Earnings, Retail Sales and Housing Data

Last Edited by: LPL Research

Last Updated: October 14, 2024

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Quincy Krosby:

Hello from LPL Financial. Welcome to the Talking Point. I'm your host, Quincy Krosby. Good morning everyone. This is Quincy Krosby. It is Monday morning. It's October 14, and it's going to be a busy week for the market, although today, Monday, the bond market is closed for the holiday. Overall, we will have about 40 S&P 500 companies reporting this week. Last Friday, we had the earnings reports from Wells Fargo, JP Morgan. They surprised to the upside. We saw the S&P 500 climb higher. It was a good end to the week, especially as we are going into finishing up the second year of the bull market. And I just want to put an asterisk here is that what history historical patterns suggest is that a third year of a bull market is actually fairly normal, although historically the earnings in the bull market are lower than the first two years.

Quincy Krosby:

But I just want to point that out because you'll see a lot as we get into this week of happy birthday, two year bull market that began, by the way, on October 12, 2022. So looking at this week, we will have more banker earnings. The banker earnings will include Goldman Sachs, Morgan Stanley. Obviously we want to hear what they have to say about their customers, about their clients. What are they saying? It'll be important because what the market is trying to figure out is how healthy is the economy. And we hear that in terms of the guidance. We'll hear it in terms of what they have to say about loan losses, just to give you an example. So that, it's going to be a busy week there. Also, we'll hear from United Airlines and hear what they have to say about what are consumers planning in terms of travel, business travel, and also retail travel.

Quincy Krosby:

So we'll be working and paying attention to that. Also, I want to point out this week we will hear from Proctor and Gamble, and as we know, they have had a difficult time with, you know, pricing power. Pricing power has come down for most of the big companies. We want to hear what they have to say, and I'm especially going to be interested in whether or not they are seeing their customers moving to off-brands, because that also suggests that the customers not just in the us, Proctor and Gamble is global in its reach. But what consumers are more discerning and looking for substitutes, which is what we would refer to as the off-brands. So that's, that's going to be, I think, quite important as well. Netflix also this week, and the market pays very close attention to the new subscriptions to Netflix. Also giving you, by the way, in essence, a snapshot on consumer spending.

Quincy Krosby:

So this is international, but we'll pay attention to what they have to say about the US and their non-U.S. potential subscriptions. The economic data this week I think is gonna be also very important. So what we're going to be looking for are retail sales. What will it say about consumer spending? And to repeat, so many times, consumer spending is 68% of U.S. GDP. And by the way, with regard to GDP, Gross Domestic Product, the expectations are that we, in this quarter, in the quarter that we're in, could even at this stage reach very close to 3%, which would be actually quite amazing given their expectations have been actually much lower. You know that there are those who still think that we are headed into a recession. And the question is, what does the data tell us? So we'll be looking at retail sales, and I also want to point out that as we go through this earning season, when we look at retail, we want to hear what we're hearing from credit card companies, we want to hear what we hear from the big retailers. Are consumers spending? And that's going to be important as we move deeper into the earning season.

Quincy Krosby:

Also, this week we are going to hear from the Empire Survey, the Empire Manufacturing survey. That is New York, New Jersey, Connecticut. In that report, and remember, the Empire Survey doesn't have as much impact on the market as, for example, the Philadelphia Fed Manufacturing Survey that we will hear later this week. But nonetheless, what I want to hear from the Empire Survey, which by the way, surprised to the upside last month and it was quite surprising. But whether or not the prices in the manufacturing process have moved higher or lower, had they stayed the same? And the reason is the Producer Price Index that came out last week, showed prices coming down. And yet, in the Consumer Price Index, the CPI last week, we saw a little bit of an uptick. But remember, in manufacturing, it's a different group of prices that we're looking at. So, but I do want to see tomorrow, on Tuesday what the Empire Fed Survey says, and also new orders and employee, employment expectations.

Quincy Krosby:

Are they planning on hiring? The reason I'm mentioning that is that what we're seeing across the board is that small businesses, we saw that in the small business survey, optimism survey, and large companies holding off in terms of capital expenditures, presumably until after the election. They're just holding off. They want to see what is next, especially with regard to taxes for these companies. So they are holding off. On Thursday, we will get the Philadelphia Fed Survey, and I've said many times that is, has more of an impact on the market in terms of what the market expects in manufacturing because the Philadelphia Fed Survey has more in common with the manufacturing across the country. So we'll look to see what they have to say. Again, with regard to prices paid, with regard to hiring expectations and new orders. You know manufacturing has been basically dormant, but we see, I hate to use this term, but less bad.

Quincy Krosby:

So I know it doesn't sound scientific, but it does matter because we want to see if they could push through above 50 because that means expansion. So if they're less bad, it tells you that a bottoming process is taking place. So that will be on Thursday. Also, we're going to have retail sales. Needless to say, this is extremely important given that consumer spending is 68% of our gross domestic product. We will also have a host of data releases with regard to the construction industry, housing. We'll have home builder optimism or you know, their expectations and their survey. We will have building permits, which I pay very close attention to, and we'll also have housing starts. That will come at the end of the week. Also, this week we're going to have industrial productions and production. And obviously that is extremely important. But I think overall this week it will be about what the companies, what the banks are telling us and what the companies are telling us that is going to be extremely important.

