This week, we’re tracking the highly anticipated earnings season for Q1 2022. Companies report their earnings (profits) performance each quarter. For most stocks, this means they start reporting about halfway through the middle of the month after the calendar quarter ends.
The unofficial start of each of these earnings cycles is triggered when the big banks like Citigroup Inc. (NYSE:C), JPMorgan Chase (NYSE:JPM), Morgan Stanley (NYSE:MS) and The Goldman Sachs Group (NYSE:GS) report. These companies kicked things off last week with decent numbers above what analysts had expected.
Typically, we count on the big banks to set the tone for each earnings season. This time, everyone knew the data would be good but nothing too surprising — and that is what we got.
Frankly, we are relieved the banks pulled it off, and we didn’t see any terrible news. The market has been volatile lately, so we couldn’t completely discount the potential for a big, negative surprise.
Earnings season starts slowly but ramps up very quickly. Only 15 companies in the S&P 500 reported last week, but another 58 (12% of the index) will report this week. This week, there are three reports that will be a bellwether to watch closely for what to expect the rest of this month and into May.
Monday, April 18:
J.B. Hunt Transport (NASDAQ:JBHT) will report after the market closes. Last month, transportation and shipping stocks were hammered on a selling feedback loop that had no rational basis in the fundamentals. We think the sector is oversold, and JBHT’s earnings report will trigger a bounce off support. We recommend traders look closely at some of the big shippers for good deals that could jump big over the next few weeks.
Wednesday, April 20:
Whirlpool Corp. (NYSE:WHR) will report after the market closes. We don’t have high hopes for WHR, and we expect the company to issue a negative outlook for this year. However, while we don’t think appliance makers are a buy right now, they will tell us a lot about consumers and the effects of inflation on spending. If WHR meets expectations (even as low as they are), it will confirm that consumers are still healthy and willing to spend. That should generally support the retail sector and be good for stocks we have recommended, like Costco Wholesale (NASDAQ:COST) and Target (NYSE:TGT).
Thursday, April 21:
American Airlines (NYSE:AAL) reports earnings before the market opens. Like the rest of us, the airlines have struggled with rising fuel costs. Besides being a good indicator of business and consumer spending, the report from American Airlines should give us some insight into whether inflation is dragging on demand and spending. Many investors will be watching the airlines very carefully for any early warnings that the economy is in trouble. We are optimistic this report will help improve sentiment based on recent data.
There are also a few economic reports to watch this week, but the one we are most interested in is Fed Chairman Jerome Powell’s speech at the World Bank Group/International Monetary Fund on Thursday morning. We didn’t expect the Fed to move the market much after the March rate hike, but the chairman and the other governors have been surprisingly vocal and hawkish over the last two weeks, and that has been a problem for traders.
We can’t really plan ahead for what Powell will or won’t say, but we are confident it will trigger market volatility. We recommend investors wait until he comments before making any significant portfolio adjustments or adding a lot more risk to your account.
Bottom line: Earnings season is off and running. So far, the overall results have been within expectations or surprisingly good, despite mediocre bank reports. Earnings start to ramp up this week, and we recommend watching a few key stocks for guidance about where the market is headed. We are optimistic but ready to adjust our outlook if the data starts to look weak.
For more information on which stocks to buy before earnings, tune in to our livestream on YouTube tonight at 7:00 ET. Click here to set a reminder.