Stocks and Cryptos Drop, Pop Ahead of Heavy Week for Earnings and Economic Data

Stocks continued to slide on Monday morning before staging an incredible rebound in the afternoon. The S&P 500 ended up gaining 0.37%.

Cryptos were more mixed, with Bitcoin gaining nearly 3.5%  over the past 24 hours, while the total crypto market is up 1.22%. The bounce is little consolation though as Bitcoin (BTC) is still down more than 13.5% and Ethereum (ETH) has crashed nearly 25% over the past week of trading.

Investors are looking forward to an economic-data rich week though at the same time that earnings season hits its peak. Tech giants such as Microsoft (MSFT) and Apple (AAPL) are set to report along with energy leaders including Phillips 66 (PSX) and Chevron (CVX). Finally, the biggest focus this week is perhaps the Federal Reserve meeting set to conclude on Wednesday as investors prepare for a cycle of policy tightening.

New Economic Data

Most of the focus will be on data releasing late this week with Durable Orders for December being made available Thursday morning followed by the Personal Consumption Expenditures (PCE) report before the open Friday.

Economists are currently expecting durable orders to fall 0.5% last month following a 2.5% jump in November. However, excluding transportation consensus from analysts are for a 0.4% increase after November’s 0.8% rise.

Both core and headline PCE prices are expected to rise 0.4% in December, a smaller jump from the 0.5% and 0.6% gain in November respectively. Economists are also expecting the PCE data to show personal income rising 0.5% last month with a drop in personal spending of 0.6%. Personal income and spending for November grew 0.4% and 0.6% respectively.

Meanwhile, consumer confidence and new home sales data comes out earlier in the week. Consumer confidence on Tuesday is estimated to drop from a reading of 115.8 to 112.0 in January. New home sales on Wednesday are expected to increase slightly  from 744,000 to 765,000 in December.

Lastly, unemployment claims data and gross domestic product (GDP) estimates are scheduled for release Thursday morning. Analysts are predicting initial claims to drop from 286,000 to 260,000 claims. Last week’s numbers were a significant jump from the roughly 200,000 it had been hovering around since late November. Meanwhile, consensus estimates for fourth quarter GDP is around 5.6% following the third quarter’s 2.3% increase.

The War Against Inflation Rages On

As inflation continues to decelerate at a less than anticipated rate investors are looking more and more to the central bank for rate hikes and a reduction in its balance sheet. The Fed has already begun tapering its asset purchases and accelerated its timeline for that in response to the continued high inflation.

Now, analysts are expecting an imminent interest-rate hike with predictions for the Fed signal that it will make its first rate hike in March in addition to a balance sheet reduction later in the year. Swap markets are showing a quarter point hike in March and roughly a full percentage point increase for 2022. After an extended period of loose monetary policy in response to the coronavirus pandemic, the central bank is ramping up the tightening of policy to keep markets as stable as it can.

Earnings Season Hits Full Stride

Plenty of the world’s biggest companies are set to report quarterly earnings this week including: Microsoft, Apple, Chevron, Tesla (TSLA), Verizon (VZ), AT&T (T), IBM (IBM), Johnson & Johnson (JNJ), General Electric (GE), Boeing (BA), Intel (INTC), Visa (V), McDonald’s (MCD), Capital One (COF), Chevron, Phillips 66, and many more.

Investors did not react overly positively to last week’s earnings reports regardless if the underlying firm beat or missed on estimates as markets took a tumble overall. Netflix (NFLX) had the privilege of experiencing its worst trading day in nearly ten years as a result of slowing subscriber growth despite an earnings beat. Traders will certainly be looking to see how these big companies are performing in the current economic climate and how firms are navigating increasing costs associated with supply chain disruptions among other factors.

Economic Events this Week

Tuesday - 10:00 a.m. - Consumer Confidence

Wednesday - 10:00 a.m. - New Home Sales - 10:30 a.m.- EIA Crude Oil Inventories - 2:00 p.m.- FOMC Rate Decision

Thursday - 8:30 a.m. - Initial & Continuing Claims - 8:30 a.m.- Durable Orders - 8:30 a.m. - GDP-Adv.

Friday - 8:30 a.m. - Personal Income - 8:30 a.m. - Personal Spending - 8:30 a.m. - PCE Prices

Earnings Reports This Week

Tuesday:

Before the bell: ERIC, UMC, VZ, JNJ, GE, ADM, LMT, RTX, AXP, MMM, NEE, PCAR After the bell: MSFT, COF, TXN, CNI, SLGN, RNR

Wednesday:

Before the bell: T, ANTM, BA, PGR, ABT, GD, FCX, KMB, ADP, TEL, GLW After the bell: INTC, TSLA, FLEX, WHR, AVT, LCRX, AMP, STX, URI

Thursday:

Before the bell: VLO, HCA, DOW, NUE, NOC, DHR, SAP, MCD, MA, IP, MO, LUV, MMC, SHW, RCI, BLL, STM, TXT, TSCO After the bell: AAPL, MDLZ, V, X, WDC, SYK, EMN, OLN, KLAC, CE, WRB

Friday:

Before the bell: CVX, PSX, CHTR, CAT, LYB, CL, VFC, SYF, ALV, WY, BAH

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