By Daniel Shvartsman
Investing.com – Corporate earnings step to the center stage this week. Last week’s bank earnings saw mixed results, and the and subsequent Federal Reserve and over the size of the next interest rate hike swamped any individual company news.
With less economic data in the U.S. that will directly affect Fed policymaking, and companies like Tesla, Netflix, Verizon, J&J, and Bank of America all reporting, earnings may have a bigger impact. Meanwhile, the European Central Bank has a closely watched interest rate decision on Thursday, and several CPI reports are due out for anybody craving for more inflation news after last week’s upside surprise.
Here’s what you need to know for the week ahead in financial markets.
1. Blue-Chip Earnings
2022 has been the year of the value recovery, and several blue-chip heavyweights are on tap to share earnings news this week.
Bank of America Corp (NYSE:) and Goldman Sachs Group Inc (NYSE:) report earnings Monday morning to round out the major money center banks, coming after JPMorgan (NYSE:) sounded a and Citigroup Inc (NYSE:) revived .
Johnson & Johnson (NYSE:) and Novartis AG ADR (NYSE:) report Tuesday, with both healthcare companies outperforming the market year to date. Abbott Labs (NYSE:) reports on Wednesday, though it has struggled in part due to in the infant formula shortage in the U.S. Roche Holding AG (SIX:) reports Thursday before the U.S. open.
AT&T Inc (NYSE:) reports on Thursday and Verizon Communications Inc (NYSE:) follows on Friday, as telecoms have so far this year.
Philip Morris International Inc (NYSE:) (Thursday), Union Pacific (NYSE:) (Thursday), American Express (NYSE:) (Friday), HCA (NYSE:) (Friday), and Schlumberger (NYSE:) (Friday) all are also due to report.
The obvious things to watch are how companies are coping with inflation, whether they are seeing slowing economic activity, and whether this quarter will see “kitchen sink” efforts to take certain charges or losses, or to just lower expectations given the overall market wariness.
2. Tech Earnings
Expectations have already been lowered for many big-name tech companies who report earnings this week, and investors questions will be more geared towards whether the worst is past.
Netflix (NASDAQ:), reporting Tuesday after market hours, exemplifies this challenge, as the streaming giant has seen its shares drop nearly 70% year to date, the worst performance in the . Q1 earnings both a post-pandemic hangover and a management team not sure what was next, so investors will watch for any sign of a clear direction.
Snap (NYSE:) reports Thursday after market hours and has been a for digital advertising, and so may have an outsized effect on overall markets again.
Tesla (NASDAQ:) reports on Wednesday, and will be after a rare quarter-over-quarter drop in deliveries.
ASML Holding’s (NASDAQ:) report on Wednesday will add the latest key data point to whether the semiconductor sector is starting to slow.
Twitter (NYSE:) will report earnings Friday morning; while they won’t be hosting a conference call given the pending acquisition by Elon Musk, and the report should not have any direct impact on the company’s litigation against Musk, it will be closely watched all the same.
3. ECB Meeting
The meets on Thursday, in a meeting that is expected to see the bank raise rates for the first time in a decade. There’s no shortage of news surrounding the ECB’s decision, whether it be the drama in Italy around Prime Minister Mario Draghi’s or the with the dollar. And more news is due just ahead of the meeting, with Eurozone due out Tuesday. Beyond the and ECB President Christine Lagarde’s , the meeting is expected to shed light on the bloc’s new tool to keep country-level bond yields from spiraling too high.
4. UK CPI, Employment, and Prime Minister Debate
A report is also due out in the U.K. on Wednesday, with coming out Tuesday. The Bank of England has been earlier to the recent rate hikes party, though proceeding at a steady 25 basis point pace, and strong employment and/or high CPI numbers might put pressure on the bank to accelerate that pace at its in three weeks.
Both these data releases come after television debates of the to replace Boris Johnson as the head of the Conservative Party and the prime minister of the U.K. While Johnson’s resignation was not directly related to the economic climate, there’s no doubt tackling inflation will be a top task for the new PM.
5. Whither Oil?
With U.S. President Joe Biden visiting Saudi Arabia with Crown Prince Mohamed Bin Salman despite the humans rights concerns stemming from the 2018 murder of journalist and dissident Jamal Khashoggi, the direction of oil comes back into the spotlight. Whether Biden got any immediate gains out of his politically risky visit remains to be seen. The price of has dropped nearly 20% in the past five weeks, coinciding with Biden’s increased jawboning over oil companies’ and oil producers’ role in inflation, though also more importantly coinciding with increased fears of a recession.
The price of oil poses a real catch-22 for the President, central banks, and the wider economy – sustained drop in the price of oil and subsequently gasoline prices would take off a great deal of inflation pressure, but also may signal that a recession is here, which brings its own economic and political challenges.