Stocks Fall Ahead of Bank Earnings, Retail Sales

Monday, April 12, 2021 4:54 PM | Nick Dey

Stocks started the week off on a lower note ahead of a slew bank earnings later this week, as well as Retail Sales data which will offer a look better look into how the latest round of stimulus checks fared in keeping the recovery going.

After closing at record highs on Friday, investors pulled back on uncertainty surrounding the economic recovery. This is shows up best in the the pause on the once robust small-cap rotation as investors fear that reopening might not be a smooth process that lifts all boats together.

Bankin’ on it

Banks are set to report earnings this week and analysts are expecting a big showing. According to FactSet, of the 11 sectors in the S&P 500, Financials had the second highest upward revision. Bottom-up EPS estimates have been revised up by 13.1%. Additionally, Financials prices increased the second highest of the 11 sectors in the S&P, adding 15.4% in the first quarter. The Energy sector outperformed on both measures with a record 123.4% increase in bottom-up EPS, while experiencing a price increase of 29.3% during the first quarter.

Among the many banks to report earnings this week are Morgan Stanley (MS), JPMorgan Chase (JPM), Wells Fargo (WFC), and Goldman Sachs (GS). The current higher interest rates are expected to lead to increases to the companies' bottom-lines as fixed-income trading revenue may have hit its highest point in at least a decade.

The surges in fixed-income trading activity is not new and is likely to be already priced in. This means that investors, when watching bank reports this earnings season, will likely be watching for signs that the bank’s bread and butter has returned: lending activity. The drivers in loan growth will be personal loans to consumers, as well as by businesses trying to get a leg up.

Retail Sales

In addition to watching for signs that lending activity is returning, investors will be keen to see how Retail Sales held up in March. Economic stimulus checks were mostly sent out in the middle of March which has led to consensus estimates for a 4.9% increase for Retail Sales. A strong increase like this would be a step in the right direction after February’s 3.0% setback.

Early signs that investors can expect a surge in March spending are coming from the Chase consumer card spending tracker. The tracker shows a sharp increase in spending from mid-March on and is likely to be reflective of a robust month of spending. Chase card spending increased about 24% year-over-year during the week ended March 19 and shows strong growth from the early months this year.

Helping March look better than January and February  is the fact that it has a low base to increase from, as spending had already started dropping in March 2020 from the then-incoming pandemic.

Economic Events this Week

Tuesday

  • 8:30 a.m. - CPI

Wednesday

  • 10:30 a.m.- EIA Crude Oil Inventories

Thursday

  • 8:30 a.m. - Retail Sales
  • 8:30 a.m. - Initial Claims

Friday

  • 8:30 a.m. - Housing Starts
  • 8:30 a.m. - Building Permits
  • 10:00 a.m. - Univ. of Michigan Consumer Sentiment - Prelim

Earnings Reports this Week

Tuesday:

Before the bell: FAST After the bell: WAFD

Wednesday:

Before the bell: JPM, WFC, GS, BBBY, FRC, LOVE After the bell: SJR

Thursday:

Before the bell: TSM, UNH, BAC, C, PEP, PGR, RAD, USB, TFC, BLK, DAL, HOMB After the bell: PPG, AA, JBHT, WAL

Friday:

Before the bell: MS, PNC, BK, STT, ALLY, CFG, KSU

Sector and Industry Sentiment

You can now see which sectors and industries are performing best for each of our metrics using our new Sector and Industry Analysis tools.

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