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The bulk of the S&P500 index components start to report Q1-23 earnings.
The U.S. dollar could see if it has regained FX market appeal.
In Asia, the Bank of Japan's (BoJ) new governor chairs his first policy meeting.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Megacap Tech Reports Q1 Earnings
The heart of first-quarter U.S. earnings season arrives next week, with some of the biggest companies reporting results.
Three of the four biggest U.S. companies by market value — Microsoft, Google parent Alphabet and Amazon — are scheduled to post earnings, with Microsoft and Alphabet due Tuesday and Amazon on Thursday.
Facebook parent Meta Platforms is sandwiched in between on Wednesday.
Mega-cap tech and growth stocks have had a resurgence across the board in 2023 after getting pummeled last year, as U.S. Treasury yields have moderated and investors gravitated toward large companies seen as having secure balance sheets following last month's banking crisis.
Their results will put that stock momentum, as well as the market's overall momentum, to the test.
(2) Outlook for European Stocks on a Knife’s Edge
The outlook for European stocks is on a knife-edge, as a resilient economy clashes with prospects of stubborn inflation and tighter monetary policy.
First-quarter Eurozone GDP data is due April 28. Output indicators analyzed by consultancy Capital Economics show the bloc's economy has expanded.
Inflation reports for Germany and Spain may also reveal price rises have been sustained and are sticky.
But March's market turmoil caused by U.S. bank failures is not viewed as likely to dissuade the ECB from hiking rates.
Goldman Sachs sees the Eurozone deposit rate rising to 3.75% by July.
(3) Euro Currency Bulls Are Back
European currency bulls.
And they're hoping for some hawkish commentary from the European Central Bank's policymakers and for plenty of data that suggests the central bank could keep rates higher for longer than the Federal Reserve.
The premium of U.S. market rates over their European counterparts reached their narrowest in many months in early April, on the view that U.S. rate cuts are coming later this year, while borrowing costs in Europe have further to climb.
Those expectations have pushed the euro, the pound and the Swiss franc to multi-month highs, although this rally could lose steam as markets reassess whether Fed cuts are really coming.
Anything that dents the dollar's yield appeal should help keep European currencies looking perky, at least for now.
Equity investors remain cautiously optimistic. The STOXX 600 index has gained +2% this month.
But German construction companies are reporting cancelled orders and euro zone consumer confidence is weak.
Robust first-quarter growth may not mean Europe is out of the woods yet.
(4) Big European Banks Report Q1 Earnings
Q1 has been interesting for the banks.
Economic euphoria in January was followed by a reality check in February, when investors decided rates would likely rise some more but the world would avoid recession — a sweet spot for financials.
March brought home the impact of tighter credit conditions. Two mid-tier U.S. lenders folded as customers pulled their deposits and ran for the hills.
Things reached boiling point with Credit Suisse's hastily arranged takeover by rival UBS (UBS - Free Report) . The whole debacle wiped almost $180 billion off the value of Europe's banks at one point.
The sector has since recovered, but it's still worth $70 billion less than it was before Silicon Valley collapsed in early March.
UBS, Deutsche Bank (DB - Free Report) , Santander (SAN - Free Report) and Barclays (BCS - Free Report) are some of the big guns reporting next week - along with the Credit Suisse's earnings swan song.
(5) New Bank of Japan (BoJ) Chief Goes to Work
New Bank of Japan governor Kazuo Ueda chairs his first monetary policy meeting at the end of the week. Confidence is growing that ultra-dovish policy will remain unchanged next Friday, but economists flag the non-negligible risk of another surprise.
Morgan Stanley (MS - Free Report) , for example, puts the risk at 20%, even as it says its main scenario is for no action next week after Ueda's repeated comments over recent weeks that stimulus settings remain appropriate for now.
Sources have told Reuters the central bank is warming to the idea of further tweaks to the controversial yield curve control policy that has sapped market liquidity with its massive bond purchases, but likely at a much later time this year.
Corporate Japan, for its part, wants Ueda to focus on market stability rather than policy changes, a Reuters poll showed.
Zacks #1 Rank (STRONG BUY) Stocks
Here are three large cap tech stocks, with Zacks B rating for growth.
(1) Infineon Technologies AG (INFN - Free Report) : This is a $38 stock, in the Electronics-Semiconductor space.
It has a market cap of $51.5B. I see a Zacks Value score of C, a Zacks Growth score of B, and a Zacks Momentum score of A.
Infineon is active in providing application-oriented semiconductor solutions for use in sectors such as speech and data communications, peripherals, wireless communications, automotive and industrial electronics, security and chip cards as well as memory products.
The company is based in Munich, Germany.
(2) Sea Limited ADRs (SE - Free Report) : This is a $79 stock. It is found in the Internet Software industry.
It has a market cap of $45.5B. I see a Zacks Value score of F, a Zacks Growth score of B and a Zacks Momentum score of C.
Sea Limited is an internet service provider company. Established in 2009 by Forrest Li, it offers Digital Entertainment, E-Commerce and Digital Financial Services known as Garena, Shopee and AirPay. The company operates primarily in Indonesia, Taiwan, Vietnam, Thailand, Philippines, Malaysia and Singapore.
