More Bank Earnings, Lots of Fed Messaging

What to Watch for This Week

Last week, the market digested the two key inflation reports quite well as they were mixed. The CPI report came in hotter than expected while the PPI report came in cooler than expected. In this shortened trading week, the theme will be less about inflation reports but rather on working through more financial sector earnings, a variety of messaging from Fed officials, and some new macroeconomic reports as well as sector specific economic reports. This week, Wall Street will get a look at the previous week’s Initial Jobless Claim data as well as the most recent U.S Retail Sales reports. Also, to close out the week, on Thursday and Friday, a fresh batch of U.S. housing sector data will be released.

Initial Jobless Claims – The Department of Labor provides a weekly report that records new Initial Jobless Claims in the U.S. Over the past month, Initial Jobless Claims have been trending down since topping out in early November. The last handful of jobless claims numbers all came in just a touch above 200K, with only one being higher than the expectation.
- If Thursday’s reported number is within expectations, this will be further evidence that the U.S. economy is holding up quite strongly and has weathered the Fed’s hiking cycle well.

U.S. Retail Sales – On Wednesday, the U.S. Census Bureau will reveal their monthly retails sales report. The U.S. Retail Sales report serves to quantify the total that U.S. consumers spent on both durable & non-durable goods. This report is a key piece of macroeconomic data as retail sales are an important measuring stick for the health of the U.S. economy.
- Retail Sales for December are expected to show an increase of 0.4%, which follows last month’s report for November, where retail sales increased by 0.3%.

Housing Starts & Building Permits – Following Wednesday’s U.S. Retail Sales report, on Thursday morning, investors will get the latest reads from the Census Bureau on new housing starts as well as new building permits issued. This data is significant as it reflects how much work U.S. home builders currently have scheduled. Additionally, it can provide helpful information about the current state of the economy and the consumer’s appetite for spending on large purchases such as housing.
- New Housing Starts & Building Permits are expected to come in at 1.43 million & 1.48 million respectively.

Existing Home Sales – To close out the week, Friday, will give us the existing home sales numbers for the month of December. The volume of U.S. existing home sales experienced a short-lived bump last February but has since continued to decline signifying the sharp drop-off in deal making in the housing market. Existing home sales numbers have yet to come anywhere near the levels seen in late 2021, early 2022.
- Existing Home Sales from December are expected to come in at 3.83 million.

Federal Reserve Watch

Last week the market seemed to shake off a mixed bag of inflation & economic data as investors still anticipate that the Fed will maintain current monetary policy levels at their next meeting and that the hiking cycle is completed.The FOMC’s upcoming meeting is slated for January 30-31. This week we are expected to get a healthy dose of Fed speak as numerous members of the FOMC are scheduled to speak. Investors will surely be keyed in for any potential insights that can be drawn from the Fed messaging. Specifically, investors will be listening for any clues about what may occur at the next FOMC meeting in March.

Looking ahead to the March FOMC meeting, the CME Group’s FedWatch tool now shows the market’s expectation is that there is a 79.5% chance that the Fed will cut policy rates. This probability has increased compared to one week ago, signaling growing sentiment that this will be the result of the March meeting. The majority expectation is that the FOMC would cut the Fed Funds Rate to a target range of 5.00%-5.25%, 25 basis points lower than the current level.

All About the Earnings

Q4 Earnings report season continues this week as we are expected to hear from the remaining major financials that did report last week. In an earnings week that will be largely dominated by financials, there are a few other notable companies set to report their earnings as well. Investors are expected to hear from two major logistics players, Prologis, Inc. & J.B Hunt Transportation Services. Additionally, the newly public, Birkenstock Holding PLC is set to post their first earnings report as a public company.

The trading week will begin with Morgan Stanley & Goldman Sachs Group, Inc. reporting their Q4 earnings before the market open on Tuesday. The following morning, both Charles Schwab Corp. & U.S. Bancorp are expected to report their earnings before the opening bell.
- MS earnings are expected to come in at $1.07 EPS.
- GS earnings are expected to come in at $3.47 EPS.SCHW earnings are expected to come in at $0.66 EPS.
- USB earnings are expected to come in at $0.99 EPS.

Two major companies in the logistics and transportation industry are on deck to report their fourth quarter earnings. Before the market open on Wednesday, Prologis, Inc. will report their fourth quarter results. J.B. Hunt Transport Services, Inc. will follow them as they report their Q4 earnings after market close on Thursday.
- PLD earnings are expected to come in at $1.26 EPS.
- JBHT earnings are expected to come in at $1.75 EPS.

Finally, on Thursday morning, Birkenstock Holding PLC, who recently became public in October by way of an IPO, is set to report their Q4 earnings. This will be BIRK’s first quarterly earnings report as a publicly traded company. Investors in the BIRK IPO will certainly be tuned in to see if the company can deliver solid results.
- BIRK earnings are expected to come in at $0.08 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.

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