Welcome back to earnings season: What to watch this week

Buckle your seatbelts and keep all hands and feet inside the vehicle, because earnings season is back.

Starting on Tuesday, Q3 earnings will properly get underway, led by the major Bulge Bracket banks throughout the week before the playing field opens up to other sectors as we get deeper into October.

Kicking off earnings week, investors on Tuesday will get results from JPMorgan (JPM), Goldman Sachs (GS), Wells Fargo (WFC), and Citi (C) on Wall Street, while UnitedHealth (UNH) and Johnson & Johnson (JNJ) will provide a view on the state of the healthcare trade.

Rounding out the Big Banks on Wednesday will be Bank of America (BAC) and Morgan Stanley (MS), joined by alternative asset giant BlackRock (BLK) and Dutch AI manufacturing giant ASML (ASML).

In another check on the AI trade, Taiwan Semiconductor (TSM) will report on Thursday.

It’s also a big week on the economic data front, where Wednesday’s consumer inflation data is set to be a major factor for the Federal Reserve’s decision on rates in the FOMC’s upcoming October meeting. Investors will also get the wholesale inflation check with the Producer Price Index report on Thursday, along with readings on industrial production and manufacturing activity on Friday.

The market wants to hear what Big Banks think about soaring yields

When the biggest banks on Wall Street begin reporting earnings this week, they’ll be coming off the back of one of their best periods within the past 10 years. Or at least they would’ve been, had a mix of factors not sent yields soaring to multi-decade highs.

As JPMorgan Chase (JPM), Goldman Sachs (GS), and Citigroup (C) kick things off — with Bank of America (BAC) and Morgan Stanley (MS) to follow on Wednesday — all eyes will be on how the money titans talk about the impact of higher interest rates.

After the booming past few quarters of major windfalls for the banks, profits are expected to pull back on a quarterly basis, alongside revenues from trading and investment banking, per analyst estimates — though they should by and large still see a profit on the year.

Over the past month, Financial Services (XLF) was the second-worst performing sector in the S&P 500, losing roughly 4% — good to beat out only Utilities (XLU) on the worst return. As of Friday’s market close, the five major banks have lost roughly $270 billion in market cap as the financial sector has suffered.

Looking forward, only 35% of institutional investors expect bank stocks to outperform the broader market, down from 68% in July and 82% in December, per a study from Truist Securities.