Sea Limited is based in Singapore.
(3) STMicroelectronics NV (STM - Free Report) : This is a $47 stock, in the Semiconductor-General space.
It has a market cap of $45B. I see a Zacks Value score of C, a Zacks Growth score of A and a Zacks Momentum score of A.
STMicroelectronics is a global independent semiconductor company which designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices used in a wide variety of microelectronic applications, including telecommunications systems, computer systems, consumer products, automotive products and industrial automation and control systems.
This Dutch company is headquartered in Geneva, Switzerland. The shares are listed in France.
Key Global Macro
The preliminary core PCE rate for Q1 in the USA comes out on Thursday.
On Monday, the German Ifo indices for April came in at cycle highs for the past two months: 93.6 in April from a slightly downwardly revised 93.2 the previous month. This is the highest print since February 2022, even with the Construction segment at its lowest levels since late 2015.
On Tuesday, the U.S. Case-Shiller home price indexes come out for February. Consensus sees a +1.8% y/y increase, down from the prior +2.5% y/y increase.
U.S. New Home Sales for March should be 0.66M, up from 0.64M in February.
On Wednesday, U.S. Durable Goods orders for March should be down -0.3% m/m. Ex-defense, they look flat.
On Thursday, the preliminary U.S. core PCE rate (the Fed’s preferred inflation measure) should be +4.5% y/y in Q1. The prior is +4.4% y/y.
U.S. initial jobless claims were 245K last week. We get the fresh weekly data. This has been trending higher.
On Friday, there is a Bank of Japan (BoJ) monetary policy rate decision, and a statement out.
Conclusion
Zacks Research Director Sheraz Mian’s key Q1 earnings points—
(1) We are off to a good start to the 2023 Q1 season, with no signs yet of the long-feared earnings cliff.
The picture emerging at this early stage is one of resilience and stability, with an above-average proportion of companies beating estimates and providing a good-enough outlook in an uncertain macro environment.
(2) For the 53 S&P500 members that have reported Q1 results, total earnings are up +2.9% on +9.3% higher revenues, with 83% beating EPS estimates and 71.7% beating revenue estimates.
This is a better performance than we have seen from this group of 53 index members in other recent periods, both in terms of the growth rates as well as the beats percentages.
(3) Looking at Q1 as a whole, total S&P500 earnings are now expected to be down -8.8% from the same period last year on +2.1% higher revenues.
This would follow the -5.4% decline in the preceding period’s earnings (2022 Q4) on +5.9% higher revenues.
Have a great week trading and investing.
Warm Regards,
John Blank Zacks Chief Equity Strategist and Economist
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Big Tech Names Report: Global Week Ahead
This should be a busy Global Week Ahead.
The bulk of the S&P500 index components start to report Q1-23 earnings.
The U.S. dollar could see if it has regained FX market appeal.
In Asia, the Bank of Japan's (BoJ) new governor chairs his first policy meeting.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Megacap Tech Reports Q1 Earnings
The heart of first-quarter U.S. earnings season arrives next week, with some of the biggest companies reporting results.
Three of the four biggest U.S. companies by market value — Microsoft, Google parent Alphabet and Amazon — are scheduled to post earnings, with Microsoft and Alphabet due Tuesday and Amazon on Thursday.
Facebook parent Meta Platforms is sandwiched in between on Wednesday.
Mega-cap tech and growth stocks have had a resurgence across the board in 2023 after getting pummeled last year, as U.S. Treasury yields have moderated and investors gravitated toward large companies seen as having secure balance sheets following last month's banking crisis.
Their results will put that stock momentum, as well as the market's overall momentum, to the test.
(2) Outlook for European Stocks on a Knife’s Edge
The outlook for European stocks is on a knife-edge, as a resilient economy clashes with prospects of stubborn inflation and tighter monetary policy.
First-quarter Eurozone GDP data is due April 28. Output indicators analyzed by consultancy Capital Economics show the bloc's economy has expanded.
Inflation reports for Germany and Spain may also reveal price rises have been sustained and are sticky.
But March's market turmoil caused by U.S. bank failures is not viewed as likely to dissuade the ECB from hiking rates.
Goldman Sachs sees the Eurozone deposit rate rising to 3.75% by July.
(3) Euro Currency Bulls Are Back
European currency bulls.
And they're hoping for some hawkish commentary from the European Central Bank's policymakers and for plenty of data that suggests the central bank could keep rates higher for longer than the Federal Reserve.
The premium of U.S. market rates over their European counterparts reached their narrowest in many months in early April, on the view that U.S. rate cuts are coming later this year, while borrowing costs in Europe have further to climb.
Those expectations have pushed the euro, the pound and the Swiss franc to multi-month highs, although this rally could lose steam as markets reassess whether Fed cuts are really coming.
Anything that dents the dollar's yield appeal should help keep European currencies looking perky, at least for now.
Equity investors remain cautiously optimistic. The STOXX 600 index has gained +2% this month.
But German construction companies are reporting cancelled orders and euro zone consumer confidence is weak.
