The week ahead 05/01/2023

Before breaking down your Investing Week Ahead — the breaking news this morning is that Jamie Dimon and JPMorgan Chase (JPM) have officially taken over First Republic Bank (FRC).

JPMorgan Chase (JPM) Stock Performance, YTD Chart, Seeking Alpha

Here’s the high-level details (via CNBC and Stock Talk Weekly):

  • JPMorgan to pay $10.6B to FDIC

  • FDIC to provide $50B, 5-YR fixed-rate financing

  • JPMorgan to repay prior $25B deposit injection from large U.S. banks

  • First Republic’s 84 branches in 8 states will reopen today as branches of JPMorgan

  • All deposits of First Republic will become depositors of JPMorgan and will have full & instant access to their deposits

  • JPMorgan says deal has fair value mark on acquired loans at roughly $22B

  • JPMorgan will NOT assume First Republic’s corporate debt or preferred stock

First Republic Bank (FRC) Stock Performance, YTD Chart, Seeking Alpha

So in short — JPMorgan gets the assets, the FDIC largely has to deal with the debt.

Simply unreal.

FDIC-Insured Commercial Banks in the United States, 2000-2021, Statista

The chart above is not fully up-to-date, but the point remains — will the U.S. continue to see a steady decline in the total number of banks?

Will the recent fear of bank failures ultimately lead to a consolidation of America’s deposits into the top 20 or so banks?

Our hunch is that this would be an overreaction.

Small-to-medium-sized banks are critically important to the U.S. financial infrastructure. Everyone isn’t piling into the name brands overnight — but it’s a trend that’s certainly worth watching.

For now, congrats to JPMorgan Chase for buying the 14th largest commercial bank in the United States (as of the end of last year) for pennies on the dollar.


Key Earnings Announcements:


Apple, Advanced Micro Devices, Coinbase, “Big Energy”, and many more.

Monday (5/1): Arista, Avis Budget Group, Diamondback Energy, Franklin Templeton, MGM Resorts, Norwegian Cruise Line, NXP Semiconductors, ON Semiconductor, SoFi, Transocean

Tuesday (5/2): AMD, BP, Caesars International, Energy Transfer, Ford, Marathon, Marriott, Match Group, Paycom, Pfizer, Starbucks, Uber

Wednesday (5/3): Albemarle Corp., Barrick, CVS Health, Estēe Lauder Companies, Etsy, Fastly, Generac, HubSpot, Marathon Oil, Mercado Libre, Phillips 66, Qualcomm, WWE, Yum! Brands

Thursday (5/4): ABInBev, APA Corp., Apple, Atlassian, Block, Carvana, Coinbase, ConocoPhillips, DataDog, DraftKings, Fortinet, Lyft, Moderna, Novo Nordisk, Peloton, Royal Carribbean Group, Shell, Shopify, The Carlyle Group

Friday (5/5): AMC, Cigna, Enbridge, EOG Resources, FuboTV, International Seaways, Warner Bros Discovery

What We’re Watching:

  1. Apple (AAPL)

Apple (AAPL) Stock Performance, YTD Chart, Seeking Alpha

After many Big Tech peers outperformed over the last couple of weeks, analysts will be focused on Apple’s iPhone demand and subscription growth within its Services sector.

Expectations: EPS of $1.43 on revenue of $92.9 billion.

  1. Advanced Micro Devices (AMD)

In AMD’s most recent quarterly release (January 31st) — one of the primary concerns was naturally earnings per share. Point your attention to the left side of the graphic above — GAAP.

If you’re unaware, this means Generally Accepted Accounting Principles. In other words, this is the measurement when you do the math according to how the SEC thinks you should.

AMD EPS collapsed due to the completion of its blockbuster acquisition of Xilinx — valued at $49 billion. Analysts will be looking for further guidance as to how the company plans to move forward now that the acquisition is completed.

Expectations: $0.56 EPS on revenue of $5.3 billion.

  1. Energy Stocks


With Energy stocks categorically performing the best in the S&P 500 — it will be helpful to hear from the likes of British Petroleum (BP), Marathon Oil (MRO), Phillips 66 (PSX), Shell (SHEL), etc.


Investor Events / Global Affairs:


The S&P 500 has carried the team, Anheuser-Busch is expecting a not-so-fun Q&A session at its earnings call, and Johnson & Johnson’s spin-off company is set to IPO.

