Economic Outlook: A Busy Week Ahead
This week promises to be a whirlwind of activity, with a slew of key economic reports and the highly anticipated kickoff of earnings season. The market has already shown signs of volatility, with the Dow Jones Industrial Average, S&P 500, and Nasdaq all experiencing declines last week.
Inflation Takes Center Stage
The spotlight will shine brightly on inflation this week, with the release of the new CPI report on Wednesday. Argus expects CPI to rise to 2.9% and Core CPI to remain steady at 3.3%. These numbers will be closely watched, particularly in the wake of last week’s strong employment report.
Economic Calendar Highlights
In addition to the CPI report, this week’s economic calendar is packed with other key releases, including:
- Producer Price Index (Tuesday)
- Retail Sales (Thursday)
- Housing Starts, Building Permits, Industrial Production, and Capacity Utilization (Friday)
Industrial Production: A Key Indicator
Argus Economist Chris Graja, CFA, believes that Industrial Production will be a crucial indicator to watch this week. He expects December Industrial Production to show improvement from November’s 0.9% decline, but still remain slightly negative at minus 0.4%. Graja notes that while new orders in the ISM Manufacturing report have risen to expansionary levels, manufacturing employment declined in December, and the Labor Department’s Diffusion Index showed weakness across 72 manufacturing industries.
Earnings Season Kicks Off
The big banks will take center stage this week, with a slew of earnings reports scheduled. Some of the notable reports include:
- Citigroup, JP Morgan Chase, Wells Fargo, Bank of New York Mellon, Goldman Sachs, and BlackRock (Wednesday)
- Bank of America, Morgan Stanley, PNC Financial, UnitedHealth Group (Thursday)
- Truist, Citizens Financial Group, and State Street (Friday)
Banking Sector Insights
Argus Director of Financial Institutions Research Steve Biggar expects minimal loan growth, but some net interest margin expansion from easing deposit cost pressures. He also anticipates a steeper yield curve, which will be beneficial to margins going forward. Biggar notes that banks have been cautious on the economy, padding the allowance for loan losses, but with the slowdown still materializing, he expects more muted loan-loss provisions, aiding profits. Capital markets revenues are also expected to have improved for the large banks year over year.
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