Stocks Lower Monday; Bank Earnings, Inflation, and Retail Spending Scheduled This Week

Stocks fell Monday as investors looked ahead to the start of the second-quarter earnings season.

Large banks and airlines will kick us off this week, and both should be interesting updates for the broader economy as mortgage cancellations have surged and rising fuel prices have sent ticket costs higher.

Elon Musk officially withdrew from his deal to acquire Twitter (TWTR) at $54.20 per share. Despite Musk’s withdrawal, the Twitter Board says it is confident that the deal will go through at the original price, implying that the parties are likely to go to court. Twitter and Tesla's (TSLA) stock fell on the news, while Digital World (DWAC) surged on the possibility of a Musk-free Twitter.

Meanwhile, Uber (UBER) stock dropped Monday after The Guardian published “The Uber Files”, which - through internal documents - allege Uber lobbied politicians and broke the law in its attempts to expand globally.

Looking ahead to this week, major earnings reports pick up later in the week. While investors wait on those, they can consider inflation updates from the CPI and PPI reports on Tuesday and Wednesday and will turn their attention to Retail Sales on Friday.

Earnings

Bank earnings begin Thursday morning with JPMorgan (JPM) and Morgan Stanley (MS), and will continue Friday morning with Citigroup (C), Wells Fargo (WFC).

These reports come at a crucial time as rising mortgage rates have caused a jump in cancellations. In June, 60,000 home sales got ditched, which is approximately 15% of sales that entered contracts during that month.

With sales slowing down, many analysts are expecting layoffs in the mortgage industry, which saw a surge in hiring from 2018-2020.

According to Doug Duncan, chief economist at Fannie Mae, the next two months should be telling as layoffs tend to lag behind turns in the market by around six months, putting potential layoffs in the next few months.

JPMorgan and Wells Fargo have both recently begun laying off employees in the mortgage divisions.

Inflation

Investors will keep their eyes on the Consumer and Producer Price Index reports for the month of June on Tuesday and Wednesday, respectively.

The May CPI report from a month ago spurred this past month’s sell-off as the “peak inflation” narrative was dealt a massive blow as Consumer Prices unexpectedly ticked higher on a year-over-year basis.

The headline CPI figure is expected to show consumer prices rising at a slightly faster pace of 1.1% month over month, while the core figure is expected to remain steady at 0.6%.

Headline PPI is expected to also rise at a slightly faster pace of 0.9% while the core figure is expected to remain steady at 0.5%.

Retail Sales

Retail Sales follows up on a disappointing report in May that showed spending unexpectedly decline by 0.3% as high gas prices cut likely into discretionary spending. Excluding gas station sales, the decline was a much sharper 0.7% hit to retail sales.

Expectations for June’s spending report are for a 0.8% jump. Investors will be looking for signs that gas spending moderated and that some discretionary spending came back. However, with the most recent uptick in the savings rate and the continued erosion in consumer confidence, resilient consumer demand could be nearing its limit.