the market's challenges, while sectors like energy and healthcare drag down earnings expectations. The upcoming earnings reports from major companies like JPMorgan Chase and Delta Air Lines will provide insights into the economic outlook and set the tone for market performance in the new year.
