What to Expect in the Markets This Week

This week, U.S. equity markets slid as inflation continued to rise, hitting fresh multi-decade highs. The latest reading of the Consumer Price Index (CPI) showed inflation accelerating to an 8.5% annual rate in March, the highest since December of 1981. For the week, the Dow fell 0.8%, and the S&P 500 declined over 2%, while the Nasdaq shed 2.6%. The yield on the 10-Year U.S. Treasury Note hit a three-year high just over 2.8%. To combat rising inflation, the Federal Reserve is expected to raise the federal funds rate by 50 basis points at its upcoming policy meeting in early May, with 91% of investors now anticipating a target range of 75-100 basis points, according to live data from CME Group.

More earnings reports are due next week, setting the stage for another busy week of corporate earnings. Financial sector earnings start the week, with Bank of America, Charles Schwab, and BNY Mellon due to report on Monday. A number of other large U.S. companies, including Johnson & Johnson, Netflix, IBM, Tesla, Procter & Gamble, AT&T, Verizon, American Express, and others will report later in the week. Several key economic indicators will also be released, including CPI reports for the eurozone and Japan, as well as Chinese first quarter GDP growth. March housing starts and existing home sales will be released on Tuesday and Wednesday, respectively, providing an update on the U.S. housing market.

Key Takeaways

  • Earnings season continues, with quarterly reports from Bank of America, Charles Schwab, Johnson & Johnson, Netflix, IBM, Tesla, Procter & Gamble, AT&T, Verizon, American Express, and others.
  • March updates to U.S. housing starts and existing home sales will be released.
  • Chinese first quarter GDP growth figures will provide insight into the strength of the world’s second-largest economy.

Events Calendar:

Monday, April 18

  • Bank of America (BAC), Charles Schwab (SCHW), and BNY Mellon (BK) report earnings.
  • China GDP Growth Rate (Q1 2022)
  • Japan Industrial Production (February)

Tuesday, April 19

  • Johnson & Johnson (JNJ), Netflix (NFLX), Prologis (PLD), IBM (IBM), and Travelers Companies (TRV) report earnings.
  • U.S. Housing Starts (March)
  • U.S. Building Permits (March)

Wednesday, April 20

  • Tesla (TSLA), Procter & Gamble (PG), Abbott Laboratories (ABT), CSX Corporation (CSX), Baker Hughes (BKR), and Nasdaq (NDAQ) report earnings
  • Canada CPI (March)
  • U.S. Existing Home Sales (March)

Thursday, April 21

  • Phillip Morris (PM), Union Pacific (UP), and AT&T (T) report earnings.
  • Eurozone CPI (March)
  • Japan CPI (December 2021)

Friday, April 22

  • Verizon (VZ) and American Express (AXP) report earnings.
  • U.K. Retail Sales (March)
  • Canada Retail Sales (February)

Earnings Season Continues

The week will begin with earnings reports from the financial sector, with Bank of America, BNY Mellon, and Charles Schwab reporting on Monday. On Tuesday, we can also expect earnings from other sectors with reports from Johnson & Johnson, Netflix, and IBM. Tesla, Procter & Gamble, and Nasdaq report on Wednesday, while telecommunications giants AT&T and Verizon report on Thursday and Friday, respectively. This past week gave investors some initial insights into financial sector earnings, with reports from JPMorgan Chase, Wells Fargo, Goldman Sachs, Citigroup, and Morgan Stanley. The results were mixed, with both JPMorgan Chase and Wells Fargo recording quarterly profit declines by 42% and 20.8%, respectively. Meanwhile, Goldman Sachs and Morgan Stanley beat estimates with respective earnings per share of $10.76 and $2.02, far exceeding projections of $8.89 and $1.68 per share.

Housing Market Update

More updates on the state of the U.S. housing market will arrive this week, with the release of March housing starts and existing home sales by the U.S. Census Bureau and the National Association of Realtors (NAR), respectively. Housing starts surged in February, climbing 6.8% on an annualized basis to a total of nearly 1.77 million. Consensus estimates for March call for a slight decrease to 1.75 million starts. Meanwhile, existing home sales fell 7% on an annualized basis in February, to 6.02 million, and are projected to decline further to 5.8 million. Rising mortgage rates and continued price gains have dented demand for housing in recent weeks as new homes become increasingly unaffordable. The average rate on a 30-year fixed-rate mortgage rose to 5.13% last week, its highest rate in over three years, according to the latest figures from the Mortgage Bankers Association.

China GDP Growth Figures

On Monday, China will release GDP growth figures for the first quarter of 2022. Consensus estimates call for a 0.6% increase from last quarter, and an annual gain of 4.4%. The Chinese economy is likely to experience a slowdown due to continued COVID-19 lockdowns in Shanghai and other major cities, which will have an impact on supply chains and exports. China’s GDP is forecasted to expand by 5.1% in 2022, following an 8.1% expansion in 2021. The lockdowns and related COVID-19 restrictions are expected to reduce GDP growth by up to 2% this year. Disruptions in China will also have an adverse effect on the global economy, exacerbating worldwide supply chain disruptions.

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