The Market News Reel for this week! Get the most important market news & updates for the week ahead each Monday!
Major headlines, excerpts from news sources and a link to the full article are shown below. "Breaking Thoughts" section is purely our opinion.
Oil Holds above $80 Due to Global Power Shortage
"Oil held above $80 a barrel on expectations that a power crisis from Asia to Europe will lift demand and tighten global balances.
Oil markets are tightening rapidly in the run-up to the Northern Hemisphere winter as shortages of natural gas and coal boost demand for alternative power generation fuels such as diesel and fuel oil." - read more on Yahoo here
Breaking Thoughts: Last year when oil prices hit rock bottom due to pandemic related lockdowns, oil companies reduced capital spending in an effort to remain in business. The resulting stock value declines forced them to promise shareholders long term spending cuts which inevitably reduces current and future supply.
The current situation is a result of the reopening putting a lot of demand back while supply is still ~10% less than Feb 2020. Global shipping delays, other supply shortages and dock worker strikes are also having an impact. This could leave an inflated price for oil and gas for several months or longer.
In the long run, EV adoption and other green energy initiatives will help reduce the demand of oil. However, declines in land based transport could partially be offset by growth in shipping & aviation, so there is a possibility even 10 years out that global oil demand only marginally decline compared to today despite massive expected EV adoption. So in the short to medium term oil could hold up its price while companies stock rises, but the rising cost of equity (due to ESG investing) along with lowering demand will be a tough pill to swallow for long term oil investors.
Big Week for US Bank Earnings
"Bank stocks have been one of the best trades of 2021, and with third-quarter earnings set to kick off on Wednesday analysts expect the industry to show continued strength.
Despite the strong performance by banks through the first nine months of the year, many analysts aren’t wavering in their bullish outlooks, believing that the environment is right for these stocks to keep running. In September, Keefe Bruyette & Woods analysts including Christopher McGratty upgraded the entire U.S. banking sector to overweight, saying an inflection in loan growth, higher interest rates and the redeployment of cash should bolster earnings.
That isn’t to say everyone agrees. Indeed, the current debate on Wall Street is whether banks are priced too close to perfection.
“Big U.S. banks are trading rich,” BMO Capital Markets analyst James Fotheringham said. He suggests investors look to take profits as JPMorgan Chase & Co. -- which kicks off the earnings party Wednesday morning -- and Bank of America Corp. have soared above historical averages." - read more on Bloomberg here
Breaking Thoughts: With most of the big banks already up 33% to 60% so far this year, it could be wise to take some profits if they already make up a significant portion of your portfolio. The main bull case going forward is the expected rises in interest rates that could come from the fed over the next few years, higher rates in a growing economy increases the Net Interest Margin (charging even more for loans vs deposits) which directly contributes to increases in bank profits.
Some of this expectation may already be "baked in" to the stock prices as many US banks are trading 10%-20% above their pre pandemic levels, however long term holders may still benefit further.
Major Earnings This Week
Wednesday October 13:
Blackrock (BLK): Expected Q3 earnings of $9.47 per share
JP Morgan Chase (JPM): Expected Q3 earnings of $3.00 per share
Delta Airlines (DAL): Expected Q3 earnings of $0.16 per share
Charles Schwab (SCHW): Expected Q3 earnings of $0.80 per share
Thursday October 14:
Bank of America (BAC): Expected Q3 earnings of $1.79 per share
Citi Group (C): Expected Q3 earnings of $1.89 per share
Domino's Pizza (DPZ): Expected Q3 earnings of $3.11 per share
Morgan Stanley (MS): Expected Q3 earnings of $1.68 per share
Progressive (PGR): Expected Q3 earnings of $0.21 per share
Taiwan Semiconductor (TSM): Expected Q3 earnings of $1.04 per share
US Bancorp (USB): Expected Q3 earnings of $1.16 per share
Walgreens Boots Alliance (WBA): Expected Q4 earnings of $1.02 per share
Wells Fargo (WFC): Expected Q3 earnings of $0.99 per share
Friday October 15:
Goldman Sachs (GS): Expected Q3 earnings of $10.16 per share
Major IPOs Expected This Week
Thursday October 14:
Gitlab (GTLB) a Github rival is raising up to $505M at an $8.6B valuation
See you next week!
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