Markets See Mixed Week as Earnings Season Begins

“I think if you have a passion for what you do then there are no limitations on how long or how much you can accomplish.” ~Tony Bennett (1926 - 2023)

Good evening:

Earnings season has begun in earnest, and investors likely paid more attention than usual to the results this week due to the relative dearth of macroeconomic news competing for their attention until the FOMC meeting on July 26. Banks kicked things off, with Head of Research Tom Lee suggesting that they might produce some pleasant surprises. “Banks and Financials might be the breakaway sector this earnings season,” he suggested, partly because “expectations are low due to headwinds from rate action and the regional bank crisis earlier in the year. So they’re still cheap and underowned,” he asserted.

Though Lee generally described their results as “in line” during our weekly huddle, banks rallied this week. In addition to the aforementioned low expectations, Lee also attributed this to “a recognition that the Fed is shifting away from ‘higher for longer’ because inflation isn’t as strong. That’s good for banks and their margins, and their deposits as well.” Also, he said, “the economy looks to be slipping into expansion, which is better for the credit-loss outlook.”