Towards the trading week: Bank reports are coming - here is what to expect
The US labor market saw a surprise job loss in July, easing concerns over interest rate hikes and driving a 5% weekly gain for the Nasdaq. In Tel Aviv, the focus shifts to earnings reports from major banks, alongside companies like Camtek, Elbit, and Strauss.
The trading week opens ahead of a major reporting week for local banks, against the backdrop of a significant shift in US interest rate expectations following a surprising employment report.
The key story on Friday was the US employment report, which surprised significantly to the downside. Instead of the expected addition of 80,000 jobs, the American economy lost 23,000 jobs in July. Data for previous months were also revised downward by approximately 103,000 jobs. The unemployment rate fell slightly to 4.1%, but this was driven by a decrease in the labor force participation rate, which is not a sign of real economic strength.
The market reacted positively because a weak labor market reduces pressure on the Fed to raise interest rates. Following the report, the probability of the interest rate remaining unchanged in September jumped to 60%, compared to 33% the previous week. Consequently, Wall Street rallied, gold prices rose, and the dollar weakened, with the shekel returning to below 3 shekels.
Ronen Menachem, chief market economist at Mizrahi Tefahot, notes that relying on a single month's data is problematic due to volatility and frequent revisions. However, the trend over the last three months points toward a sustained weakening.
Wall Street concluded an exceptionally strong week. On Friday, the Nasdaq rose 1.3%, the S&P 500 added 0.6%, and the Dow Jones 0.3%. The weekly summary is even more impressive: the Nasdaq jumped about 5% and the S&P 500 about 3.5%, marking one of the strongest weeks of the year driven by solid corporate earnings.
The local stock exchange saw the TA-35 index rise 0.5% for the week. On Friday, the chip sector led the gains, with Tower jumping 9.1% and Camtek adding 4.6%. Next Vision rose 2.6% following the announcement of $14.4 million in new orders.
This week is "bank week" on the local exchange. Hapoalim, Leumi, Discount, and Beinleumi are all scheduled to report. Investors will be focused on three critical areas:
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Financial margin: How the Bank of Israel's interest rate cuts are impacting profitability.
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Provisions for credit losses: A barometer for the economic health of households and businesses.
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Dividends and buybacks: Whether banks will continue their generous capital distribution policies.
Given that the banking index jumped 9.6% in July, market expectations are high, raising the bar for these reports. Beyond the banks, Camtek, Next Vision, Elbit, Strauss, Cellcom, and Isracard will also report this week.
On Wednesday, the US Consumer Price Index will be published, providing further insight into the Fed's trajectory. For long-term investors, it is important to remember that a single quarterly report is only one piece of a company's broader story.