  • S&P 500 (SPY) Under the Microscope

Reuters Graphics

As of Thursday, just seven stocks were responsible for more than 88% of the S&P’s year-to-date gains — Alphabet (GOOG), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).

Two macro trends are now competing.

On one end, “sell in May and go away” is a cute little phrase that many investors take quite seriously. On the other end, investors continue to become more defensive — and the largest companies in the S&P have been looped into the ‘defensive’ play.

We’d naturally expect a healthy pullback in the largest names over the coming weeks — but isn’t everybody?

“It makes me nervous to be honest… It just seems like the market gains are being concentrated in fewer and fewer stocks and that is probably unsustainable for too long.”

— James Ragan, Director of Wealth Management Research at D.A. Davidson

  • Anheuser-Busch (BUD) Expecting Record Earnings Call Attention

Anheuser-Busch InBev (BUD) Stock Performance, YTD Chart, Seeking Alpha

Things have been quite heated in the beer world — with Anheuser-Busch placing two executives on leave due to its transgender marketing campaign debacle.

The company has even brought in ex-GOP aides to help lobby conservatives in their efforts to mend relations over the controversy.

Expectations: $0.67 EPS on revenue $14.05 billion.

  • Johnson & Johnson (JNJ) Spin-Off Set to IPO

The #1 Pick In Health Care: Johnson & Johnson (NYSE:JNJ) | Seeking Alpha

With trading beginning on this Friday, May 5th — J&J’s consumer health unit, Kenvue, will officially be spun off in a new IPO.

Johnson & Johnson will price shares $20 to $23 under the ticker KVUE.

The spinoff, which should be valued at around $40 billioncould be the largest IPO in the U.S. YTD.

Products of the company (shown above) include Band-Aid bandages, skin care brands like Neutrogena & Aveeno, drugs like Tylenol & Zyrtec, and its namesake baby powder. 


Major Economic Events:


The Fed’s next rate decision, S&P and ISM PMI data, and an all-important Jobs Report.

With the onslaught of economic and investing data that can make your head spin, we encourage you to check out this week’s episode of The Rich Habits Podcast! Links here: Apple | iHeart | Spotify

Monday (5/1): Construction Spending, ISM Manufacturing PMI, S&P Manufacturing PMI

Tuesday (5/2): Factory Orders, Job Openings

Wednesday (5/3): ADP Employment, Fed Chair Powell Press Conference, Federal Reserve Interest Rate Statement, ISM Services PMI, S&P Services PMI

Thursday (5/4): U.S. Productivity, U.S. Trade Deficit

Friday (5/5): Consumer Credit, Jobs Report (Unemployment Rate, Hourly Wages, etc.)

What We’re Watching:

  1. Fed Rate Decision

  • The Fed began raising the benchmark federal funds rate from nearly zero in March of 2022. Now May 1st of 2023, the consensus is another +25 bps increase to a 16-year high on the Fed Funds rate.

  • Many speculate that this could be the last of the Fed’s hikes. Sticky Core PCE inflation, Employment Cost Index (ECI) results, and a still strong labor market make the case for further hikes this summer.

  1. S&P Services & Manufacturing PMI

  • The most recent S&P Services PMI reading pointed to the fastest pace of expansion in the country’s service sector since April 2022 as new business rose for the second straight month.

  • The most recent S&P Manufacturing PMI pointed to the first expansion in factory activity in six months.

  1. Institute of Supply Management (ISM) Services & Manufacturing PMI

ISM Services PMI for March 2023, ISM Report
ISM Manufacturing PMI for April 2023, ISM Report

This week, we will find out the April results for the ISM Services PMI. In March, the Services PMI registered 51.2%, a -3.9% decrease compared to the February reading of 55.1%.

This morning, we already found out the April results of the ISM Manufacturing PMI. In April the Manufacturing PMI registered 47.1%, +0.8% higher than the reading of 46.3% recorded in March.

This marks the sixth straight month of contraction and continuation of a downward trend that began in June 2022.

Golden Rule: A reading above 50% indicates the services sector economy is generally expanding; below 50% indicates it is generally contracting.

  1. Jobs Report

The most recent Jobs Report in early April saw a down trend continue in job creation since the beginning of 2023. Most notably — the unemployment rate dropped lower last reading, reaching 3.5%.

Expectations: non-farm payrolls of 180,000 and an unemployment rate of 3.6%.


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Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.


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