Banks kick off earnings season and US retail sales are due

Nasdaq =>The index rises to 11100

JP Morgan =>The stock rises to $110

Citigroup =>The pair rises towards $43

Nasdaq rises ahead of retail sales

The Nasdaq rallied after initial losses following the release of hotter-than-expected US CPI inflation. Inflation cooled by less than expected, and core inflation, which strips out food and fuel, rose by more than expected to 6.6%. The market now expects the Federal Reserve to hike rates by 75 basis points in November, the fourth straight jumbo-sized hike. The data comes following the minutes of the September Fed meeting, which showed that policymakers are committed to tacking inflation. Today the futures are rising helped higher by falling bond yields and as attention turns to US retail sales data. Retail sales are expected to rise again, suggesting that the US consumer is resilient even as prices rise.

US CPI September YoY

Actual: 8.3% (0.2%)

Previous: 8.5%

Where next for Nasdaq?

The Nasdaq trades within a descending channel since mid-August, which, combined with the bearish RSI keeps investors hopeful of further downside. Sellers will need to take out support at 10740 the October 11 low to open the door to 10400 yesterday’s low. Buyers are attempting to break above resistance at 11100 the June 17 low to expose the 20 sma at 11340 and 11725 the October high.

JP Morgan Q3 earnings preview

JP Morgan is due to report Q3 earnings before the open today. The bellwether reports as the share price trades down 34 so far year to date, and it is expected to be another challenging quarter for the bank. Rising interest rates and strong jobs markets are supportive. Net interest income is expected to rise 28.5% from last year’s $16.8 billion. However, recession fears are also rising; just this week, JP Morgan CEO Jamie Dimon warned about the rising likelihood of a recession. The bank is expected to raise bad loan provisions to $1.21 billion in Q3, likely to be the biggest drag on earnings. Wall Street expects earnings to fall 22% to $2.90 per share on revenue of $31.13 billion, an 8.4% increase.

Citigroup Q3 earnings preview

Citigroup is set to release Q3 earnings ahead of the market opening as the share price trades down 34% across the year, underperforming the broader market. Citigroup and JP Morgan underperformed in the latest stress test and were told to increase buffers, prompting both to halt their share buyback programme temporarily. Citigroup is also exiting operations outside of the US, helping o build reserves. Bad loan reserves are expected to rise $573.9 million in Q3, which will impact the bottom line. Citigroup is expected to report a 6.6% rise in revenue to $18.3 billion and a 28% decline in EPS to $1.47.

Support can be found at 40 (2022 low) and 38 (October 2020 low).

Resistance for the stock can be seen at 43.60 (20 sma) and 45 (October).