Prism MarketView Market Insights: What’s Ahead This Week

Investors are settling into a week with anticipation for the latter half as they tee up for a big macro week coupled with a kickoff into Q1 earnings season.

Upcoming Macro Highlights

 Wednesday: March CPI and FOMC Minutes

• CPI: As it relates to CPI, previews have flagged stickiness in core services from increased rent and OER with rising pressure on core goods from new and used vehicles. A softer headline can be anticipated due to impacts from energy.
• FOMC: It is anticipated that the FOMC minutes will provide further insight into the Fed’s thoughts related to the impact of the banking disruptions.

Thursday: Initial Claims, Retail Sales, and Prelim Michigan Consumer Sentiment

Friday: Industrial Production

Q1 Earnings Season

The Q1 Earnings season unofficially kicks off this week and arguably there is no better sector to start with than banking.

• Banking EPS: On Friday, big banks Citigroup (C) and JPMorgan Chase (JPM) will report earnings before market open. Others lined up for an early morning EPS release include PNC Financial (PNC) and Wells Fargo (WFC).
• Street S&P 500 Earnings Expectations: According to Factset, the Street is anticipating a 6.6% y/y decline in Q1.
• Sectors Expected to Decline Q1 EPS: Materials, Healthcare, Tech, and Communications Services.
• Sectors Expected to Report Best Q1 EPS Growth: Consumer Discretionary and Industrials.

Bears and Bulls: Trends, Chatter, Concerns

•  Bear Talk – Hard Landing Scenarios: As lending standards tighten due to recent bank disruptions, hard landing scenarios are being considered. Further points driving these considerations are the deeply inverted yield curve and collapsing money supply growth. Commercial and office real estate has been on the docket for being the next potential disruption.
• Bull Talk – Momentum and Stabilization: Major moving averages are all moving higher for the first time since October lows. For upcoming earnings, a low earnings bar may give support to the bottom-up Q1 S&P 500 EPS estimate that has fallen substantially since the start of the year. Discount window borrowing has reversed more than half of the recent ~$150B surge indicating some potential banking stabilization taking place.