Earnings season could enter one of its busiest weeks with reports from some of the largest companies in the world. We can expect earnings from Microsoft, Johnson & Johnson, Tesla, AT&T, Verizon, Boeing, IBM, Visa, and Mastercard, among others. On Tuesday, S&P Global will release its Composite PMI for January, gauging business activity across the U.S. On Thursday, the Bureau of Economic Analysis (BEA) will issue the advance estimate for fourth-quarter gross domestic product (GDP), followed by its Personal Consumption Expenditures (PCE) Price Index for December on Friday. The latest updates on the housing market will include new and pending home sales for December.
Earnings Season Shifts Into High Gear
Next week could be one of the busiest this earnings season, featuring reports from some of the world’s largest companies. Microsoft, Johnson & Johnson, Verizon, and Lockheed Martin will report earnings on Tuesday, followed by Tesla, AT&T, IBM, and Boeing on Wednesday. Thursday’s earnings lineup will include Visa, Mastercard, and Intel. The week will wrap up with earnings from Chevron and American Express on Friday.
Earnings projections for S&P 500 companies have improved slightly in recent weeks, with an estimated earnings decline of 3.9% for the latest quarter, compared to 4.1% projected at the start of the year, according to research from FactSet. Analysts now project three consecutive quarters of earnings declines extending into the second quarter of this year, with Q1 and Q2 earnings projected to fall 0.6% and 0.7% on an annual basis, respectively, before rebounding in the second half of 2023.1
Fourth-Quarter GDP Figures
On Thursday, the Bureau of Economic Analysis (BEA) will release the advance estimate for fourth-quarter gross domestic product (GDP), tracking whether the U.S. economy expanded during the last three months of 2022. Economists project the U.S. economy grew 2.5% at a seasonally-adjusted annual rate, following a 3.2% expansion in the third quarter and after two consecutive quarterly declines in the first half of the year. Growth likely decelerated from the third quarter due to a slowdown in consumer spending, which accounts for nearly 70% of U.S. GDP.
December PCE Prices
The BEA will also release its Personal Consumption Expenditures (PCE) Price Index for December on Friday, providing the latest update on inflation. PCE prices likely rose just 0.1% last month, down from 0.4% in November. On an annual basis, price growth likely decelerated to a rate of 5.1%, down from 5.5% in November and a recent peak of 7% in June. Core prices, which exclude food and energy costs, are projected to have risen 4.4% year-over-year, down from 4.7% in November.
A lower-than-expected reading could prompt Federal Reserve policymakers to decide on a smaller interest rate hike of 25 basis points at the upcoming meeting of the FOMC beginning on Jan. 31. It would also add to recent data showing consumer and producer prices decelerated in December, with the annual rate of consumer inflation falling to its lowest level in over a year.