Next week brings earnings and inflation data amid resumption of U.S.-Iran hostilities. Here’s what’s ahead
Next week promises to be a big one for markets, with investors anticipating the start of the second quarter earnings season and the release of key June inflation data — just as the U.S-Iran war threatens to reassert itself in a major way. The corporate reporting season kicking off next week is set to show a second straight quarter of earnings growth above 20%, an impressive feat that may confirm for investors that the bull case for equities remains intact. Just about all of the S & P 500’s returns year over year are tied to earnings growth, rather than an expanding price-to-earnings ratio, BMO Capital Markets noted this week. If that continues, the stock market can continue to summit fresh peaks, even if multiples fall. “This has not been a PE-led bull market, of late. It’s been an earnings-led market,” Ed Yardeni, president of Yardeni Research, told CNBC’s ” Closing Bell ” this week. “And I think it continues to be an earnings-led market.” The long-time market researcher expects the S & P 500 could end the year at 8,250, which would equate to the broad market index climbing another 10% from current levels. The S & P 500 is already up nearly 11% year to date. The big banks reporting next week are likely to show investors the robust state of capital markets, especially in light of recent dealmaking activity. Citigroup , Goldman Sachs Group , Wells Fargo , JPMorgan Chase , Bank of America are all set to report their latest financials on Tuesday. BlackRock and Morgan Stanley will release results Wednesday. Earnings from ASML, the world’s leading manufacturer of semiconductor manufacturing equipment, and Taiwan Semiconductor Manufacturing Company, will also get a close look, as traders weigh any signs of exhaustion in the chip trade. The Van Eck Semiconductor ETF ( SMH ) has soared about 70% this year. Interest rate outlook Future earnings may depend on the course of interest rates, and they in turn rely on relatively tame inflation. Here there are increasing fears on the Street that pricing pressures will continue to mount, now that energy prices are moving up again with the end of the ceasefire between the U.S. and Iran. This week, Brent crude futures jumped 7% to above $77 a barrel, while West Texas Intermediate crude climbed 6% to top $72 a barrel. To date, investors have viewed the oil shock as a one-time passthrough to inflation. But the resumption in hostilities between Washington and Tehran could upend that outlook if pricing pressures prove to be more durable. “It’s early to tell, because is it a flare-up or is it an escalation?” said Brian Leonard, portfolio manager at Keeley Gabelli Funds. “We’ve had flare-ups on and off over the past, call it six weeks. But if it’s an escalation, I think then that’s something that could potentially be repriced in.” On Thursday, stocks rallied after President Donald Trump said Iran called to make a deal. MS Now reported that Qatar and Pakistan are attempting to bring the U.S. and Iran back to the negotiating table. An administration official said the two countries are continuing “technical talks.” Next week’s inflation data could give some early indication as to where pricing pressures are showing up the most. The June consumer price index on Tuesday is expected to have risen at an annual rate of 3.8%, down from 4.2% in May, according to FactSet consensus estimates. Monthly core inflation is set to have accelerated slightly, to 0.22% from 0.20%, estimates show. In June, wholesale inflation is expected to have decelerated slightly. The producer price index on Wednesday is forecast to have fallen 0.20% last month, while rising 6.2% year over year, according to economists polled by FactSet. In the prior report, wholesale inflation rose 1.1% and 6.5% on the month and year, respectively. The results will help shape what the Federal Reserve does next. The central bank has been embroiled in what Fed Chairman Kevin Warsh called a “family fight,” debating whether the central bank will tighten policy or leave rates where they are later this year. Markets were last pricing in a quarter percentage point hike coming as soon as the September meeting, according to the CME FedWatch tool . Investors will hear directly from Warsh next week, though he has decided on less communication than his predecessors Jerome Powell, Janet Yellen and Ben Bernanke. Warsh is scheduled to deliver his first testimony on monetary policy before Congress starting on Tuesday. Week ahead calendar All times ET. Monday, July 13 2:00 p.m. Treasury Budget (June) Earnings: Fastenal Tuesday, July 14 6:00 a.m. NFIB Small Business Index (June) 8:15 a.m. ADP Weekly Employment change (06/27) 8:30 a.m. CPI (June) 8:30 a.m. Hourly Earnings final (June) 8:30 a.m. Average Workweek final (June) Federal Reserve Chairman Kevin Warsh delivers semi-annual monetary policy report to Congress. Earnings: Citigroup , Goldman Sachs Group , Wells Fargo , JPMorgan Chase , Bank of America Wednesday, July 15 8:30 a.m. Empire State Index (July) 8:30 a.m. Producer Price Index (June) Earnings: J.B. Hunt Transport Services , United Airlines , Cintas , Morgan Stanley , Johnson & Johnson , The PNC Financial Services Group , The Bank of New York Mellon , Elevance Health , M & T Bank , BlackRock Thursday, July 16 8:30 a.m. Initial Claims (07/11) 8:30 a.m. Philadelphia Fed Index (July) 8:30 a.m. Retail Sales (June) 10:00 a.m. Business Inventories (May) 10:00 a.m. NAHB Housing Market Index (July) 10:00 a.m. Pending Home Sales (June) Earnings: Netflix , Prologis , State Street , Abbott Laboratories , U.S. Bancorp , Citizens Financial Group , UnitedHealth Group , Truist Financial , GE Aerospace Friday, July 17 8:30 a.m. Export Price Index (June) 8:30 a.m. Housing Starts (June) 8:30 a.m. Import Price Index (June) 9:15 a.m. Capacity Utilization (June) 9:15 a.m. Industrial Production (June) 10:00 a.m. Michigan Sentiment preliminary (July) Earnings: The Travelers Cos. , Truist Financial , Fifth Third Bancorp , Regions Financial
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