Tesla, Netflix, and banks highlight earnings rush: The week ahead

After weeks of Fed speak and rising yields driving stock action, corporate earnings will take center stage in the week ahead.

Results from Bank of America (BAC) and Goldman Sachs (GS) will provide a look at how the financial sector is responding to the rising rate environment. Meanwhile, Tesla and Netflix will highlight the start of tech earnings.

A September retail sales report is expected to show minor growth amid an otherwise quiet week for economic data.

Recent economic data showed inflation cooling enough for the market to bet that the Fed won't raise interest rates at its November meeting but stocks still struggled to find solid footing as rising geopolitical risks and the fallout from higher for longer interest rates continue to cloud the picture.

In the past week, the Nasdaq (^IXIC) fell nearly 0.2% while the benchmark S&P 500 (^GSPC) rose almost 0.5% and the Dow Jones Industrial Average (^DJI) popped about 0.8%.

Inflation data out last week showed cooling price increases under the surface. The data left markets optimistic on a rate pause in November as Fed officials expressed that higher yields could provide necessary monetary tightening and effectively take the place of another interest rate hike.

But combined with a hot September jobs report, there isn't a broad consensus that the Fed is done hiking altogether.

"Continued strength in the labor market could lead to persistence in wage growth and forestall declines in consumption growth, which would leave price pressures elevated and growth above trend," Oxford Economics' team of economists wrote in a research note on Thursday. "With the Fed committed to returning inflation back to its long-run target of 2%, this would raise the odds of rate increases this year, extend the duration of restrictive monetary policy, and increase the chances of a recession occurring down the road."

The impact of the Federal Reserve's interest rate hikes on corporate America are expected to once again be a key focus during third quarters earnings season. And at first reading, major financial institutions are holding up, as JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) all reported higher profits during earnings releases on Friday.

But JPMorgan CEO Jamie Dimon laid out risks ahead in the company's earnings release.

"US consumers and businesses generally remain healthy, although consumers are spending down their excess cash buffers," Dimon said before commenting on how rising geopolitical tensions in the Middle East could further cloud the economic picture.

"The war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships," Dimon continued. "This may be the most dangerous time the world has seen in decades."

In the week ahead, Bank of America, Goldman Sachs, and Morgan Stanley (MS) will lead the earnings calendar for the financial sector.

"The disappointing thing is JPMorgan was the best last quarter and probably will be the best in terms of performance this quarter," Dave Ellison, Hennessy Financial Funds manager, told Yahoo Finance Live after JPMorgan reported results. "So we're getting the best of bank earnings today and the rest is going to be not quite as exciting."

Tesla recently missed Wall Street's estimates for third quarter deliveries, and margins remain a key concern for the electric vehicle maker. Margins have declined throughout 2023 as the company has used price cuts to ignite demand.

Morgan Stanley equity analyst Adam Jonas thinks margins likely fell to 17.5% from 18.2% in the period prior. After hosting a "bull/bear lunch" this week, Jonas said the read on Tesla's earnings "skews cautious."

"Many are wondering if Tesla can grow earnings at all in fiscal year '24," Jonas wrote in a research note on Oct. 11.

He added: "The performance of Tesla stock following the print will likely be driven by comments on the forward outlook and how that may move consensus (up/down/neutral) for [fiscal year] '24."

For Netflix, investors will be searching for details on recent developments at the company including rumors of a price hike, new details on the streamer's password sharing crackdown, and the success of the advertising tier.

"We believe pricing changes, slower than expected sub growth, anecdotal consumer checks, and viewership data indicate Netflix has slowed down, if not outright stopped, cracking down on password sharing," Jefferies equity analyst Andrew Uerkwitz wrote in a research note previewing earnings. "This is likely due to re-focusing on getting timing, content, and pricing structures in a better position to increase borrower retention. We adjust our revenue model lower on new subscriber growth."

In sum, Uerkwitz is "looking for earnings to provide some answers."

Broadly, the question facing investors this earnings season will be if company results can bring stocks out of their recent slump. Entering third quarter reports, the Street projected flat earnings compared to the same period a year prior.

Some strategists believe the stronger-than-expected data could drive better-than-feared earnings. If that's the case, the next catalyst for stocks could take hold.

"We expect a better-than-feared earnings season and the SPX trading toward the top end of our range (4200-4600)," Wells Fargo equity analyst Christopher Harvey wrote in a note to clients on Friday.

But the "upside will be hampered by interest rates," he added.

Weekly Calendar

Monday

Economic data: Empire Fed manufacturing, October (-5 expected, +1.9 previously)

Earnings: Charles Schwab (SCHW)

Tuesday

Economic data: National Association of Home Builders sentiment index, October (45 expected, 45 previously); Industrial production, month-over-month, September (-0.1% expected, +0.4% prior) Retail sales month-over-month, September (+0.3% expected, 0.6% previously); Retail sales month-over-month, excluding auto and gas, September (+0.1%, +0.2% previously)

Earnings: Bank of America (BAC), BNY Mellon (BK), Goldman Sachs (GS), Interactive Brokers Group (IBKR,) J.B. Hunt (JBHT), Lockheed Martin (LMT), Johnson & Johnson (JNJ), Pinnacle Financial Partners (PNFP), United Airlines (UAL)

Wednesday

Economic data: Building permits, September, month-over-month (-5.9%% expected, +6.9% previously); Housing starts, September, month-over-month (+8.5% expected, -11.3% previously); MBA mortgage applications, week ending Oct. 13 (+0.6%, previously)

Earnings: Netflix (NFLX), Tesla (TSLA), Alcoa (AA), Ally Financial (ALLY), ASML (ASML), Abbott Labs (ABT), Citizens Financial Group (CFG), Discover Financial Services (DFS), Halliburton (HAL), IBM (IBM), Las Vegas Sands (LVS), Nasdaq (NDAQ), Zions Bancorporation (ZION)

Thursday

Economic data: Initial jobless claims, week ending Oct. 14 (209,000 previously); Philly Fed Business outlook, October (-6.4 expected, -13.5 previously); Existing home sales, September, month-over-month (-3.5% expected, -0.7% previously); Leading index of economic indicators, September (-0.4% expected, -0.4% previously)

Earnings: AT&T (T), American Airlines (AAL), Blackstone (BX), Freeport McMoran (FCX), KeyBank (KEY), PPG (PPG), Truist (TFC), TSMC (TSM), Union Pacific (UNP), Western Alliance (WAL), WD-40 (WDFC)

Friday

Economic data: No notable economic releases.

Earnings: American Express (AXP), Comerica (CMA), Huntington Bancshares (HBAN)

Josh Schafer is a reporter for Yahoo Finance.

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