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

The week of October 9, 2023, saw a flurry of economic activity and market activity as US stock investors awaited key quarterly earnings reports from major banks and other corporate releases. The S&P 500 reached a record high on Tuesday, marking its first all-time closing high since mid-August and surging more than 14% year-to-date.

Investors are keenly watching the Consumer Price Index (CPI) report due on Wednesday, as it serves as a primary gauge of inflation. The Federal Reserve, which raised interest rates last month for the first time since 2023, will meet at the end of the month to decide on further rate hikes to combat inflation.

The Federal Reserve's interest rate hikes have impacted banks, with JPMorgan, Goldman Sachs, Citigroup, Wells Fargo, Morgan Stanley, and Bank of America all scheduled to release their third-quarter earnings. These reports should provide valuable insights into the health of the US economy and corporate profitability. Analysts are particularly interested in how rising interest rates will affect capital markets and consumer spending.

Matt Stucky, chief portfolio manager at Northwestern Mutual Wealth Management, emphasized the need to monitor how higher rates are influencing various sectors, especially consumer spending. He noted that bank stocks have underperformed recently due to the rise in Treasury yields, with the S&P 500 banks index falling 7.5% over the past month. Miskin from Manulife John Hancock Investments expressed optimism if the banks report strong results next week, as it could signal a respite for the market.

Healthcare companies like Johnson & Johnson and UnitedHealth Group, as well as asset manager BlackRock, are among the other corporations expected to report earnings during the week. Preliminary expectations for the September CPI report suggest a 3.7% annual increase, with the core measure (excluding energy and food) projected to rise by 2.5%.

The Fed's target inflation rate stands at 2%. Michael Reynolds, vice president of investment strategy at Glenmede, expressed concern over persistent inflation in services, which could ease some concerns about the Fed's aggressive rate-hiking stance.