Big banks reported better-than-expected results kicking off earnings season on Friday though the indexes declined slightly from their very extended positions. However, the bulls continue to dominate with little to no fear despite the earnings uncertainty ahead. Today we will get the latest reading on Empire State Manufacturing and a few regional bank reports to inspire the bulls or bears.  China’s economic growth miss may have a temporary negative impact on sentiment but it may be wise to watch for some profit-taking to enter the picture if the bears become more emboldened to attack.

As we slept Asian markets declined modestly after a miss on China’s economic growth expectations raising concerns about their recovery.  European markets trade lower across the board as momentum wanes after last week’s surge higher.  With manufacturing numbers and regional bank reports in focus, U.S. futures suggest a modestly bearish open as the uncertainty of market-moving earnings ramps up this week.

Economic Calendar

Earnings Calendar

Notable reports for Monday HDB, CFB, ELS FBK & HBCP.

News & Technicals’

The media industry is facing a crisis as it grapples with multiple challenges, including two labor disputes that have paralyzed Hollywood production, a decline in advertising revenue due to the pandemic and the shift to digital platforms, and fierce competition in the streaming market that is draining resources and profits. Even Disney, one of the most successful media giants, is rethinking its strategy and considering whether its traditional TV business is still essential to its future. Meanwhile, Netflix, the leader in streaming, is enjoying a strong performance and is expected to report positive results when it announces its earnings on Wednesday.

The global wheat market was shaken by the announcement that Russia had withdrawn from the Black Sea grain initiative, a deal that facilitated the export of agricultural products from Ukraine to Turkey and other countries. The move was seen as a sign of escalating tensions between Moscow and Kyiv over the conflict in eastern Ukraine and the fate of Crimea. Wheat prices soared 3.5% as traders feared a disruption in supply and a potential trade war. The Russian Foreign Ministry said it had informed Turkey, Ukraine, and the U.N. of its decision, citing security and environmental concerns.

China’s economic growth slowed down in the second quarter of 2023, as the world’s second-largest economy faced headwinds from the pandemic, trade frictions, and domestic challenges. According to the official data, China’s gross domestic product (GDP) expanded by 6.3% year-on-year in the April-June period, down from 7.9% in the previous quarter. Quarterly, the growth rate decelerated to 0.8%, compared with 2.2% in the first quarter. Despite the slowdown, a spokesperson for the National Bureau of Statistics expressed confidence that China could still meet its annual growth target of around 5%, which was announced by the government in March. He also acknowledged that China faced a complex and uncertain global situation.

The S&P 500 edged down by 0.10% on Friday, but still posted a weekly gain of more than 2.4% as earnings season began. The index was boosted by strong earnings from U.S. banks and lower-than-expected inflation data this week. Stock indexes in Europe and emerging markets also did better than the U.S. last week. We begin the new week with an Empire State Manufacturing report and some regional bank earnings reports as we wait on more big bank reports coming Tuesday. The pullback on Friday eased a little of the short-term overbought conditions but the bulls continue to dominate with big tech leading the way.

Trade Wisely,

Doug