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What To Expect As Q3 Earnings Season Commences

This week's upcoming economic data and slew of quarterly results should provide market participants with sufficient vindication for decisive price action

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This story originally appeared on Zacks

The public equity market can't seem to find a solid footing in this unstable market environment as we come to the precipice of Q3 earnings elation. All the major averages have fallen below their 50-day moving averages as market enthusiasm abates with bullish catalysts running out.

- Zacks

Investors have been projecting an early fall index level correction (10%+ decline from recent highs) for months now, and they nearly got it in September, as nervous market participants pulled profits in the seasonally weakest trading month of the year. This self-fulfilling prophecy dragged all the major indexes down over 5% (generally referred to as a pullback), but we haven't reached that 10% sell-off mark that buyers continue to look for.

FUD (fear, uncertainty, & doubt) continues to infect this market, with growing stagflation (slow economic growth with significant inflationary) concerns, escalated by a perplexing September jobs report, negative pre-earnings sentiment, and mounting anxiety about an accelerated liftoff timeline as global supply chain bottlenecks linger (Federal Reserve rate hikes).

We have an exciting week of market-moving reports ahead, with a flood of quarterly releases and crucial economic data from September, which should provide market participants with sufficient vindication for decisive volume-fueled price action (the direction remains to be seen).

Kicking Off Q3 Earnings

The stock market is on the precipice of Q3 earnings season mania, which will dictate investor sentiment towards equities for the remainder of the year. The primary elements that investors will be focused on are the consequences of mounting pricing pressures and the speed of recovery from the abating Delta-variant.

Banks will be kicking us off this stimulating quarterly affair with their Q3 results, which should be an enlightening set of results beginning Wednesday before the opening bell. JP Morgan Chase JPM, Goldman Sachs GS, and BlackRock BLK will be reporting before the opening bell on Wednesday (10/13). Bank of America BAC, Wells Fargo WFC, Morgan Stanley MS, and Citigroup C are releasing their Q3 results Thursday mornings. By the end of the week, over 40% of the S&P 500's financial sector will have reported, and we will have a pretty clear picture of the health of our economy's bankrollers. 

Delta DAL, the most valuable publicly traded commercial airline, will provide us with color on the impacts of this latest wave of COVID when it releases its quarterly results Wednesday morning (10/13). Analysts are projecting the airliner to reveal its first profitable quarter since 2019. This report will give us an initial gauge of the travel & leisure sector and the status of resurging business travel (whether this primary profit driver will ever return to pre-pandemic levels).

Taiwan Semi TSM, the world's largest semiconductor manufacturer (producing 57% of the world's chips), will provide a breakdown of the tumultuous global chip market in this week's earnings, which has been a critical concern for strategic sectors across the global economy. Analysts are looking for a record quarter from TSMC when it releases its Q3 report Thursday before the bell.

Below is a breakdown of Zacks Consensus Estimates for this week's key quarterly reports.

Zacks Investment ResearchImage Source: Zacks Investment Research

Key Economic Data

September's consumer price index (CPI), the market's inflation benchmark, will be published on Wednesday at 8:30 am (ET). Economists are projecting the headline inflation measure to come in 0.3% above August's CPI. Core inflation (excluding volatile pricing categories like energy and food) is anticipated to exhibit the same 0.3% month-over-month increase. Market participants will be laser-focused on this number as it will signal whether the Federal Reserve and their steadfast "transitory" posturing on inflation can be trusted (significant interest rate implications).

We have a leading inflation report to watch out for on Thursday, September's producer price index (PPI), which will provide us with a pricing pressure indicator straight from the initial source. This will give us insight into inflationary pressures at their inception, which is a good indicator of future product prices. 

September's retail sales data will be announced Friday at 8:30 am (ET), and economists are looking for a 0.2% decline from August but a 0.5% increase when excluding the automotive space. The preliminary consumer sentiment index for October Friday morning is also a data point to watch for improvements after hitting an over-decade low in August.

Happy Trading!

Dan Laboe



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