This week, several major companies, including tech giants Apple and Amazon, along with coffee giant Starbucks, are set to report their earnings, providing insights into consumer spending habits amidst easing inflation and rising interest rates.
Other notable companies reporting earnings include Uber Technologies, Pfizer, Amgen, PayPal, Square, Kraft Heinz, and Kellogg. In total, 170 S&P 500 companies, including four Dow Jones Industrial Average components, are scheduled to report their quarterly updates this week. According to FactSet, as of now, 51% of S&P 500 companies have already reported their earnings.
The current pace of earnings is expected to show a 7.3% decrease compared to the previous year, which would be the largest drop since the second quarter of 2020, as per FactSet's data.
These earnings reports come after the Federal Reserve raised interest rates to a 22-year high last week, resuming a series of rate hikes that were paused in June. The Fed has also indicated the possibility of further rate increases. Meanwhile, inflation has moderated from its peak levels last year, and economic growth has picked up over the past three months.
Consumer spending has shown growth, although it has cooled down. In the second quarter, spending by American consumers rose 1.6%, contributing to the overall U.S. economic expansion. However, this growth was slower than the 4.2% rise seen in the first quarter.
Visa's Chief Financial Officer, Vasant Prabhu, mentioned that their data did not indicate any significant behaviour changes among consumer segments in the second quarter, reflecting the resilience of consumers during this period.
PayPal and Square's earnings will offer insights into the performance of online payments, while Amazon and Shopify's reports will indicate consumer spending on online shopping.
Starbucks and Yum! Brands will provide a glimpse of consumers' willingness to pay higher prices for their favourite brands, with Yum having increased discount offerings at its KFC and Taco Bell chains.
Uber and DoorDash's earnings will reflect consumer demand for deliveries, showing how delivery businesses are adapting to the shift in consumer behaviour as more people dine out and look for cost-saving options.
The travel industry will also be under the spotlight, with earnings reports from hotel and accommodation chains like Marriott International, Airbnb, Booking Holdings, and Hyatt, indicating how they are coping with the high demand for travel.
Insurance companies Allstate, Prudential Financial, and MetLife will report their results after a stormy quarter, with Travelers experiencing increased catastrophe losses.
Pharmaceutical companies Pfizer, Merck, Moderna, and Amgen, along with CVS Health, will report their results as sales of Covid-19-related products start to fade.
Toymakers Hasbro and Funko will report their earnings, following Mattel's 12% drop in sales.
These earnings reports will be closely watched by investors and analysts as they provide valuable insights into the current state of the economy and consumer behaviour amidst the changing economic landscape.
