S&P 500: Q3 Earnings Takes-Off This Week!

The upcoming week is set to be one of the most eventful as earnings season takes off, with a slew of reports expected from some of the world’s leading companies. The week will start with financial sector reports from giants like Charles Schwab (NYSE: SCHW), Bank of America (NYSE: BAC), Goldman Sachs (NYSE: GS), and Morgan Stanley (NYSE: MS). 

Additionally, Johnson & Johnson (NYSE: JNJ) and Lockheed Martin (NYSE: LMT) are slated to unveil their results on Tuesday. Midweek updates will come from Tesla (NASDAQ: TSLA), Procter & Gamble (NYSE: PG), and Netflix (NASDAQ: NFLX) on Wednesday, while AT&T (NYSE: T) and TSMC (NYSE: TSM) will disclose their performance on Thursday. The week will wrap up with American Express (NYSE: AXP) announcing its earnings on Friday.

 

JP Morgan sounds the alarm bells 

JPMorgan Chase (NYSE: JPM) posted impressive profits for the third quarter. Still, it came with a cautionary message from CEO Jamie Dimon about the multitude of threats the globe is currently grappling with.

In a statement released alongside the bank’s earnings report, Dimon described the current period as potentially “the most dangerous time the world has seen in decades.” The prominent executive highlighted the ongoing conflict in Ukraine and the recent attacks by Hamas on Israel, underscoring the potential ripple effects these could have on energy and food markets, global trade, and international relations.

Moreover, Dimon expressed concern over the soaring national debt and unprecedented peacetime fiscal deficits, factors that are exacerbating the risk of persistent inflation and high interest rates. 

He also touched upon the Federal Reserve’s initiative to downsize its bond portfolio through a process known as quantitative tightening. Dimon warned that this move is draining liquidity from the system at a juncture when regulations are already constraining market-making capabilities. 

The CEO has been vocal about alerting clients to the prospect of not just sustained, but potentially sharply escalating interest rates.

“We are optimistic but also prepared for various scenarios, ensuring the firm’s ability to consistently serve our clients regardless of the prevailing circumstances,” Dimon stated.

For the third quarter of 2023, JPMorgan Chase recorded a profit of $13.15 billion, or $4.33 per share, marking a 35% increase from the previous year. However, Dimon was quick to temper enthusiasm, noting that this robust performance was buoyed by factors impacting net interest income and credit costs, and such favorable conditions might not be sustainable.

 

Consumer spending and housing market 

In addition to corporate earnings, attention will be turned to the U.S. retail sector. The U.S. Census Bureau is set to release its latest findings on national retail sales on Tuesday, offering insights into consumer spending trends. Despite the challenges of high inflation and escalating interest rates, retail sales have demonstrated resilience, marking five consecutive months of growth. 

The sustained willingness of consumers to spend, a critical component contributing over two-thirds to the U.S. GDP, has been instrumental in steering the country clear of a recession.

Further, updates on the housing market are on the horizon. The National Association of Home Builders (NAHB) is anticipated to release its Housing Market Index (HMI) for October on Tuesday, providing insights into the mood amongst homebuilding industry executives. Following this, housing starts and building permits data, which serve as indicators of new home construction activity, are expected on Wednesday.

The week will conclude with the unveiling of existing home sales data for September on Thursday. Each piece of data will offer valuable insights into the ongoing dynamics of the housing market.