Quincy Krosby:

In terms of the market, probably now, you know, reaching new highs and overbought. So, you know, we always talk about overbought or oversold. The market will be looking for a catalyst to help pull the market back down, take a breather and pause a little bit, but we know that overbought can stay overbought for some time. Similarly, oversold can stay oversold for some time, particularly in a bull market scenario in underpinning. In terms of outside of the U.S., we've seen oil prices just come down a little bit. Certainly they're not surging higher, even edging higher at this point. And the reason for this is that in the Middle East, at this point, keep in mind, I'm saying at this point, the conflict between Israel and Hezbollah and Iran seems to be contained in the region. That's how we look at it. That's how the oil market looks at it. Any suggestion that it becomes, goes deeper towards Iran.

Quincy Krosby:

Any suggestion that the Israelis attack the Iranian oil fields, obviously oil prices are going to climb much higher, and it will happen very quickly. But nonetheless, the question for the overall market is does it stay contained within the region or does it become an all out broader war? Obviously that is not expected at this point, but the market is still paying very close attention to it. Over in China, remember on Saturday there was going to be, and there was, a press conference with the Ministry of Finest, talking about the possibility of more fiscal stimulus. Remember that's different from monetary stimulus. That is where they actually take money, put it into a program or a stimulus package. Actually, the market was fairly disappointed with it because there wasn't much, oh, you know, of telling the market how much money they were actually put in.

Quincy Krosby:

Although they did say that there was the ability to have more deficit spending. So again, suggesting that they could do more. The market was, when it opened today, it was kind of up and down. You know, it was green, it was red. But overall, it's a market that is saying, what exactly are they going to do? When are we going to find out how they are going to help? Help the economy to increase consumer demand and then also fix the problems in the property market. So all of this is still hanging over the Chinese market. Overall this week, the expectations are that we could see a pullback again for the reason I said the market is overbought at this point, but nonetheless, the market is completely focused on the guidance that we are going to hear from the companies, which is going to be very, very important.

Quincy Krosby:

And then there will be those in the market who focus on anything suggesting about prices, pricing, is it going up or are they coming down? And this will be important because the market is a little bit worried, just a little bit worried. Are we seeing another uptick in an inflation and how, if so, how much higher would it go? And so we get an idea from those reports out of manufacturing on those prices paid. I also want to add here that the market is also focused on initial unemployment claims because they ticked higher last week. Some of that had to do with the earlier hurricane. But the question is, is this now going to be a weekly uptick in unemployment claims? Obviously, increasingly we're going to see a lot more coming from the hurricanes that we've been seeing and the damage that has consumed the headlines and consumed concerns over the rebuilding of these areas in North Carolina and in Florida, for example.

Quincy Krosby:

So a lot for the market to digest this week. And then, I don't mean to end on this, but we were talking about China. We have seen more incursions around Taiwan. They're deeper. They were sent with a message basically to the head of the Taiwanese government, the Anti-Beijing government, but basically saying you've got to stop the Anti-Beijing commentary and so on. The reason I'm mentioning this is that Taiwan semiconductor right, major, major semiconductor manufacturing company in the world now talking about where they are building other factories. And we knew that this was going on, but they wanted to emphasize this again because of concerns over Chinese Beijing's intentions with Taiwan. So lot for the market to digest this week. But thank you for listening. We'll be back next week. Thank you so much.

Quincy Krosby:

This material was prepared by LPL Financial. It's for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed or suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principle. Any economic forecast set forth in the podcast may not develop as predicted and are subject to change. References to markets, asset classes and sectors are generally regarding the corresponding market index. All indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance reference is historical and is no guarantee of future results. All information referenced in the podcast is believed to be from reliable sources. However, we make no representation as to its completeness or accuracy.

Quincy Krosby:

Securities and advisory services offered through LPL Financial, a registered investment advisor and broker dealer member RA and SIPC insure its products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor, that is not an LPL affiliate. Please know LPL makes no representation with respect to such entity. If you're a financial professional is located at a bank or credit union, please note that the bank or credit union is not registered as a broker dealer or investment advisor. Registered representatives of LPL may also be employees of the bank or credit union. These products and services are being offered through LPL or its affiliates, which is separate entities from and not affiliates of the bank or credit union. Securities and insurance offered through LPL or its affiliates are not insured by the FDIC or N-C-U-I-A or any other government agency, not bank or credit union, guaranteed not bank or credit union deposits or obligations and may lose value.

 

LPL Financial’s Chief Global Strategist, Dr. Quincy Krosby, discusses Earnings, economic data, and geopolitical factors impacting markets.

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IMPORTANT DISCLOSURES

This material was prepared by LPL Financial. It's for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks, including possible loss of principle. Any economic forecast set forth in the podcast may not develop as predicted and are subject to change. References to markets, asset classes and sectors are generally regarding the corresponding market index. All indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance reference is historical and is no guarantee of future results. All information referenced in the podcast is believed to be from reliable sources. However, we make no representation as to its completeness or accuracy.

The fast price swings in commodities and precious metals will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors.

Securities and advisory services offered through LPL Financial, a registered investment advisor and broker dealer member RA and SIPC, ensure its products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor, that is not an LPL affiliate. Please note, LPL makes no representation with respect to such entity. If your financial professional is located at a bank or credit union, please note that the bank or credit union is not registered as a broker dealer or investment advisor. Registered representatives of LPL may also be employees of the bank or credit union. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of the Bank of Credit. Union. Securities and insurance offered through LPL or its affiliates are not insured by the FDIC or N-C-U-A-A or any other government agency, not bank or credit union, guaranteed not bank or credit union deposits or obligations, and may lose value.

This Research material was prepared by LPL Financial, LLC. 

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