key earnings next week

US stocks bounced back last week. As earnings take a backseat next week, Fed chair Jerome Powell’s testimony and February nonfarm payroll data would be in the focus next week.

Looking at the last week, US stocks jumped on Thursday and Friday. On Friday, the Dow Jones gained 1.17% while the S&P 500 rose 1.61%. The tech-heavy Nasdaq Composite too added almost 2%.

During the week, the S&P 500 gained 1.9% and had its first positive week after three consecutive weeks of losses. The Dow Jones too rose 1.75%. It had closed with losses in the preceding four weeks. The Nasdaq ended 2.58% higher last week. In the preceding week, the index shed 3.3%.

The last week was action packed and we had a flurry of earnings as well as economic indicators.

Last week’s earnings were a mixed bag. While retailers like Costco and Target posted better-than-expected earnings, they sounded circumspect about the outlook. Other retail companies including Lowe’s which reported earnings last week also sounded cautious about the outlook.

Key Earnings Last Week

Zoom posted better-than-expected earnings for its fiscal fourth quarter of 2023 and also provided a rosy profit outlook for the current year. The company’s revenue guidance however fell short of estimates.

Snowflake meanwhile provided tepid guidance for the current fiscal year and the stock crashed despite earnings beat.

Meanwhile, major EV (electric vehicle) earnings disappointed last week. Rivian said that it expects to produce only 50,000 cars in 2023 while analysts are expecting the metric at 60,000 or higher.

NIO also posted a massive loss in Q4 2022. Its gross margin also plummeted to a mere 3.9% in the quarter as compared to 17.2% in the corresponding quarter in 2021.

Many analysts see NIO as a worthy competitor to Tesla. There is a guide on how to buy NIO stock.

Also, Chinese EV companies reported mixed February deliveries. While NIO and Xpeng Motors disappointed investors with their deliveries, Li Auto’s delivery report looked encouraging. BYD’s China deliveries also rose 110% in February and the company increased its lead over Tesla which lost market share in the month.

Tesla held its investor day last week where the company talked about issues ranging from demand, AI, new models, and the upcoming Mexico Gigafactory.

The event meanwhile fell short of market expectations and Tesla stock plunged. The Elon Musk-run company is nonetheless among the top 5 S&P 500 gainers YTD.

Key Earnings Reports and Economic Indicators to Watch Next Week

The earnings calendar for the next week looks quite light. Nonetheless, names like, Dick’s Sporting Goods, Campbell Soup, and Ulta Beauty would release their quarterly earnings.

Among economic indicators, we’ll get factory orders, wholesale inventories, and trade deficit data next week. However, the most important indicator would be the February nonfarm payroll data.

US jobs data for January shattered expectations and showed that the world’s largest economy added 517,000 new jobs in the month. The metric was over twice what the market was expecting.

Last month, commenting on the January nonfarm payroll data, Powell said that the report was “certainly strong—stronger than anyone I know expected.” He added, “It kind of shows you why we think this will be a process that takes a significant period of time.”

Fed officials have said on multiple occasions that stronger economic data would push the US central bank to raise rates even higher.

Powell Testimony Could Drive Markets

Next week, Powell would testify to both houses of the US Congress. His testimony comes at a time when hopes over “disinflation” have faded.

US CPI rose 0.5% on a monthly basis in January. The annualized inflation came in at 6.4% which was higher than the 6.1% that markets were expecting. Higher inflation also took a toll on corporate earnings in 2022.

Also, the Labor Department upwardly revised December CPI to show that the metric rose 0.1% monthly instead of the 0.1% fall. The Department has adjusted the weights of goods and services which warranted a revision of data.

The core CPI, which excludes the volatile food and energy prices rose 5.6% annualized in January, which was ahead of the 5.5% that analysts were expecting.

The wholesale inflation also inched up in January which showed that inflation is still quite sticky.

US Inflation Rose in January

High inflation and the resultant rate hikes took a toll on risk assets last year. However, some investment strategies can outperform during high inflation.

All said, while the earnings calendar for the next week looks quite light after a flurry of reports in the previous two years, Powell’s testimony and nonfarm payroll data could drive US stocks.

In the past, Powell had testified that the Fed’s rate hikes might lead to a recession but it is not trying to trigger one. Many economists believe that the Fed might not be able to tame inflation without triggering a recession.

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