But attention could soon shift elsewhere as corporate earnings season arrives, delivering a distraction from the economy and the unknowns that lie ahead.
What’s happening: S&P 500 earnings are expected to have increased by 22.4% compared to the previous year during the final three months of 2021, according to Refinitiv. That would be a strong showing.
In a note to clients on Friday, UBS said that despite a volatile start to the year, it does not think a more hawkish Fed will “derail” the stock market rally, and that earnings season will “turn investor attention back to robust fundamentals.”
This just in: Delta Air Lines (DAL) said on Thursday that its profits beat expectations during the last three months of 2021. While it expects to lose money in its current quarter due to a surge in Omicron cases, it thinks the impact on its operations will end within the next 60 days.
“We believe the worst is behind us,” CEO Ed Bastian said in an interview with CNBC on Thursday.
The rush of corporate earnings begins in earnest on Friday, when many US banks report results. Shares of these companies have soared since the start of the year. Higher interest rates would help banks make more money on loans.
The KBW Bank Index has jumped almost 12% year-to-date, while the S&P 500 is down more than 2%.
These banks will need to prove they’re worthy of the recent influx of cash. Lending and lucrative investment banking fees are expected to deliver for them.
JPMorgan Chase (JPM) on Friday posted earnings that beat analysts’ expectations.
“JPMorgan Chase reported solid results across our businesses benefiting from elevated capital markets activity and a pick up in lending activity as firmwide average loans were up 6%,” CEO Jamie Dimon said in a statement.
Counter-programming: Federal Reserve officials made clear this week that they view three interest rate hikes in 2022 as the baseline, but they could do more to fight prices that are rising at the fastest pace in 39 years.
“Our monetary policy is focused on getting inflation back down to 2% while sustaining a recovery that includes everyone,” Lael Brainard, who has been tapped to be the Fed’s No. 2 official, said at her confirmation hearing Thursday. “This is our most important task.”
Christopher Waller, a Fed governor, told Bloomberg TV that the number of rate hikes will depend on “what inflation looks like in the second half of the year.”
“If it continues to be high, the case will be made for four, maybe five hikes,” Waller said.