By Bill Hornbarger, Chief Investment Officer
Print This Post
Three Things to Watch
- Approximately 25% of S&P 500 constituents will report earnings this week. With slightly more than half of the S&P already reporting, earnings are running slightly ahead of expectations. To date, 81% of the reports have been positive surprises with the aggregate surprise 6.8% ahead of expectations. Earnings for the quarter were expected to be down from both the previous quarter and Q1 last year and full year earnings are expected to be down slightly from 2022.
- The U.S. economy will be in the spotlight this week with a Fed meeting and high-profile data releases. The ISM manufacturing survey (released Monday morning) showed the manufacturing sector contracting for the sixth consecutive month. Other important economic releases include updates on construction spending, factory orders, and the April employment report on Friday. Construction spending was better than expected and factory orders are forecast to increase 1.3% from the previous month. The job market remains one of the economic bright spots and April payrolls are expected to register a 154,000 increase and a 3.6% unemployment rate.
- On Wednesday the Fed will finish its two-day May meeting. The committee is widely expected to increase rates 25 basis points which would be the 10th consecutive meeting where rates have been increased.
Three Things to Know
- JPMorgan Chase agreed to acquire regional bank First Republic, in a deal that was announced early Monday after First Republic was seized by regulators. All depositors will be kept whole in what is now the second largest bank failure in U.S. history. Early trading in the U.S. indicates little to no spillover and the KBW bank index is slightly higher in Monday morning trading. (Source: Bloomberg, CNBC)
- Three of the five largest U.S. bank failures have occurred in calendar year 2023. The five largest in order, including the year they failed are: Washington Mutual (2008), First Republic (2023), Silicon Valley Bank (2023), Signature Bank (2023), and Continental Illinois National Bank and Trust (1984). (Source: Wikipedia)
- The 2010 Dodd-Frank Act established the Financial Stability Oversight Council (FSOC), giving it the authority to label banks and other financial institutions, Systemically Important Financial Institutions (SIFIs). The goal was to prevent a repeat of the 2008 financial crisis, which saw largely unregulated institutions such as American International Group Inc. requiring large taxpayer-funded bailouts. There are 11 U.S. based institutions and 30 institutions total worldwide labeled SIFI. (Source: Investopedia)
The above information reflects the current opinion of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security mentioned.