Key Themes to Monitor This Week: Geopolitics, Earnings, and More

Themes to Monitor

Last week, we witnessed a gradual reduction in the market’s volatility, with the S&P 500 (SPX) closing the week with a modest gain of just under 0.5%. Despite a mixed bag of news releases, the markets demonstrated resilience, largely buoyed by the performance of tech giant Apple (AAPL).

This week promises to be eventful, with several critical themes and developments in the spotlight, encompassing earnings reports, geopolitical tensions, economic indicators, and insights from Federal Reserve speakers. Here are five key points to keep a close watch on this week:

1. Earnings 

Quarterly earnings season is back, and it’s an opportune time for investors to go beyond the traditional top and bottom-line figures. Pay attention to forward guidance provided by companies, which often offers valuable insights into their future outlook. Leading financial institutions, including Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and American Express (NYSE:AXP), are among those reporting this week. These financial giants can shed light on interest rate expectations and consumer spending trends. Tesla (NASDAQ:TSLA) will also release its earnings after hours on Wednesday, potentially influencing the entire market due to its popularity among traders. It’s advisable to stay vigilant if holding positions through Wednesday’s close.

2. Geopolitical Conflict 

The Middle East has become a focal point of escalating tensions and conflict. The repercussions of this situation extend far beyond the immediate human cost. As the situation develops, it presents a growing geopolitical event risk that could impact financial markets. Both Western and Eastern powers appear cautious about direct involvement, making this a critical issue to monitor.

3. Empire State Manufacturing

On Monday at 8:30 a.m., the Empire State Manufacturing report will be released. Recent reports from this indicator have been less than stellar. While this release may cause some short-term market volatility before the opening bell, any impact is likely to subside quickly. It primarily serves as an economic indicator, providing insights into the overall health of the economy. Given the recent news releases, it might be scrutinized more closely by investors.

4. Building Permits

Wednesday at 8:30 a.m., the U.S. building permits report is scheduled, offering a measure of new home construction (annualized). In the context of the current housing market dynamics in the United States, this data could be considered a bellwether for the future of the housing sector. If permits exceed expectations, the market might rally in hopes that increased supply could ease housing costs. Conversely, if it’s a miss, the market might react with a modest selloff, speculating that the Federal Reserve might need to continue raising rates to curb housing costs.

5. Federal Reserve Speakers

Thursday is slated to be a busy day for Federal Reserve speakers. Jerome Powell, the Fed Chair, is scheduled to speak at the Economic Club of New York. His remarks and responses to questions are known to have a moderate impact on the markets. Later in the day, both Austan Goolsbee and Patrick Harker, representatives of the Fed, are also scheduled to speak. With Tesla releasing earnings the night before, Thursday could potentially witness heightened price volatility, with these Fed communications adding another layer of significance to the day’s events.

Featured Image: Freepik @ designerlitvinenko

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