With another round of US earnings set to kick off, the Australian share market enters the trading week with an indecisive lead. US markets have been weighed down by tech weakness on the back of interest rate concerns, although the ASX has fared better due to index composition, with banks and resources stocks holding firm.

Economic calendar and news

The November Balance of Trade is on show Tuesday, and the data is expected to point to another bumper surplus. The strength of the commodities sector has played an instrumental role since the start of the pandemic, with a series of records established during this time amid booming iron ore, coal and gold prices.That data will be accompanied by a final reading on retail sales for November, with the likes of Black Friday and Cyber Monday expected to have delivered a 4% increase in sales versus the prior month. Meanwhile, the Federal Reserve takes centre stage again in the US over the coming days. Just a week after the central bank signalled a warning that the first interest rate hike could be as soon as March, the Fed key figureheads will be speaking. 

First, the Fed Jerome Powell will testify on Tuesday US-time at a hearing regarding his nomination as Chair before a Senate panel, while the hearing for Fed Governor Lael Brainard nomination to the post of Vice Chair is pencilled in for Thursday. Both may come under pressure to provide further clarity on their views surrounding the interest rate outlook.

Inflation is also on watch, and despite assurances from US President Joe Biden that inflation may have already peaked, economists are in a different camp, suggesting it may have accelerated. At the moment, forecasts point to a year-on-year reading above 7%, however, the monthly reading may come in at what would be a slightly moderating level of around 0.5% versus November.Jobless claims will be another watch-point after data last week from the US indicated that 199,000 jobs were added to the economy in December, less than half of that expected. However, the unemployment rate surprised, falling to 3.9%, closing the gap towards full employment'.The week will close with retail sales data for December, industrial and manufacturing production activity, consumer sentiment, plus more remarks from Fed officials.

Stocks on watch

Fourth-quarter earnings kick off in the US this week, and it is the major banks lining up to publish their results. Friday will see the likes of JPMorgan (NYSE: JPM), Citibank (NYSE: C) and Wells Fargo (NYSE: WFC) deliver results, and given the direction of the economy, it is fair to say expectations are currently high. That also aligns with the prospect that rising interest rates could help drive earnings growth for the major banks.

Rising bond yields last week played havoc across global equity markets, and with 10-year Treasury yields at one stage touching 1.8%, that marked the second-biggest movement in yields to start any given year in more than 20 years. That follows expectations the Fed may be preparing to accelerate its interest rate path. Adding to the fold is the fact that the Omicron variant continues to spiral out of control in many parts of the world, with peak daily cases not expected for weeks at the least. 

Tech stocks were among those most susceptible to the ruction, with Apple (NASDAQ: AAPL) down 3%, Microsoft (NASDAQ: MSFT) sinking 6.6%, Alphabet (NASDAQ: GOOGL) shed 5.4% and Tesla (NASDAQ: TSLA) dived in each trading session after Monday strong rally tied to its record quarter. Locally, the impact was felt on names like Afterpay (ASX: APT), Xero (ASX: XRO), Appen (ASX: APX) and Altium (ASX: ALU), among many others.

Chip stocks are also in focus over the coming days, both home and abroad. First, Taiwan Semiconductor Manufacturing (NYSE: TSM) is set to report this week, with the company in the height of a boom period following unprecedented demand for semiconductors across the world. Locally, Brainchip (ASX: BRN) is another name on watch, with the stock last week hitting a record after surging more than 40% throughout the week following reports auto-giant Mercedes-Benz has included its Akida chip in its Vision EQXX electric concept car.Coal stocks are another sector entering the new trading week with momentum, which follows news that the world largest thermal coal exporter in Indonesia has blocked coal exports as it deals with critically-low stock of the commodity. ASX coal stocks like Yancoal (ASX: YAL) and Whitehaven Coal (ASX: WHC) rallied on the news, but rail firm Aurizon (ASX: AZJ), which transports coal via its network, also had a positive week.