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Banks kick off earnings season, inflation gauge, Delta reports: 3 things to watch for in the markets Tuesday

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Jamie Dimon, CEO of JP Morgan Chase, speaking at the Business Roundtable CEO Innovation Summit in Washington, D.C. on Dec. 6th, 2018. 
Janvhi Bhojwani | CNBC

Here are the most important things to know about Tuesday before you hit the door.

1. Banks kick off earnings season

J.P. Morgan, Wells Fargo and Citigroup all report quarterly earnings before the bell on Tuesday.

Barclays is forecasting J.P. Morgan will report fourth-quarter earnings of $2.30 per share, above the $1.98 per share earned in the same quarter last year. The firm expects a strong report from the nation's largest bank "given positive momentum in net interest income/markets," Barclays analyst Jason Goldberg said in a note to clients.

Citigroup will report fourth-quarter earnings of $1.83 per share, according to Barclays. This tops last year's fourth-quarter earnings of $1.64 per share. Barclays said all eyes will be on the nation's third-largest bank's return on tangible common equity or ROTCE estimates, a widely watched gauge of how well a bank uses shareholder money to generate profits. Citigroup has been hesitant to re-commit to its target of 13.5% ROTCE for 2020, said Goldberg.

Barclays expects Wells Fargo to report earnings per share of $1.08, compared to the $1.21 per share earned in the fourth quarter last year. The firm's estimates excludes the 7 cent gain from the $360 million sale of Wells Fargo's Eastdil Secured business in October 2019. Barclays is looking for business insights and 2020 guidance takes from the company's new CEO Charles Scharf.

Shares of J.P. Morgan rallied more than 17%, shares of Wells Fargo gained nearly 6% and shares of Citigroup rose nearly 14% in the past three months.

2. Inflation gauge

A key indicator of inflation trends, the Consumer Price Index, will be released by the Labor Department on Tuesday. Economists polled by Dow Jones are estimating U.S. consumer prices rose 0.2% in December, at a 2.3% annual rate. Although CPI is not the Fed's preferred inflation indicator, the estimates are above the Fed's 2% inflation target, which could raise concerns about whether the Fed's current monetary policy is too easy.

Economists are forecasting that core CPI, which excludes volatile food and energy prices, increased 0.2% in December, after a jump of 0.2% in November. This monthly estimate would be a 2.3% increase since December of last year.

3. Delta earnings

Delta Air Lines also reports earnings before the bell on Tuesday. A.B. Bernstein is expecting the Atlanta-based carrier to report earnings of $1.42 per share, compared to the $1.30 earned in the same quarter last year.

"The combination of the company's revenue initiatives, diversified business, and investments in the creation of a truly global airline holding company leave us 5% ahead of consensus EPS for 2020 and 13% above for the out years," A.B. Bernstein analyst Anna Peterman said in a note to clients. Consensus estimates is $1.40 for Delta's fourth quarter, according to Refinitiv. Delta's earnings report will be the first time in a while that the company reports without pre-announcing numbers beforehand, noted Peterman.

Shares of Delta have risen more than 12% in the past three months.

Major events (all times ET):

6:00 a.m. NFIB survey

8:30 a.m. CPI

9:00 a.m. New York Fed President John Williams at London School of Economics

1:00 p.m. Kansas City Fed President Esther George speaks

Major earnings:

Citigroup (before the bell)

JPMorgan Chase (before the bell)

Wells Fargo (before the bell)

Delta Air Lines (before the bell)

— with reporting from CNBC's Michael Bloom.