Here are the 3 biggest things we’re watching in the stock market this week
A common thread linking this week’s major market events is the state of the US economy. The big day is Tuesday, when the nation’s biggest banks – JPMorgan, Bank of America and Citigroup, as well as Club names Wells Fargo and Goldman Sachs – mark the start of the second quarter season. As if that wasn’t enough, the June consumer price index report will be released at 8:30 am ET Tuesday, right when JPMorgan’s influential conference call, led by CEO Jamie Dimon, is scheduled to begin. Throughout the week, non-banks with important insights into the economy and consumer behavior also delivered earnings, notably trucking company JB Hunt , Netflix , and United Airlines. The economic calendar also has a second inflation report – the gross producer price index – among other minor updates. Let’s not forget the Johnson & Johnson group reports Wednesday morning, and our July Monthly Meeting is scheduled for noon ET Thursday. Now, let’s take a closer look at what to expect from our portfolio names and inflation data. 1. Bank earnings: While macroeconomic reports are important in helping to better understand the economy at a high level, nothing compares to the real-time analysis we get at post-earnings conferences. That is even more true when it comes to banks. While all banks can provide information about their operations, the big ones – the ones we’ve invested in – have a unique understanding of the global economy, given how much money flows through them daily, weekly, and quarterly. That cash flow can provide incredible insight into all levels of economic activity. Both Wells Fargo and Goldman Sachs reported ahead of the bell on Tuesday. Wells Fargo’s conference call begins at 10 a.m. ET. Goldman starts a half hour earlier at 9:30 am ET. For both banks – and, frankly, this will take the rest of the earnings season as well – we’re interested in hearing about any tangible benefits that artificial intelligence management sees. We also want their thoughts on AI spending levels as companies increasingly look to increase their computing power, moving away from an attitude of pure experimentation, known as “tokenmaxxing.” Our latest club entry video explores this change. Between the two, Wells Fargo should be able to give us more insight into the consumer’s situation. Goldman Sachs should be able to provide an overview of the state of corporate M&A and financing activities, such as the IPO pipeline, interest among public companies to raise debt or sell equity, and the willingness of the market to support those efforts. This is an important part of the Wells quarter, in terms of our investment in stocks. After consecutive disappointing quarters, we need to see the bank return to beating Wall Street estimates. Along those lines, management should instill confidence that it is still on a clear path to deliver strong top-line growth, with return on operating average tangible equity (ROTCE) continuing to track in a stable range of 17% to 18%. ROTCE is a key metric used to assess how well a bank is using its equity capital to generate profits. Additionally, Wells’ ratio of efficiency – operating expenses divided by gross profit – will be closely watched because it has trended in the wrong direction for the past two quarters. Revenue: $21.8 billion Earnings per share: $1.72 For Goldman Sachs, the earnings base is clearly strong, given the plethora of deals, IPOs, and financing efforts that companies made during the first half of the year. Most notably, Goldman led SpaceX’s record-breaking IPO, which took place in the second quarter and will be included in investment banking filings on Tuesday. As a result, much of the focus will be on operational performance that leads to sustainable ROTCE and earnings growth throughout the business cycle. Put another way, investors want to better understand how Goldman Sachs will work in the general environment, not only when the IPO and M & A activity is hot. ROTCE performance is often what investors look at when deciding which price-to-earnings multiple to allocate to a financial stock. Revenue: $16.1 billion Earnings per share: $14.39 2. J & J earnings: Johnson & Johnson entered its earnings week hovering near an all-time high, thanks to a strong multi-week rally in the health care group. Arguably, some of J&J’s strength is owed to a broader market shift in healthcare and away from hot AI stocks. But now, Wednesday’s earnings report gives J&J a chance to show that its business is worth owning the stock for important reasons. The flipside is that the rally raises the bar and can invite profit-taking, especially because the management team of CFO Joe Wolk and CEO Joaquin Duato are not a marketing duo. Wolk, in particular, can save with his forward direction. Still, there’s a lot to like about J&J’s story as growth accelerates, driven by a healthy pipeline and a slide in sales. The major drugs to