Investors need to steel themselves for potentially rockier times ahead, when third-quarter earnings season begins in a little over a week, CNBC’s Jim Cramer said Friday.
Quarterly results from the nation’s largest banks is considered the start of a new earnings season. JPMorgan, Wells Fargo, Citigroup and Goldman Sachs are scheduled to report their numbers for the September quarter on Oct. 14. The flood gates open from there.
“We’re on the verge of the earnings deluge and, this time, I don’t think we’ll be getting the kind of strong numbers that we’ve become accustomed to,” Cramer said Friday on “Mad Money.”
His comments came after the S&P 500 posted its third losing week over the past four, despite a nice pop in Friday’s session on soft jobs data and declining oil prices. The blue-chip Dow has been negative in four out of the past five weeks. The Nasdaq is the outlier, posting back-to-back winning weeks in a sign of the market’s concentrated leadership in artificial intelligence and tech stocks. The Nasdaq briefly set a new intraday record Friday.
“Thanks to rising rates and [a Federal Reserve] that’s determined to bring down inflation, we’ve got a much more difficult backdrop coming up for earnings season,” Cramer said. “I’m not saying it’s impossible to make money owning stocks in this environment, but it’s certainly a lot harder than it used to be.”
If there’s a silver lining ahead of bank earnings, it is that next week’s calendar of corporate events and economic releases is relatively light, according to Cramer. That doesn’t mean nothing important is happening, though.
One of the biggest things on Cramer’s radar is Marvell’s investor day set for Tuesday. The maker of custom AI chips and networking technology, led by CEO Matt Murphy, is expected to lay out updated long-term targets. Cramer said he expects the event to show “how integral his company has become to the great data center buildout.”
“I bet his presentation will be very strong, with big reverberations throughout the hyperscaler world,” said Cramer, whose CNBC Investing Club owns shares of Marvell rival Broadcom.
Cramer said the market will also be listening closely to New York Fed President John Williams this coming Tuesday. When Williams spoke a few days ago at an event in Buffalo, New York, the central banker said that there was “no need for urgency” when it comes to the next rate hike. Those comments moved both the bond and stock markets in positive ways, Cramer noted. The question is what Williams will say in light of Friday’s weak September jobs report.
Levi Strauss and PepsiCo are among the few companies reporting earnings next week.
In a world of high gas prices, investors are concerned a slowdown in spending hitting a company like Levi’s, which is why the stock is down over 20% from its 52-week high in July. The denim maker reports Wednesday night. “I have no real answer for this kind of situation other than to say Levi’s has to continually, endlessly execute,” Cramer said, calling that a “high bar.”
Cramer said he’s hesitant to recommend Pepsi ahead of its results Thursday morning. Not only is the stock’s dividend payout less attractive in a environment with 5-year Treasury notes yielding 5%, Pepsi’s Frito-Lay snack business is grappling with more health-conscious consumers.
“I want so badly to say that this could be the quarter when PepsiCo turns things around, but even if I believed that, all you’d get is a short-term bounce, so the risk-reward is just simply not compelling,” he said.
Cramer said the bottom line for investors is “we’re heading for a quiet week. Don’t get used to it.”
Disclosure: Cramer’s CNBC Investing Club owns shares of GS, WFC and AVGO.
