Bank earnings, CPI headline busy markets week as S&P 500 hovers near records

Throughout this busy week in the markets, US investors will be closely analyzing quarterly earnings reports from major banks and inflation data, which will shed light on corporate profits and interest rates as the Federal Reserve meets later in October to decide on interest rate adjustments. The S&P 500 reached an all-time high on Tuesday, marking its first closing high since mid-August and registering a year-to-date gain of over 14%.

Investors are eagerly awaiting the Consumer Price Index (CPI) report on Wednesday, as it is considered a key indicator of inflation. The Fed raised interest rates last month for the first time since 2023 to combat inflation. Large banks, including JPMorgan and Goldman Sachs, are expected to report their earnings next week, with their results anticipated to contribute to a projected 30% increase in S&P 500 earnings for the third quarter.

Matthew Miskin, a co-chief investment strategist at Manulife John Hancock Investments, expressed optimism about the upcoming earnings reports and the impact of higher interest rates on the economy. However, bank stocks have been underperforming recently, amid rising Treasury yields, with the S&P 500 banks index falling 7.5% in the past month.

The markets appear to be uncertain about the underlying performance of financial companies, awaiting positive results from the banks next week. The September CPI report is projected to show an annual increase of 3.7%, while the core measure, excluding energy and food costs, is expected to rise by 2.5%. Michael Reynolds, a vice president of investment strategy at Glenmede, expressed concern about sticky services inflation, which could influence the Federal Reserve's decision on interest rates.

Reports on producer prices and retail sales are also anticipated to provide a clearer view of the economic situation. While the Fed has started to hike interest rates, traders have reduced expectations of further increases at the October meeting, although rising inflation could revive those hopes.