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Week Ahead: CPI & Big Banks, Netflix & Tesla Earnings

Plus500 | Monday 17 April 2023

This week, a plethora of financial events are expected to take place, most of which can provide valuable insight into the state of the global economy, and, as such, can affect the trajectory of the markets. From upcoming earnings releases to key economic data like CPI and GDP, here’s what traders should expect from the week ahead:

An image of economic data charts

Bank of America & Goldman Sachs Earnings: Is the Banking Crisis Over?

Q1 earnings season continues this week in full swing with Goldman Sachs (GS) and Bank of America (BAC) which are perhaps some of this quarter’s most anticipated earnings releases, especially in light of the latest banking sector crisis and big banks’ collapses.

To perhaps understand these scheduled releases from Goldman Sachs, the world’s 2nd biggest investment bank by revenue, and Bank of America, a leader in the financial field, traders may want to refer to last Friday’s big bank earnings reports from JPMorgan (JPM), Wells Fargo (WFC), and Citigroup (C)

Accordingly, whereas many may have been apprehensive about the future of the banking sector, Friday’s earnings releases may have provided much-needed relief to many traders and investors as the banks reported better-than-expected data. As a result, major Wall Street Indices rallied with the Dow Jones Industrial Average (USA 30- Wall Street) rising by 1.1%. The banks also led much-needed gains as JPMorgan and Citigroup rose respectively by 7.5% and 4.7% on Friday, hence hitting the brakes on the banking crisis for a while. 

Nonetheless, it seems that Wells Fargo did not enjoy similar gains as it slightly fell by 0.02%. In addition, it is important to note that many believe that despite this positive turn of events, the banking sector’s woes are far-from-ending and might continue in the near future. Even JPMorgan CEO, Jamie Dimon, also stated that the US economy might still face challenges in the months to come. 

As for Bank of America which is expected to report its earnings on Tuesday, April 18th before market open analysts expect it to report an EPS of $0.80 which is similar to last year’s quarter’s figure, while its revenues are expected to have hiked by 8.7% from the previous quarter last year.

Similarly, Goldman Sachs is also expected to report its Q1 2023 earnings on Tuesday, April 18th, before market open and is also believed to report an earnings beat. Analysts predict an EPS of $8.53 which might be 20.7% lower YoY while revenues are expected to have hiked by 2.1% from the year-ago quarter to reach $13.21 billion. 

If, indeed, these predictions hold true, then these big banks' stocks could recoup some of the losses incurred over the past few months and vice versa. Since the beginning of the year, Bank of America and Goldman Sachs have respectively lost 11.8% and 2.6% of their value, and therefore, tomorrow’s earnings reports could be detrimental to their growth. (Source:Yahoo Finance)

Netflix & Tesla to Report Earnings 

Big banks are not the only anticipated earnings for this week, as entertainment giant Netflix (NFLX) and EV-maker Tesla (TSLA) are also expected to report their Q1 2023 earnings on Tuesday, April 18th, and Wednesday, April 19th after market close. 

It is no secret that these companies' earnings reports come against the backdrop of rising market competition and an overall ailing economy driven by inflation, recession fears, and ensuing rate hikes from central banks like the Federal Reserve.

However, it might come as a surprise to learn that despite the aforementioned hurdles, since the beginning of 2023, both Netflix and Tesla soared by 14.8% and 71.1%. In addition, analysts estimate that Netflix is likely to report steady user growth, and revenue of $8.18 billion which is a 4% annual rise, while its EPS is expected to have declined by 20% YoY to reach $2.81. The company’s earnings are also projected to grow by 12% in 2023 and continue expanding in 2023. 

Tesla is also expected to beat estimates in its upcoming earnings report. Wall Street analysts expect higher revenue coupled with a decline in earnings. According to Zacks Consensus Estimate, Tesla’s EPS is expected to reach $0.85 which is a YoY decline of 20.6% while its revenue is expected to have risen by 25.6% from the previous year’s quarter to have reached $23.56 billion. If Netflix and Tesla report as expected, their value might hike and vice versa. 

Key Economic Data Releases Worldwide: CPI, GDP & Initial Jobless Claims 

Inflation has been an ongoing motif in the past couple of months as record-high inflation rates were reached in various countries, thus putting a strain on consumers and generating volatility across the various market sectors. 

Accordingly, this week’s scheduled CPI, GDP, and Initial Jobless Claims releases may provide traders, investors, and analysts alike with valuable information about the current state and health of the economy. 

The Consumer Price Index, otherwise abbreviated as the CPI, is a key economic index that gauges inflation and deflation. This week, CPI figures are scheduled to be released in Italy on Monday, April 17th, in the UK and the Eurozone on Wednesday, April 19th, and in Hong Kong and Japan on Friday, April 21st. These releases will reveal if inflation has finally cooled down or if it's still record-high.

As it stands, despite the fact that Germany seems to be heading closer to a recession, the economic outlook for the Euro Area seems to have slightly improved. However, one should wait for Wednesday’s Eurozone CPI to see how the data might affect the ECB’s upcoming monetary policy decision. Regarding the UK’s upcoming CPI, the expectations seem to point at inflation easing a tad to 9.8% from last month’s 10.4% highs. Nonetheless, high inflation figures are still a possibility that might increase the BOE’s hawkishness

Another key financial data this week is the US initial jobless claims which are due on Thursday, April 20th, and might reflect the health of the world’s biggest economy as these measure unemployment rates. As US inflation cools down a bit, it will be interesting to see how the labor market performs. 

Moreover, traders may also be interested in keeping track of China’s Q1 GDP release on Tuesday, April 18th to see how the world’s second-biggest economy has been coping after the COVID lockdowns and the overall economic hurdles. China’s GDP is expected to have grown by 4.5% compared to 2.9% and the economic conditions are thought to be more positive than in the past. 

All in all, a possibly fruitful and interesting week awaits the markets and traders should keep track of these events to see how the markets might react and how these might affect their trades.

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