Wall Street Brunch: Will AI Steal Earnings Spotlight From Banks?

Will AI earnings eclipse big bank reports. Taiwan Semi, ASML offer clues on AI demand. Headline CPI seen cooling.

Listen below or on the go via Apple Podcasts and Spotify Will AI earnings eclipse big bank reports? (0:17) Taiwan Semi, ASML offer clues on AI demand. (0:54)

Headline CPI seen cooling. (2:01) Earnings season officially kicks off this week as the big banks report. But major updates on AI spending could overshadow the financial results.

Wall Street analysts remain overwhelmingly bullish on the banking sector, with no Sell ratings on the major banks reporting this week, including JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC), Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS). Seeking Alpha analysts are a bit more cautious, though they also rate the sector a Buy overall. This weekend, SA analyst Ian Brezek issued a rare Sell rating on Citigroup, arguing that consensus EPS estimates for 2027 and 2028 "may be too high, and there is a risk of downward revision, especially if financial markets weaken."

Barring major disappointments from the banks, market attention is likely to shift quickly to chipmakers for the latest read on AI demand. Taiwan Semiconductor (TSM) and ASML (ASML) are both due to report. SA analyst Oliver Rodzianko says guidance will be the key focus for TSM.

Investors should "look out for advanced-packaging capacity commentary, 2nm margin dilution, and perhaps most importantly, whether management still sounds like the business is supply-constrained." Here's how the calendar shapes up: On Tuesday, JPMorgan Chase (JPM), Bank of America (BAC), Goldman Sachs (GS), Wells Fargo (WFC) and Citigroup (C) report. On Wednesday, ASML (ASML), Johnson & Johnson (JNJ), Morgan Stanley (MS), BlackRock (BLK), Bank of New York Mellon (BK) and United Airlines (UAL) report.

On Thursday, Taiwan Semiconductor Manufacturing (TSM) and Netflix (NFLX) report. Regions Financial (RF) and Fifth Third Bancorp (FITB) round out the week on Friday. For Netflix, SA analyst Louis Gerard says it's a "pound the table" Buy based on valuation.

"The only thing that has really deteriorated for the firm has been its price, while the new competitive behemoth I warned about is being assembled by Paramount under a mountain of leverage, and NFLX got paid $2.8B to not participate in that folly." Looking to the economy, inflation data dominate the economic calendar this week, with the June consumer price index due on Tuesday and the producer price index on Wednesday. Economists expect headline CPI to fall 0.1% in June, bringing the annual inflation rate down to 3.7% from 4.2%.

Core CPI is expected to rise 0.2%, leaving the annual rate unchanged at 2.8%. Wells Fargo economists say core services inflation should moderate in June. "While supply-side developments continue to generate volatility in a handful of categories, the broader data do not suggest inflation pressures are re-accelerating across the economy," they said.

In the news this weekend, U.S. Sen. Lindsey Graham, a longtime Republican lawmaker from South Carolina and one of President Donald Trump's closest allies on Capitol Hill, has died at the age of 71 following a sudden and brief illness, according to a statement from his office. No cause of death was disclosed. The United States launched a new wave of strikes against Iran after Tehran allegedly attacked a commercial vessel transiting the Strait of Hormuz.

American forces targeted about 140 Iranian military sites, including communications, air-defense, drone-storage and naval mine-laying facilities. Iran responded with missile and drone attacks targeting U.S.-allied Gulf states, including Bahrain, Kuwait, Qatar, the United Arab Emirates and Oman. And MGM Resorts (MGM) has reportedly opened discussions with People (PPLI) over a potential buyout after Barry Diller's media company offered to acquire the casino operator in a $12.4B deal last month.

The Wall Street