Dow Jones, Nasdaq, S&P 500 weekly preview: Q1 earnings season kicks off

On Friday, stocks on Wall Street retreated as concerns over inflation and geopolitical tensions weighed and a broader decline in banking stocks weighed on investor sentiment.

The Dow Jones Industrial Average fell by 475.84 points, or 1.24%, ending the day at 37,983.24. The S&P 500 saw a decrease of 1.46%, closing at 5,123.41, while the Nasdaq Composite declined by 1.62%, finishing at 16,175.09. During the session, the Dow momentarily dipped by nearly 582 points, indicating a 1.51% loss, and the S&P 500 had slid by as much as 1.75%.

On a weekly basis, the S&P 500 was down by 1.56%, the Dow dropped by 2.37%, and the Nasdaq fell 0.45%.

Shares of JPMorgan Chase (NYSE:JPM) plunged over 6% following the release of its first-quarter results. The banking giant indicated that its net interest income for 2024 might fall slightly below Wall Street's expectations, which contributed to the decline in its stock price.

Wells Fargo &Company (NYSE:WFC) experienced a modest drop of 0.4% after announcing its latest quarterly figures. Meanwhile, Citigroup Inc's (NYSE:C) shares declined by 1.7%, even though the bank reported revenues that exceeded expectations.

Looking forward, the markets will be primarily focused on upcoming economic data, particularly the retail sales and housing data, which are expected to be unveiled on Monday and Tuesday, respectively.

“We expect a strong retail sales print, but risks are to the downside,” Bank of America strategists said in a Monday note.

“Meanwhile, existing home sales and new home starts likely fell after good weather boosted the Feb data. There are also more Fed speakers on the docket, who could affect market pricing of the fed funds path.”

Q1’24 reporting season begins

The quarterly reports by Wall Street banking giants marked the start of the Q1 2024 earnings season, with investors now redirecting their focus to the upcoming reports set to come out this week.

BofA strategists said Monday that the equity market has been macro-driven over the past two years, however, recent signs have indicated that earnings data is becoming the primary driver, “ with EPS driving 53% of the S&P 500 return YoY in March,” they noted.

“We continue to see momentum in the earnings cycle and expect another strong 4% beat in 1Q,” said BofA.

Among the companies that are scheduled to release their earnings in the coming days are UnitedHealth Group (NYSE:UNH), Bank of America Corp (NYSE:BAC), Netflix (NASDAQ:NFLX), and Procter&Gamble (NYSE:PG), among others.

What analysts are saying about US stocks

Morgan Stanley: “Just a few months ago, the consensus view skewed heavily toward a soft landing. However, the macro data have started to support the no landing outcome, with recent growth and inflation data points exceeding most forecasters' expectations, including the Fed’s.”

“Given that the rally in equities since October has largely been a function of higher multiples as rates came down, it’s rational to assume that multiples may now face headwinds if rates rise further.”

JPMorgan: “In a break from recent norms, though, the activity momentum firmed up during the quarter, as seen in rising global PMIs - middle chart. This improvement, combined with the reduced earnings hurdle rate on the back of lowered expectations, is suggesting that we will get earnings beats. The likely earnings beats do not necessarily mean that equities will advance during the reporting season, though. This is because the market has already strongly rerated during Q1, and the big gap has opened up ytd between Fed projections and equity index levels. The risks of interest rates spiking for the “wrong reasons”, Fed pivot getting fully reversed and inflation staying too hot are all elevated.”

Roth MKM: “The S&P 500 finished the week lower by over -1.5%. Friday’s -1.46% drop confirmed that the longer-term uptrend channel is no longer in place, but the benchmark was able to hold the rising 50 DMA. We have seen some of our indicators show signs of an increase of distribution. Our best guess is more pain is ahead after reviewing bottom-up charts, but we don’t want to make a big deal about last week as the S&P 500 is just -2.65% below all-time highs. We will see if the seasonal tailwinds, which are quite strong in the back half of April, pick up this earnings season where 40+ S&P 500 companies are set to report.”