Earning season is approaching and that could be a positive catalyst for equities

The earnings reporting season kicks off in the coming week and it is expected to be a positive catalyst that could continue to raise stocks for the time being.

The week is also packed with Federal Reserve speakers and key data, including a long-awaited inflation on Tuesday, when the consumer price index is released. Fed Chairman Jerome Powell kicks off another busy week for Fed performances with a Sunday night interview on “60 Minutes.”

Powell continued to stress in last week’s comments that the Fed will maintain its easy policy for a long time and that any rise in inflation must be temporary. But higher-than-expected producer price inflation figures from Friday have made the release of the consumer price index on Tuesday all the more important. PPI gained 1%, double the expected increase.

Kevin Cummins, US economist at NatWest Markets, said he expects core CPI to rise 0.2% or 1.5% year on year in March, but headline inflation would be 0.5% or 2.5% on an annual basis. Cummins said March marks the beginning of a period when inflation could appear higher just because of the comparison to last year’s low levels when the economy was shut down.

“I think the Fed is already in favor,” said Cummins. He said he expects the CPI to peak at 3.6% in May, but then calm down in the summer.

The other important piece of data for the coming week is the March retail sales report, which Cummins said could show a 10% gain.

Cummins said sales should be boosted in March by the $ 1,400 incentive checks sent to individuals that started reaching bank accounts in mid-March. Also, a larger share of the economy has opened up as more people are vaccinated.

“The back of the month should be very strong,” he said. “If you look at car sales, it was the highest level in four years. It seems like restaurants are getting busier, with outside seating.”

But it could be that the income season is the real sign for the economy.

“It’s not what they report,” said James Paulsen, chief investment strategist at Leuthold Group. ‘For the first time we will hear that more and more companies are now actually making comments about the future. Are they going to adjust or notice some of their outlook? That’s what will really be the key to it. “

The big banks kick off the reporting on Wednesday with JPMorgan, Goldman Sachs and Wells Fargo. Bank of America and Citigroup report this on Thursday. Morgan Stanley reports on Friday. PepsiCo and Delta Airlines are also among the first to report.

“The consensus for the first quarter should be up about 22%. We have an easy profit compared to last year. That number could be closer to 30%,” said Brian Rauscher, head of global portfolio strategy at Fundstrat.

Rauscher said he expects most of the gains to be made in the cyclical sectors, such as consumer discretionary, financials and materials, all of which are benefiting from the reopening economy.

“I think the earnings season will be constructive, and it will be good enough to keep the market moving higher,” he said.

Based on estimates and early reports, Refinitiv now expects earnings growth of 25% for the first quarter. Companies have so far outpaced estimates at a rate of 81%. Profits for the financial sector are expected to increase by 75%. The consumer discretionary sector was badly hit by shutdowns a year ago and Refinitiv says earnings are expected to recover by 98%.

“I think we’re going to see the operating leverage for these companies really being undervalued. Revenues will come back faster than revenues,” said Rauscher. “Corporate America has done a really good job over the past year in streamlining their operations, their cost structures and everything else. Revenues can come back by 50% and revenues by 100%.”

Major stock market indices were higher over the past week, but small caps lagged as the Russell 2000 lost ground.

Monday

1:00 pm Boston Fed President Eric Rosengren

2 p.m. Federal budget

Tuesday

Income: Fastenal

6:00 am NFIB Small Business Survey

8:30 am CPI

12:00 p.m. Fed Panel on Race and Economy – Atlanta Fed President Raphael Bostic, Boston Fed President Eric Rosengren, Kansas City President Ester George, Minneapolis Fed President Neel Kashkari, San Francisco Fed President Mary Daly

12:00 pm Philadelphia Fed President Patrick Harker

Wednesday

Merits: JPMorgan Chase, Goldman Sachs, Wells Fargo, Bed Bath and Beyond, Infosys, First Republic Bank

8:30 am Import prices

2 p.m. Beige book

2:30 p.m. New York Fed President John Williams

4:00 p.m. Atlanta Fed President Raphael Bostic

Thursday

Earnings: Bank of America, Citigroup, UnitedHealth, PepsiCo, BlackRock, Alcoa, PPG Industries, US Bancorp, Charles Schwab, Delta Air Lines, Rite Aid, Wipro, Taiwan Semiconductor, Truist Financial, SunTrust

8.30 a.m. First claims

8:30 am Retail

8:30 am Philadelphia Fed survey

8:30 am Empire State Production

9.15 am Industrial production

10:00 a.m. Company inventories

10:00 am NAHB home builder sentiment

11:30 am Atlanta Fed President Raphael Bostic

2:00 pm President Mary Daly of San Francisco

4:00 pm TIC data

4:00 pm Cleveland Fed President Loretta Mester

Friday

Merits: Morgan Stanley, PNC Financial, Kansas City Southern, Bank of NY Mellon, Citizens Financial, Ally Financial, State Street

8.30 am Survey of business leaders

8.30 am Housing starts

10:00 am Consumer feeling