This Week in Focus June CPI and Big Bank Earnings: The Biggest News

Wall Street is gearing up for a key week as key economic data and earnings from major banks converge. Investors are focused on two key events: the Consumer Price Index (CPI) report due out on Thursday and earnings releases from banking giants like JPMorgan Chase & Co. (JPM) and Wells Fargo (WFC) on Friday. Together, these reports will help investors gauge the potential direction of monetary policy from the Federal Reserve.

Morning Brief co-hosts Seana Smith and Brad Smith discuss the biggest market news coming out this week.

For more expert opinions and the latest market news, click here to watch the full episode of Morning Brief.

This article was written by Angel Smith

Video Transcription

Wall Street is gearing up for a busy week with stock futures relatively unchanged after stocks closed near record highs last week, the first week of July and in the second half and third quarter.

And inflation is now front and center, given that job growth is starting to slow and investors are looking to urge Chairman Powell to step back from the labor market. That comes ahead of the June Consumer Price Index, which is due out Thursday, a sign that the Fed could cut interest rates in September.

Of course, that’s the probability, the earliest probability that we see, that points to a potential rate cut, and then we look at the rest of the year and what that might look like in December. For now, investors are still keeping that in mind, we certainly are.

Now that we have the economic calendar, let’s turn to the earnings calendar because that’s what’s most important this week for investors as they get a look at the latest inflation data and what exactly it means for the Federal Reserve.

Of course, attention will also be paid to financial results.

The condition of corporate America, that’s what we’re seeing.

And it really starts on Thursday with Delta Pepsi Co., and then on Friday we’ll start hearing from some of the larger banks, and Brad, I have a chart, if we can put it up here, of the earnings growth and some of the expectations for this quarter and also for the coming years. You can see that growth of 8.8% in the second quarter.

But let’s look at the fourth quarter of the year and 2025. There’s a perspective that’s really driving the markets because the bar that these corporations are going to have to clear is getting higher and higher.

And if last quarter was any indication of what we might see in terms of that reaction, companies that beat market expectations outperformed the S&P by only three basis points on the next trading day, which is well below the historical average.

The story continues

So we’re talking about a high bar for corporations and what exactly they need to accomplish to meet or exceed expectations this earnings season.

You have a question how big a driver it is or how big the growth is.

We may see a broader market reaction following these financial results.

Yes, the three largest companies by market capitalization that released this report represent over $1 trillion of the companies that are about to release a report: JP Morgan, Pepsico, and Wells Fargo.

Those top three companies, of course, that’s a whole bunch of names, even when we looked at the calendar and some of those logos, household names like Delta, Citigroup, Bank of New York, Mellon Bny, of course.

And then we have the Conagra brands in addition, but two interesting stats from the factset folks that really came to mind and jumped out at me in this latest second quarter 2024 earnings growth report is the estimated growth rate for the S&P of 508.8%.

And if this is the growth rate for the quarter, what is happening?

This will be the highest year-over-year profit growth recorded by the index since the first quarter of 2022.

And you asked the question how expensive things are now.

Well, in terms of valuation, the P/E ratio for the next 12 months for S&P is 521.2.

Why is this important?

This result is higher than the five-year and ten-year average.

And ultimately, that’s something we’ll be tracking in this results season as well.