What to Expect in the Week Ahead (JPM, DAL, C, and PEP Earnings; CPI and Fed Chair Powell Testimony)

Moomoo Breakfast US joined discussion · Jul 7, 2024 14:53

What to Expect in the Week Ahead (JPM, DAL, C, and PEP Earnings; CPI and Fed Chair Powell Testimony)

In the upcoming week, Federal Reserve Chair Jerome Powell will deliver his semiannual monetary policy report to the Senate Banking Committee and the House Financial Services Committee. The key macroeconomic event will be the release of the CPI inflation data on Thursday. Additionally, the US earnings season begins, with major banks reporting their results, drawing attention amid a period of low market volatility.

Earnings Preview

$Delta Air Lines (DAL.US)$ is set to report earnings on July 11, following a strong Q1 with record revenue and earnings at the high end of its guidance. CEO Ed Bastian has highlighted robust demand for air travel, driven by a financially healthy customer base prioritizing travel. Delta continues to benefit from a premium consumer mix, diversified revenue, and cash streams. Analysts expect Delta to reiterate its 2024 guidance for an EPS of $6.00 to $7.00 and free cash flow of $3 billion to $4 billion. The earnings report could significantly impact the airline sector, with options trading indicating a potential 6% share price swing.

$PepsiCo (PEP.US)$ is set to report Q2 earnings on July 11, with analysts expecting revenue of $22.7 billion, an EPS of $2.16, an adjusted operating margin of 17.6%, and adjusted EBITDA of $4.72 billion. Organic sales are projected to rise by 3.0%, driven by strong performance in Europe and Latin America, while volume is expected to increase by 4.1%, offsetting a 1.1% decline in pricing. Despite trading sideways and concerns about U.S. trends, UBS sees a longer-term path to improved performance and views the current entry point as attractive.

$Citigroup (C.US)$ is expected to report higher top- and bottom-line results, with attention on its corporate restructuring progress. The turnaround will focus on its services business, projected to grow by 5.9%, while its banking and wealth units need to reverse their decline to meet mid-term revenue targets, according to Piper Sandler. The corporate advisory business is anticipated to expand by 39%, whereas wealth management likely shrank by 3.8%.

$JPMorgan (JPM.US)$ is expected to see a 6.8% revenue growth, but rising costs may lead to its first profit contraction in nearly two years. Double-digit fee growth in advisory businesses, driven by a dealmaking revival, should help balance this. Evercore notes JPMorgan's strong market share in card and retail banking. The bank, valued at $580.82 billion, will report Q2 2024 earnings on July 12, with analysts predicting $4.19 per share, down from $4.37 last year. Despite past warnings of an "uncertain" year, JPMorgan has consistently exceeded EPS estimates.

$Wells Fargo & Co (WFC.US)$ is set to announce its Q2 2024 earnings on Friday, July 12. Analysts expect a profit of $1.26 per share, up 0.8% from $1.25 a year ago. Despite a year-over-year profit decline last quarter due to reduced loans and regulatory changes, Wells Fargo has consistently surpassed Wall Street's EPS estimates in the past four quarters. The company holds approximately $1.9 trillion in assets and offers a diverse range of financial services.

Macroeconomic Data and Events in the Coming Week: US CPI, Fed Chair Powell Testimony, and More

US June CPI and Core CPI

The June headline CPI, due on July 11, is expected to rise by 0.1%, primarily due to a significant seasonally adjusted decline in gasoline prices. Monthly core CPI is projected to grow by 0.2%, driven by disinflation in used cars and recreation. Year-over-year, the headline CPI should decrease to 3.0% from May's 3.3%, with core CPI remaining at 3.4%. This core CPI forecast corresponds to a 0.1%-0.2% increase in the June core PCE deflator, the Fed’s preferred inflation gauge, due later this month. This would mark the second consecutive month with a core PCE reading aligning with the Fed’s 2% target. If two more similar inflation reports follow before the September FOMC meeting, the market anticipates officials will be prepared to cut rates then.

Fed Chair Powell's Testimony

Federal Reserve Chair Jerome Powell will present his semiannual monetary-policy report to the Senate Banking Committee on July 9 and the House Financial Services Committee on July 10. Republican members are expected to question him on the economic impact of the past four years of inflation, while Democrats will likely push for rate cuts to prevent rising unemployment. Powell is anticipated to adopt a dovish tone, acknowledging progress in curbing inflation. He is also expected to express concerns about the US's unsustainable fiscal trajectory and emphasize the importance of the Fed's political independence, while avoiding specific comments on tax and spending policies.

US June PPI

Producer prices likely showed little change in June, with rising oil prices reversing May's decline in PPI inflation. Core PPI prices are expected to have rebounded after being flat in May. The ISM Services PMI commentary indicated that costs have stabilized, limiting the extent of any increase in producer prices. However, producers remain concerned about potential rising costs. Respondents to the June ISM surveys noted ongoing increases in chemical and freight costs, and continued volatility in commodity prices.