3 reasons big bank earnings are super important to the stock market in the week ahead

Published Sat, Apr 8 202310:18 AM EDTUpdated Sat, Apr 8 202310:24 AM EDT

There are two big watchers on our list for the week ahead, and one of them — believe it or not — is not an inflation reading. The consumer price report (CPI), which calculates the average change over time in prices shoppers pay for goods and services, comes out Wednesday before the opening bell. While not the Federal Reserve's preferred measure of inflation — that's the core personal consumption expenditure (PCE) price index — the CPI should provide some insight on the central bank's battle with inflation. We want to see the rate of price increases on an annual basis continue to come down. The second big event next week is the unofficial start of earnings season on Friday, led by the big banks including JPMorgan (JPM), Citigroup (C) and Club holding Wells Fargo (WFC). While the CPI and other data have the potential to move the market, we'd argue the commentary from these household financial names could be even more important for three reasons: Earnings commentary is much more real-time data and color compared to the backward-looking economic releases. As a result, management discussions give us a better look at the current operating environment. The collapse of Silicon Valley Bank (SVB) and two other U.S. lenders in March has made many investors understandably worried about the banking sector. We will be listening for any talk about tighter lending standards — a factor that has helped do some of the Fed's tightening work for it — along with the flow of deposits from regional institutions to the "too big to fail" banks. Less movement of deposits would improve investor sentiment as the health of the financial sector influences Fed's ability to avoid a hard landing for the economy. Banks can provide a better look at the state of the consumer, specifically savings and credit levels, which in turn show how well positioned the consumer is to ride out an economic slowdown. In his annual letter to shareholders on Tuesday, JPMorgan CEO Jamie Dimon warned that the current banking crisis isn't over yet, and that once over there will be repercussions for many years. Dimon also called for more forward-looking regulation . Other data next week includes the producer price index report on Thursday and the retail sales report on Friday. The latter will show consumer spending habits, which is super important considering private consumption accounts for over 65% of U.S. GDP. Also on Friday, we will see what's happening in the manufacturing, mining, and electric and gas utilities industries, which together make up another 14% of GDP. Within the portfolio, Wells Fargo reports results on Friday before the opening bell. Here are some other earnings reports and economic numbers to watch in the week ahead: Monday, April 10 Before the bell: Greenbrier (GBX), iMedia Brands (IMBI) After the bell: PriceSmart (PSMT), Tilray (TLRY) Tuesday, April 11 Before the bell: Albertsons (ACI), CarMax (KMX) Wednesday, April 12 Before the bell: Apogee Enterprises (APOG) After the bell: Rent the Runway (RENT), Sportsman's Warehouse (SPWH) 8:30 a.m. ET: Consumer Price Index 2:00 p.m. ET: FOMC Minutes Thursday, April 13 Before the bell: Delta Air Lines (DAL), Fastenal (FAST), Infosys Tech (INFY), Progressive (PGR) After the bell: Washington Federal (WAFD) 8:30 a.m. ET: Initial Claims 8:30 a.m. ET: Producer Price Index Friday, April 14 Before the bell: BlackRock (BLK), Citigroup (C), JPMorgan (JPM), PNC Financial (PNC), UnitedHealth Group (UNH), Wells Fargo (WFC) 8:30 a.m. ET: Retail Sales 9:15 a.m. ET: Industrial Production & Capacity Utilization Looking back Only the Dow Jones managed to close higher this holiday-shortened trading week as investors booked some tech profits and rotated into more defensive areas of the market. The most important macroeconomic update of the week came on Friday while the market was closed for Good Friday. The March nonfarm payrolls report showed the economy added 236,000 jobs in March, just below the 238,000 expected. The unemployment rated ticked down to 3.5% (from 3.6%) while wage inflation advanced 4.2% annually, the lowest level since June 2021 and below the 4.3% expected on the Street. It was a Goldilocks report, in other words, and pushed the futures into positive territory on Friday. The roughly inline payrolls additions indicates a resilient economy (not too cold), while the slightly lower-than-expected wage inflation shows the Fed's strategy to combat inflation is working (not too hot). On Thursday, initial jobless claims for the week ended April 1 came in at 228,000, a decrease of 18,000 from the prior week, which was revised higher (to 246,000 from 198,000 initially reported) and above the 200,000 expected. On Wednesday, March ISM Services data came in below expectations at 51.2% (versus estimate of 54.3%). Though the reading being above 50 shows expansion, this was the weakest reading we have seen since May 2020 and indicates slowing growth. Also on Wednesday, the March ADP employment report came in at 145,000, below the expected 210,000. On Tuesday, the February Job Openings and Labor Turnover Survey (JOLTS) results , which pointed to fewer job openings that expected and fell below 10 million for the first time in nearly two years. We also got the February report on Factory Orders, which fell 0.7% monthly, following a 2.1% monthly decline in January (revised lower from the 1.6% decline previously reported). The report was weaker than the 0.5% monthly decline analysts were expecting. The March ISM Manufacturing report on Monday was 46.3%, below the expected 47.5%, indicating the fifth consecutive month of contraction in the manufacturing sector. Notably, the monthly decline from the 47.7% level in February shows the rate of contraction is accelerating. Under the hood, the utilities sector led to the upside, followed by health care and energy. Industrials led to the downside, followed by consumer discretionary and materials. Meanwhile, the U.S. dollar index stands at around 102. Gold is trading just above the $2,000 per ounce. WTI Crude prices advanced to $80 per barrel, while the yield on the 10-year Treasury pulled back to about 3.4%. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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Jamie Dimon, chairman and chief executive officer of JPMorgan Chase & Co., speaks during the Institute of International Finance (IIF) annual membership meeting in Washington, DC, US, on Thursday, Oct. 13, 2022.

Ting Shen | Bloomberg | Getty Images

There are two big watchers on our list for the week ahead, and one of them — believe it or not — is not an inflation reading.