We are now in the peak earnings season and next week around 80 S&P constituents including heavyweights like Microsoft and Tesla would report their quarterly reports. Here are the key earnings that markets would watch next week.

After starting the year on a negative note, US stocks have recovered and have now closed with gains for three consecutive weeks.

Talking of the last week, data showed that US retail sales fell 1.1% in December which was worse than expected.

US wholesale price index fell 0.5% in December which was steeper than the 0.1% fall that analysts expected. The fall is the largest since April 2020 when lockdowns took a toll on global economic activity.

Notably, the CPI also fell 0.1% in December while the annualized pace of rise slowed down to 6.5%. Rising inflation took a toll on US corporate earnings last year and the fall in inflation is a welcome break.

While high inflation is generally negative for stocks, some investment strategies can outperform during high inflation.

Another highlight of last week was the flurry of layoffs. On Friday, Alphabet announced that the company would eliminate 12,000 roles which are 6% of its workforce. Earlier in the week, Microsoft announced that it would lay off 10,000 people which is 5% of its workforce.

Earnings Were Mixed Last Week

Corporate earnings were mixed last week. Netflix stock soared despite profit miss as its subscriber number shattered estimates. Goldman Sachs stock meanwhile crashed after it reported the worst earnings miss in a decade.

Digital assets too rose last week and bitcoin outperformed stocks. There is a beginner’s guide to buy bitcoins.

Meanwhile, earnings would take center stage this week as a diverse set of companies across old and new economy release their earnings.

Key Earnings Report to Watch Next Week

In the tech space, Microsoft and Tesla would release their earnings next week. Tesla stock has been on a free fall, among others on demand concerns. The company recently lowered car prices in US and Europe in an apparent bid to spur demand.

During Tesla’s earnings call, markets would watch for commentary on how the price cuts would impact margins. Also, the company’s 2023 delivery guidance would be in focus especially after it missed the initial guidance for 2022.

IBM and Intel would be the other major tech earnings next week. Intel earnings would provide insights into the PC market as falling gadget sales took a toll on chipmakers last year.

Among industrials, Union Pacific, CSX, and Boeing would also release their earnings. Nucor, which is the largest US-based steel producer and U.S. Steel Corporation would also release their quarterly earnings next week.

Defense names like Lockheed Martin and Raytheon Technologies would also release their earnings next week. In the pharma space, Abbott and Johnson & Johnson are set to release their quarterly reports next week.

Several airline and energy companies would also release their earnings next week. The earnings from these diverse sets of companies would provide market insights into the health of the US economy.

Key Economic Indicators to Watch Next Week

We also have multiple economic indicators scheduled for the next week. We’ll get flash January PMI which should provide early insights into not only the US but also the global economy. We’ll also get the advance GDP estimate for the fourth quarter.

Recession fears have risen this year and the recent wave of layoffs has only compounded the fears. Analysts might also question management on their workforce plans during the upcoming earnings.

The World Bank has slashed its 2023 global GDP growth forecast to a mere 1.7% which is way below its previous projection of 3% growth. It also fears a recession this year amid slowing global growth.

If the World Bank’s projections turn out to be true, it would be the third worst global growth in almost three decades. The global economy fared poorly only during the Global Financial Crisis and the 2020 COVID-19 pandemic.

Several housing market indicators would also be released next week. On Friday, the Bureau of Labor Statistics would release the core PCE data for December. It would be the last major economic data before the Fed meeting which would begin on January 31 and conclude the next day.

Overall, the next week looks action-packed with a flurry of economic data and earnings. US stocks might attempt to continue the upward momentum and recoup their 2022 losses.

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