consider in the second phase of blood cancer treatment are Darzalex and Tremfya, an injection to treat autoimmune conditions that affect the skin, such as plaque psoriasis, and the digestive tract, such as Crohn’s disease and ulcerative colitis. Investors are also looking for updates on the launch of Icotyde, a daily psoriasis pill approved by US regulators in March; is among J & J’s most exciting new products to drive growth in the coming years. To be sure, Goldman Sachs analysts told clients last week that they don’t expect J&J to disclose Icotyde’s revenue figure, “which is consistent with the company’s reporting practice for early launches.” Instead, the focus will be on the number of medications and the type of patients taking them. In J&J’s medical devices segment, the leading growth drivers are cardiovascular health products for the treatment of heart disease from Shockwave, acquired in 2024, and Impella heart pumps. Remember: J&J’s pharmacy business is bigger and growing faster ($15.4 billion in sales and 7.4% organic growth last quarter) than its medical device business ($8.6 billion and 4.6% organic growth). Here’s what the street expects up and down: Revenue: $25.05 billion Earnings per share: $2.85 3. Economic data: The big reports for the week are Tuesday morning’s consumer price index report and Wednesday morning’s producer price index. Both are from June. The inflation picture is very important to the Federal Reserve’s interest rate decisions in the coming months and early next year. Thankfully, the sharp decline in oil prices throughout the month of June eased the inflationary pressures led by the strength of the US economy – as WTI crude retreated from the $90s per barrel at the beginning of June to just under $70 by the end of the month. The caveat is that the reason for the downgrade (the interim peace deal between the US and Iran, which led to the reopening of part of the Strait of Hormuz) got a little muddy last week as tensions between the two sides flared up; in response, the flow of tanks in Hormuz decreased. Missiles and drones continued to fly over the weekend. So while we hope the June CPI report is down from the 4.2% annual increase in May, what happens to oil prices going forward is more important to our view of inflation than this retrospective data. For the CPI, as of Friday, economists polled by FactSet expect a 3.8% annual increase and a 0.2% month-on-month decrease. The PPI, in turn, is considered the leading indicator of consumer inflation because it measures the prices producers receive for their goods. If companies pay more for their inputs, such as steel, they may look to pass those higher costs on to finished goods down the road. PPI is expected to show annual growth of 6.2% and a monthly decline of 0.2%, according to FactSet on Friday. A few other economic reports to mention briefly: June’s retail sales data helps us understand where consumers have been spending their money, while Friday’s initial housing data complements our Home Depot situation. The Federal Reserve’s monthly look at industrial production and energy use will also be out on Friday, and the level of industrial activity in the country is important on behalf of the FedEx Freight Club. The more things are done, the better for FedEx Freight as North America’s largest shipping provider of undertruck services, combining multiple customer shipments on a single trailer. Next week Monday, July 13 Before the bell: No note reports After the bell: AeroGrow International (AERO) Tuesday, July 14 Before the bell: Goldman Sachs (GS), Wells Fargo (EFC) , Citigroup (C), JPMorgan (JPM), Bank of America (BAC), Fastenal (FAST), July bell1: Johnson bell Wednesday, Ericsson (ERIC) (JNJ) , ASML (ASML), Progressive (PGR), BlackRock (BLK), Conagra (CAG), Morgan Stanley (MS), Cintas (CTAS), PNC Financial (PNC), BNY Mellon (BNY), M & T Bank (MTB) After the bell: United Airlines (UAL), JB Hunt (JBHT) Thursday, July 6, United (TSMC), GE Aerospace (GE), Abbott (ABT), Citizens Financial (CFG), State Street (STT), Prologis (PLD) After the bell: Netflix (NFLX), Alcoa (AA), Intuitive Surgical (ISRG) Friday, July 17 Before the bell: Regions Financial (RF), Truist Financial (TFC), Autocorp (TFC) (TRV) After the bell: No note reports (Jim Cramer’s Charitable Trust is long GS, WFC, JNJ, HD and FXDF. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive an alert in commerce before Jim went commercial. Jim waits 45 minutes after sending a trade alert before buying or selling stock in his charity portfolio. When Jim talks about a stock on CNBC TV, he waits 72 hours after issuing a trade warning before making a trade. THE PRIVATE INFORMATION OF THE BURNING CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AND OUR PRIVACY POLICY. NO LEGAL LIABILITY OR OBLIGATION EXISTS, OR IS CREATED, BY YOUR ACCEPTANCE OF ANY INFORMATION PROVIDED BY CONTACTING THE INVESTMENT CLUB. NO PARTICULAR RESULT OR INTEREST IS GUARANTEED.
