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Equity investors will be impacted as the earnings season for Q1 is all set to begin this week. Several big banks and financial services companies, including JPMorgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC), and Citigroup (NYSE: C), will report their Q1 earnings this week.
Analysts expect earnings for companies part of the S&P 500 to report a decline of 6.6% in quarterly earnings, which would be the largest quarterly decline since Q2 of 2020. Out of all companies that issued guidance, 79 have issued negative earnings guidance, and 27 expect the bottom line to increase year over year.
What to expect from the big S&P 500 banks in Q1?
Despite an uncertain macro environment, analysts expect JPMorgan to increase sales by 14.5% year over year to $36.18 billion, while adjusted earnings might expand 29% to $3.4 per share. Comparatively, Wells Fargo sales are forecast to rise 14.3% to $20.1 billion, while earnings are on track to widen by 27.3% to $1.12 per share.
Valued at a market cap of $89 billion, Citigroup sales are estimated to rise 4.7% to $20.1 billion with adjusted earnings of $1.7 per share, down 15.8% from the prior-year period.
Inflation report for March 2023
Next week, we can expect the latest updates on inflation with the release of the Labor Department's Consumer Price Index (CPI) for March on Wednesday. It is projected that prices rose 0.3% last month, compared to a 0.4% gain in February. Year-over-year, prices likely increased just over 5%, which is a deceleration from the 6% gain in February.
The annual rate of core inflation, which excludes volatile food and energy costs, is projected at 5.6%, up slightly from 5.5% in February. Although headline inflation has cooled significantly after reaching a 40-year high of 9.1% in June 2021 due to the Federal Reserve's raised interest rates, it remains well above the central bank's target range.
On Thursday, we will also see the release of the Bureau of Labor Statistics (BLS) Producer Price Index (PPI) for March, which tracks inflation from the standpoint of manufacturers and wholesalers. It is projected that producer prices remained unchanged last month after falling 0.1% in February.
On an annual basis, they're projected to have risen just 3.1%, decelerating from 4.6% in February, marking the slowest annual gain in over two years.
Update for retail sales
The U.S. Census Bureau is set to release the latest figures on March retail sales this Friday, providing a crucial update on consumer spending. According to forecasts, sales are expected to have remained unchanged, with a decline of 0.4% in March, following the same pace as February.
The National Retail Federation (NRF) has projected that sales will grow between 4% to 6% this year, amounting to a range of $5.13 trillion to $5.23 trillion by the end of 2023. The majority of this increase is anticipated to come from non-store and online sales, which are expected to surge between 10% to 12%, reaching $1.41 trillion to $1.43 trillion.
However, rising interest rates, elevated inflation, and mounting concerns over a recession could potentially result in a slower growth rate when compared to 2022, where overall sales grew by 7%.