Markets This Week: Earnings And Central Bank Decisions In Focus

Earnings and central bank decisions will be in focus this week. Traders are bracing for the Federal Reserve and the European Central Bank to boost interest rates and telegraph whether further hikes are on the way. The BOJ is expected to remain neutral, allowing the rate differential with its peers to grow while it waits for sustained inflation.


Wednesday could be pivotal, with the Fed expected to raise its benchmark rate to a 22-year high, followed by Chair Jerome Powell's news conference. The central bank chief may lean towards another raise, which risks slamming the brakes on growth and upsetting the bulls.


On Thursday, the ECB is expected to raise rates by 0.25%. According to a survey of analysts, the European Central Bank will raise borrowing costs to a peak of 4% in September as inflation remains resistant.


The GDP report is projected to show the economy grew at a 1.8% annual clip last quarter, compared with 2% in the prior reading, a Bloomberg survey shows.


Investors are bracing for a massive week on two fronts. Around 170 companies in the S&P 500, accounting for some 40% of its market capitalization, are scheduled to report earnings, including Microsoft, Meta Platforms, and Google parent Alphabet Inc.


On Friday, traders will be watching the employment cost index, a broad measure of wages and benefits, as well as the personal consumption expenditures price index — the Fed's preferred inflation measure to see if the central bank begins to favor another rate hike at its September meeting.


US bank stocks were active this week after a flood of better-than-feared earnings reports lured investors back to the downtrodden shares. The KBW Bank Index gained about 7% this week for its strongest advance since May last year. That outpaced a roughly 0.7% gain in the S&P 500 Index.


To present, 18% of the S&P 500 businesses have reported actual results for Q2 2023. 75% of these firms posted actual EPS above forecasts, which is lower than the 5-year average of 77% but higher than the 10-year average of 73%. Companies are reporting earnings that are 6.4% higher than expected, which is lower than the 5-year average of 8.4% but comparable to the 10-year average of 6.4%.




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