Earnings may offer clues on US economy

Investors are looking forward to the consumer discretionary sector’s quarterly earnings reports in the coming weeks to get a sense of how the US economy is doing in the face of consistently rising inflation and the Federal Reserve’s most aggressive rate-hike cycle since the 1980s. Even when interest rates increased the cost of credit card financing and mortgage loans, consumers have mainly maintained their strength over the past year.

However, huge layoffs in the first quarter affected wealthy technology professionals, and the current regional banking crisis has reduced household credit availability, potentially reducing expectations for spending on entertainment, dining, cars, and lodging. According to Garrett Melson, Portfolio Strategist with Natixis Investment Managers Solutions, “We’re in this narrative tug of war between a hard landing and a soft landing for the economy, but if we see some strength in the consumer, it could bolster the story that some of these worst-case scenarios won’t play out.”

In anticipation of a recovery in the housing industry, he is positive on homebuilders and appliance producers. This earnings season, corporate results and outlooks are more important than ever as investors assess whether monetary tightening and the chaos in the banking sector last month are slowing global growth. Big banks started the earnings season on Friday, exceeding Wall Street estimates with JPMorgan Chase & Co, Citigroup Inc, and Wells Fargo & Co. Tesla Inc., Netflix Inc., and AutoNation Inc. are among the consumer discretionary expenditure companies that will report results the next week. On April 27, Amazon.com Inc., a significant component, is anticipated to report financial results.