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The Week Ahead: More Bank Earnings; Netflix Raises Subscription Prices Ahead of Earnings

Monday, January 17, 2022 02:25 PM | Nick Dey
The Week Ahead: More Bank Earnings; Netflix Raises Subscription Prices Ahead of Earnings

Cryptocurrencies fell Monday while other U.S. markets were closed in observance of Martin Luther King Jr. Day.

The crypto market as a whole was down 3.25% Monday afternoon, with Ethereum leading the decline, falling 4.3% and Bitcoin slumping 2.2%.

With the stock market closed, there wasn’t a lot of news for investors to digest today. One interesting bit that came out over the weekend was that Walmart (WMT) applied for a total of seven new trademarks related to the metaverse and cryptocurrencies in late December.

There isn’t a ton known about the push as of now and the extent of its seriousness is still up in the air. However, the three most interesting trademark applications were related to the creation of a digital currency and digital token of value, online retail store services for virtual merchandise, and downloadable software for managing portfolios of cryptos and other digital assets and currencies.

According to trademark attorney Josh Gerben, “There’s a lot of language in these, which shows that there’s a lot of planning going on behind the scenes.” However, given the molasses-like speeds in which Walmart joined the online retailing fun, it’s speculative at best to consider this a major push by the retailer.

Anyways, looking forward to the rest of this week, we have a busy week of earnings as well as a housing market update.

Bank Earnings Continue

After a disappointing start to earnings season, brought to us courtesy of a slew of underwhelming bank earnings reports, investors will be looking at reports from a lot more banks this week.

Late last week, card volume became a talking point. JPMorgan (JPM), Citigroup (C), and Well’s Fargo (WFC) all showed a quarter-on-quarter recovery. That seems like a great development for banks at first glance, however, the figure is, of course, gauged in dollars and not adjusted for inflation.

According to Wedbush analyst Moshe Katri, the positive here is from a directional perspective that dissipates some when adjusted for inflation, as purchase volume growth remained “anemic” during the quarter.

This could be a sign that spending is normalizing following months of spending being propped up by stimulus efforts, as well as some favorable comparison points as figures are no longer overlapping with depressed-2020 figures.

Unless last week proves to be a set of anomalies, this talking point will likely continue this week. Goldman Sachs (GS), Bank of America (BAC), and Morgan Stanley (MS), among many banks, both regional and national, are slated to report throughout this week.

Subscriber Proxy

Now, it is no secret that the Nasdaq is rather tech-heavy and that it did fantastic during the pandemic. The index, however, has fallen 8.06% since the turn of the year as tech stocks finally seem to be making way for value stocks.

The last time the markets looked like this, the Delta variant pushed value stocks back out of the limelight, affording the Covid darlings a last hoorah and stymying the reflation trade. It's unclear if the Omicron and potentially emerging Deltacron will have the same effect, but analysis coming out of Ned Davis Research suggests that the trend may finally be switching.

As it stands, more than a third (36%) of the Nasdaq is 50% or more off of its 52-week high. According to the research firm, the Nasdaq tends to average just 12.5% of companies trading 50% or more off of its 52-week high. Rampant underperformance like this is rare but tends to precede a “cyclical bear market”, according to the company, which means a 20% decline or more from records, lasting a few months.

However, given the tech-heavy nature of the Nasdaq and the trading patterns that persisted over the last few years due to the pandemic, this might better reflect a change in favor by market participants.

So what does this have to do with subscribers? Well, Netflix (NFLX) is slated to report earnings later this week, and the streaming service will be the first major subscription-based company to report.

Ahead of this quarter’s report, Netflix announced an increase to its subscription price as the company aims to cope with slowing growth. The pandemic saw the company add 20%+ paid memberships throughout the 2020 quarters, but it has struggled to maintain this growth, with the second quarter 2021 showing 8.4% growth and the third quarter getting 9.4%.

In addition to added subscribers, investors will be watching the average paid streaming membership, which grew 9% in the previous quarter, and ARM (average revenue per membership) which grew 7% last quarter as the trends shown by Netflix could be proxies for the swarms of subscriber-based reports to come in subsequent weeks.

Housing Market

Investors will also get December data about the housing market.

Housing starts and building permits are slated for release Wednesday. Expectations are for housing starts to decline to an annualized rate of 1.65 million homes from 1.679 million in November. Meanwhile, building permits are expected to tick lower to an annualized rate of 1.072 million from 1.712 million.

The last report had encouraging signs as single-unit activity rose 11.3% for housing starts and 2.7% in permits. This trend is important to maintain as an increased supply of houses would do wonders to bring down elevated home costs.

Meanwhile, Existing Home Sales is expected to have edged lower in December to an annualized rate of 6.42 million units from 6.46 million units in November. The median existing-home price rose for its 116th consecutive month as affordability pressures continue to mount.

Economic Events this Week

Tuesday

- 08:30 ET - Empire State Manufacturing

- 10:00 ET - NAHB Housing Market Index

- 16:00 ET - Net Long-Term TIC Flows

Wednesday

- 08:30 ET - Building Permits

- 08:30 ET - Housing Starts

- 10:30 ET - EIA Crude Oil Inventories

Thursday

- 08:30 ET - Continuing Claims

- 08:30 ET - Initial Claims

- 10:00 ET - Existing Home Sales

Friday

- 10:00 ET - Leading Economic Index

Earnings Reports This Week

Tuesday:

Before the bell:

GS, TFC, PNC, SCHW, BK, SBNY, PACW

After the bell:

JBHT, IBKR, PNFP, HWC, FULT, UCBI

Wednesday:

Before the bell:

UNH, BAC, PG, MS, USB, ASML, STT, CFG, FAST, PLD, CMA

After the bell:

UAL, KMI, AA, DFS, FUL, WTFC, UMPQ, FNB

Thursday:

Before the bell:

AAL, TRV, UNP, BKR, FITB, KEY, NTRS, RF, MTB, SAFM, CTXS, FHN, SNV, WBS, WNS, BKU

After the bell:

NFLX, PPG, CSX, ISRG, SIVB, EDU, PBCT, OZK, ASB, TCBI, NBHC

Friday:

Before the bell:

SLB, ALLY, HBAN, INFO, FHB

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