By Peter Nurse
Investing.com -- Big banks continue to divulge their earnings this week, but are also joined by quarterly results from a number of more consumer-facing companies. There are also comments from a plethora of central bank speakers to digest.
1. Earnings season starts in earnest
First-quarter earnings season hits full stride this week, after a number of major Wall Street banks reported better-than-expected results on Friday.
Several more big banks, including Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and Bank of America (NYSE:BAC), are due in the next few days, but the focus may now turn to how more consumer discretionary companies are faring given persistently high inflation and the Federal Reserve's aggressive rate-hiking cycle.
Results from the likes of Netflix (NASDAQ:NFLX), Tesla (NASDAQ:TSLA), Johnson & Johnson (NYSE:JNJ), Procter & Gamble (NYSE:PG) and AutoNation (NYSE:AN) are due this week, and could easily disrupt the optimism generated by Friday’s strong bank numbers.
Analysts expect S&P 500 earnings to have declined 4.8% in the first quarter from the year-ago period, according to Refinitiv data Friday.
2. Central bankers speak
The major Western central banks–the Federal Reserve, European Central Bank and Bank of England–all have major policy decisions to make early next month, placing the focus firmly on comments from these policymakers before they enter their traditional blackout periods.
ECB President Christine Lagarde speaks in New York later Monday. Investors will be looking to see if she expands on Friday’s comment that “underlying inflationary pressures remain strong”, as opinions are divided on whether the Eurozone’s central bank will hike by 25 or 50 basis points in May.
Jon Cunliffe, the Deputy Governor of the Bank of England for Financial Stability, is scheduled to speak Monday, just a couple of days before the release of the U.K.’s consumer price index for March.
Inflation unexpectedly rose to 10.4% in February, largely cementing another rate increase next month, which would be the BoE’s twelfth consecutive rate increase since December 2021.
A number of Fed officials are also due to speak in the next few days, including New York Fed President John Williams, Governor Michelle Bowman, Governor Christopher Waller and Governor Lisa Cook.
3. Futures edge higher; stocks remain resilient
U.S. futures traded marginally higher Monday, with investors awaiting the release of more quarterly earnings which should provide strong clues about the health of corporate America.
At 05:00 ET (09:00 GMT), the Dow futures contract had gained 20 points or 0.1%, S&P 500 futures inched up 6 points or 0.1%, and Nasdaq 100 futures added 10 points or 0.1%.
This is an important week for earnings [see above] with growth expectations pretty low following the Federal Reserve’s series of aggressive rate hikes in order to combat soaring inflation.
That said, stocks have remained resilient, with the Dow Jones Industrial Average positive overall last week for the fourth straight time, while the S&P 500 and Nasdaq Composite both had their fourth up week in five.
4. SpaceX aims for the moon
Elon Musk's SpaceX is set to launch later Monday its new ultra-powerful Starship rocket system to space for the first time, in potentially another step forward in the company’s ambition of sending humans back to the moon and ultimately to Mars.
The aim of the launch, if conditions are right, is to provide crucial data about how the vehicle ascends to space and how it will fly back to Earth, with both the lower-stage Super Heavy booster rocket and the upper-stage Starship cruise vessel designed as reusable components, reducing the cost of future launches.
The optimism surrounding the SpaceX project contrasts vividly with the decision of Richard Branson’s Virgin Orbit (OTC:VORBQ) to file for Chapter 11 bankruptcy earlier this month after the satellite launching business struggled to secure long-term funding following a failed launch in January.
The filing comes less than two years after Virgin Orbit went public at a valuation of roughly $3 billion.
5. Oil prices subdued ahead of Chinese growth data
Crude prices traded lower Monday, handing back some of the recent gains, as traders await the latest growth data from China, the world’s largest crude importer.
By 05:00 ET, U.S. crude futures traded 0.4% lower to $82.09 a barrel, while the Brent contract edged lower by 0.5% to $85.91 per barrel.
Both benchmarks recorded their fourth weekly gains last week, the longest such streak since mid-2022, continuing to be boosted by the output cuts announced by OPEC+ producers earlier this month.
The International Energy Agency also helped sentiment last week by forecasting record demand in 2023, largely predicated on the recovery of the Chinese economy after the lifting of its zero-COVID policy.
With this in mind, the release of China’s first-quarter GDP early Tuesday is seen as key this week, as traders look for signs of demand recovery in the world's second-largest oil consumer.