Week ahead: Q2 earnings season on Wall Street

The second quarter earnings season unofficially opens with JPMorgan Chase (JPM) this Thursday with markets uncertain about whether analyst expectations for Q2 and beyond can survive a general slowdown in the economy amid higher inflation. On that note, market attention will land on the US CPI inflation report on Wednesday.

Earnings season

After declining 20% in the first half of the year, the second quarter earnings season comes at a vital moment for the S&P 500. Analysts still see 10% earnings growth this year and it seems likely that these estimates will need to be revised lower, potentially leading to further declines for the stock market.

JPMorgan gets the US Q2 earnings season underway July 14th before the market opens. CEO Jamie Dimon’s letter to shareholders is always a must-read view of the US and global economy. Forecast EPS is $2.90 on revenues of nearly $32bn. Our Analyst Recommendations platform tool shows The Street maintains a buy rating on the stock, with a 35% upside average price target. Morgan Stanley (MS) also reports on Thursday, with Citigroup (C) and Wells Fargo & Co (WFC) on Friday.

Inflation easing?

US consumer inflation is the focus on Wednesday as markets search for direction from central banks and the path of bond yields. CPI rose 1% in May, up from +0.3% in April, leaving the annual increase at +8.6%, the highest since 1981. Core inflation, which strips out food and energy, rose 0.6% in May, the same rate as in April. Markets have been pushed from pillar to post on a mix of rising inflation and growing concerns about a recession, so this release will be closely watched for signals about the likely path of monetary policy. Produce price inflation data is released the day after.

Consumer health check

The US consumer is the focus on Friday with a couple of releases that will be closely watched by market participants. Retail sales numbers for June are due up first, coming off the back of a –0.3% decline in May as inflation bit. After this the University of Michigan releases its consumer sentiment index and consumer inflation expectations numbers.

Central banks

On the central bank front, the main focus will be the Reserve Bank of New Zealand, which is expected to raise its official cash rate by another 50bps, to 2.5%, when it meets on Wednesday, Having already raise rates by half a percentage point at its last meeting, markets anticipate a 50bps this week to be followed by another in August. Meanwhile, the Bank of Canada is also expected to raise rates by 50bps to 2% on Wednesday.

China data

Friday sees a deluge of economic data from the world’s second largest economy. Strict lockdowns have hampered China’s economic recovery, but we’ll get a better picture with the Q2 GDP report. China’s economy is forecast to grow by 1.4% year on year in the April-June quarter, which would be its slowest expansion since the first three months of 2020. Also on deck are Chinese fixed asset investment, industrial production and retail sales numbers.

Earnings calendar

Economic calendar