Business

Stocks week ahead: Big banks are booming. Now here come earnings

Banking stocks got off to a strong start in 2022, extending gains from the second half of last year.

the Invesco KBW Bank ETF (KBWB)which has American bank (buck)And Wells Fargo (WFC)And c. B. Morgan Chase (JPM)And US Bancorp (USB) And City Group (c) As its largest holding, it is already up more than 8% this year and has gained more than 19% in the past six months. This is better than the wider market.

JPMorgan Chase, Citi and Wells Fargo will tell investors how they did during the fourth quarter and what to expect in 2022 when they report their earnings Friday.

US Bancorp and Bank of America will release their earnings on Wednesday, January 19th. So do powerful investment banks Morgan Stanley (miss). Goldman Sachs (p) It is due to report earnings on Tuesday, January 18th.
Banks will benefit from higher interest rates, provided they do not rise too quickly and harm demand for mortgages, credit cards, and other loans. Although higher interest rates make lending more profitable for banks, there is a limit to how high interest rates can be before the overheated housing market subsides.

Financial companies are also booming thanks to the boom in the stock market, which has helped boost trading activity. The stock rally has also fueled demand for mergers and initial public offerings, and has led to a jump in lucrative investment banking fees.

Together, trends can increase banks’ profits. Analysts expect JPMorgan Chase share earnings to rise nearly 70% in 2021.

Wall Street is also anticipating big increases in earnings for Citi, which is now under the leadership of new CEOs Gene Fraser and Wells Fargo, which is finally beginning to recover after years of underperforming due to its fake accounts scandal.
& # 39;  Promote everyone.  & # 39;  Andy Slavett says CEOs should authorize reinforcements before office workers return

But investors want to hear what these banks have to say about the rapidly spreading Omicron variant of the coronavirus and how it could affect markets and the economy for the rest of the year.

Several big Wall Street firms, including JPMorgan Chase, Goldman Sachs and BlackRock, have postponed plans to get their workers back to their trading floors, despite pressure from Eric Adams, the new New York City mayor, to bring people back to the Big Apple offices. .

Investors will also be curious to hear what JPMorgan Chase CEO Jamie Dimon and other top bank executives have to say about the recent surge in long-term bond yields.

There are fears that the Federal Reserve will raise interest rates more aggressively than expected this year in order to rein in inflation. If that happens, it could cause a chill in both the housing and stock markets.

All eyes on the economy

Speaking of inflation, the US government will release CPI figures for December on Wednesday.

The Consumer Price Index rose 6.8% in the twelve months to November to its highest level in nearly four decades. Even after excluding volatile energy and food prices, core inflation rose 4.9% over the past year to its highest reading since June 1991.
The market is concerned that inflation pressures may not ease any time soon. It now appears that the Fed is participating in those tensions. The central bank raised its forecast for total and fundamental price increases for 2022 at its meeting last month.
The minutes of the Federal Reserve’s December meeting showed that the central bank was concerned about “surprisingly high inflation” due to “ongoing supply bottlenecks”.
Nevertheless, American consumers have continued to spend, even though higher prices may begin to squeeze some budgets. On Friday, the government will release retail sales figures for the crucial December holiday month.
Retail sales rose more than 16% in the twelve months to November, but growth slowed from October to November.

next one

Monday: American wholesale trade; Tilray (TLRY) earnings; The Tokyo Stock Exchange is closed for a market holiday
Tuesday: consumer inflation in Brazil; Albertsons earnings
Wednesday: US consumer price index; Jeffreys (JEF) And KB Home (KBH) profits
Thursday: US unemployment claims and producer prices; Delta Airlines (From) And Taiwan Semiconductor (TSM) profits

Friday: US Retail Sales, Industrial Production and Consumer Confidence (US from Michigan); Earnings from JPMorgan Chase, Citigroup, Wells Fargo and BlackRock

.

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