Heading into the first full trading week of the year, investors can look forward to the latest inflation data and reports from big banks to kick off earnings season. The Labor Department’s Consumer Price Index will be released on Thursday, followed by the Producer Price Index tracking wholesale inflation on Friday. The end of the week will also bring earnings reports from several of the country’s biggest banks, including JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Wells Fargo & Co. (WFC), Citigroup Inc. (C), and BNY Mellon Corp. (BK). Other indicators out this week will include reports on consumer credit, the federal trade deficit, wholesale inventories, and the NFIB Small Business Optimism Index.

Big Bank Earnings Kick Off Earnings Season
After reporting strong results for the third quarter, investors will be watching earnings from several big banks, seeking evidence of the economic weaknesses that executives signaled could be coming. JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, and BNY Mellon are all scheduled to report earnings Friday. Each delivered better-than-expected results last quarter, mostly boosted by high interest rates.

However, several financial services executives warned that parts of their businesses were facing stress, and that economic challenges were coming. JPMorgan Chief Executive Officer (CEO) Jamie Dimon warned that U.S. consumers and businesses could face even higher interest rates as inflation risks remain elevated. And Citigroup Chief Financial Officer (CFO) Mark Mason cautioned that the bank’s credit card spending volume fell from the previous quarter.

Inflation Readings Come After Strong Jobs Report
Following last week’s jobs report showing employers added more jobs than expected in December, investors will be closely watching inflation data due Thursday with the release of the Consumer Price Index (CPI), which will show December’s price changes at the retail level. The wholesale-focused Producer Price Index (PPI) will follow on Friday. Consumer inflation has been declining steadily since its surge in 2022, but still remains higher than the Federal Reserve’s target of 2%. The CPI slowed to an annual rate of 3.1% in November, while the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, eased to 2.6% in its most recent reading.

A higher-than-expected inflation reading from December could raise worries that the Fed hasn’t brought inflation under control, despite raising interest rates to 22-year highs. A lower inflation number, on the other hand, could boost confidence that the Federal Reserve will follow through with rate cuts later this year. While inflation has been trending lower, there are signals that the growth in prices may not cool as fast as Fed officials think. The latest jobs report showed that wages grew 4.1% year-over-year, higher than expected and above pre-pandemic levels, raising worries that prices could remain elevated.