What to Watch for This Week
In the past few months, inflation has continued to trend downward, U.S economic data has remained resilient, and there have been no major spikes in unemployment or jobless claims. These are all indications that the runway for the ‘soft-landing’ is within sight and that seemingly inflation has been tamed without bringing about a recession. This week we have some crucial new inflation datapoints in CPI & PPI due that will serve as further evidence. These reports will either continue to show that the Fed was successful in battling inflation or if there is an unexpected upside surprise, it could push back on the narrative that the Fed is done hiking in this cycle. Either way, you can be assured that investors will be tuned into these releases.
- CPI – On Thursday, the BLS will deliver the new CPI (Consumer Price Index) data for the month of December. CPI is a gauge of price inflation at the consumer level. CPI measures the price inflation that consumers are faced with when purchasing goods or services.
- In last month’s report, CPI came in as expected, in-line with expectations at 3.1%.
- PPI – Following Thursday’s CPI report, on Friday, we will get the new PPI (Producer Price Index) data from the BLS. PPI is a gauge of wholesaler price inflation. This can be a good indicator of inflation to come as it is measuring the output cost at which producers have sold their goods.
- In last month’s report, PPI came in at 0.9%, below the 1.0% expectation.
Federal Reserve Watch
The past few FOMC meetings coupled with the few latest batches of economic data have investors confident that the Fed has completed their hiking cycle. Because of this pivot, expectations for future rate hikes have plunged and the focus has turned to when the first rate cuts are expected. The FOMC’s next meeting is slated for January 30-31. Investors are not expecting any change in monetary policy from the Fed at this meeting but are more anxious to listen for any clues about what may occur at the following meeting.
- The CME Group now projects a 93.3% probability that at the next FOMC meeting the committee will opt to maintain the current target range between 5.25%-5.50%. Additionally, Fed Funds Futures are now indicating that the first rate cut could be as early as the Fed’s March meeting.
All About the Earnings
This week, Q4 earnings season is set to kick off. The fourth quarter reporting will get off to a slower start at first with a mix of mostly small to mid-cap companies reporting in the first half of the week. The rubber will really meet the road come Thursday and Friday as Taiwan Semiconductor MFG, UnitedHealth Group Inc., & several major banks are set to report their Q4 earnings.
- Taiwan Semiconductor MFG, the largest semiconductor manufacturer in the world, is due to report their Q4 results on Thursday. Consensus expectations are that TSM will post higher quarterly EPS results than their Q3 results. However, the consensus is well below the results that TSM posted for Q4 ’22.
- TSM earnings are expected to come in at $1.34 EPS.
- Prior to the market open on Friday, UnitedHealth Group Inc. is expected to make their latest Q4 earnings public. Over the past six months, UNH shares have enjoyed a nice run. If UNH can exceed expectations in their earnings report, this could be a catalyst to extend the stock’s rally.
- UNH earnings are expected to come in at $5.98 EPS.
- Additionally, on Friday morning a number of major banks and financial institutions are set to report their fourth quarter results. This group will feature J.P. Morgan Chase & Co., Bank of America Corp., Wells Fargo & Company, Citigroup Inc., & BlackRock, Inc. These earnings reports will likely be heavily examined for any clues they can provide about the health of the U.S. economy.
- JPM earnings are expected to come in at $3.64 EPS.
- BAC earnings are expected to come in at $0.68 EPS.
- WFC earnings are expected to come in at $1.15 EPS.C earnings are expected to come in at $1.04 EPS.
- BLK earnings are expected to come in at $8.75 EPS.
Thank you for reading this week’s edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week’s important market events.
Author, Weekly Market Periscope
Hughes Optioneering Team