Robust first-quarter growth may not mean Europe is out of the woods yet.
(4) Big European Banks Report Q1 Earnings
Q1 has been interesting for the banks.
Economic euphoria in January was followed by a reality check in February, when investors decided rates would likely rise some more but the world would avoid recession — a sweet spot for financials.
March brought home the impact of tighter credit conditions. Two mid-tier U.S. lenders folded as customers pulled their deposits and ran for the hills.
Things reached boiling point with Credit Suisse's hastily arranged takeover by rival UBS (UBS - Free Report) . The whole debacle wiped almost $180 billion off the value of Europe's banks at one point.
The sector has since recovered, but it's still worth $70 billion less than it was before Silicon Valley collapsed in early March.
UBS, Deutsche Bank (DB - Free Report) , Santander (SAN - Free Report) and Barclays (BCS - Free Report) are some of the big guns reporting next week - along with the Credit Suisse's earnings swan song.
(5) New Bank of Japan (BoJ) Chief Goes to Work
New Bank of Japan governor Kazuo Ueda chairs his first monetary policy meeting at the end of the week. Confidence is growing that ultra-dovish policy will remain unchanged next Friday, but economists flag the non-negligible risk of another surprise.
Morgan Stanley (MS - Free Report) , for example, puts the risk at 20%, even as it says its main scenario is for no action next week after Ueda's repeated comments over recent weeks that stimulus settings remain appropriate for now.
Sources have told Reuters the central bank is warming to the idea of further tweaks to the controversial yield curve control policy that has sapped market liquidity with its massive bond purchases, but likely at a much later time this year.
Corporate Japan, for its part, wants Ueda to focus on market stability rather than policy changes, a Reuters poll showed.
Zacks #1 Rank (STRONG BUY) Stocks
Here are three large cap tech stocks, with Zacks B rating for growth.
(1) Infineon Technologies AG (INFN - Free Report) : This is a $38 stock, in the Electronics-Semiconductor space.
It has a market cap of $51.5B. I see a Zacks Value score of C, a Zacks Growth score of B, and a Zacks Momentum score of A.
Infineon is active in providing application-oriented semiconductor solutions for use in sectors such as speech and data communications, peripherals, wireless communications, automotive and industrial electronics, security and chip cards as well as memory products.
The company is based in Munich, Germany.
(2) Sea Limited ADRs (SE - Free Report) : This is a $79 stock. It is found in the Internet Software industry.
It has a market cap of $45.5B. I see a Zacks Value score of F, a Zacks Growth score of B and a Zacks Momentum score of C.
Sea Limited is an internet service provider company. Established in 2009 by Forrest Li, it offers Digital Entertainment, E-Commerce and Digital Financial Services known as Garena, Shopee and AirPay. The company operates primarily in Indonesia, Taiwan, Vietnam, Thailand, Philippines, Malaysia and Singapore.
Sea Limited is based in Singapore.
(3) STMicroelectronics NV (STM - Free Report) : This is a $47 stock, in the Semiconductor-General space.
It has a market cap of $45B. I see a Zacks Value score of C, a Zacks Growth score of A and a Zacks Momentum score of A.
STMicroelectronics is a global independent semiconductor company which designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices used in a wide variety of microelectronic applications, including telecommunications systems, computer systems, consumer products, automotive products and industrial automation and control systems.
This Dutch company is headquartered in Geneva, Switzerland. The shares are listed in France.
Key Global Macro
The preliminary core PCE rate for Q1 in the USA comes out on Thursday.
On Monday, the German Ifo indices for April came in at cycle highs for the past two months: 93.6 in April from a slightly downwardly revised 93.2 the previous month. This is the highest print since February 2022, even with the Construction segment at its lowest levels since late 2015.
On Tuesday, the U.S. Case-Shiller home price indexes come out for February. Consensus sees a +1.8% y/y increase, down from the prior +2.5% y/y increase.
U.S. New Home Sales for March should be 0.66M, up from 0.64M in February.
On Wednesday, U.S. Durable Goods orders for March should be down -0.3% m/m. Ex-defense, they look flat.
On Thursday, the preliminary U.S. core PCE rate (the Fed’s preferred inflation measure) should be +4.5% y/y in Q1. The prior is +4.4% y/y.
U.S. initial jobless claims were 245K last week. We get the fresh weekly data. This has been trending higher.
On Friday, there is a Bank of Japan (BoJ) monetary policy rate decision, and a statement out.
Conclusion
Zacks Research Director Sheraz Mian’s key Q1 earnings points—
(1) We are off to a good start to the 2023 Q1 season, with no signs yet of the long-feared earnings cliff.
The picture emerging at this early stage is one of resilience and stability, with an above-average proportion of companies beating estimates and providing a good-enough outlook in an uncertain macro environment.
(2) For the 53 S&P500 members that have reported Q1 results, total earnings are up +2.9% on +9.3% higher revenues, with 83% beating EPS estimates and 71.7% beating revenue estimates.
This is a better performance than we have seen from this group of 53 index members in other recent periods, both in terms of the growth rates as well as the beats percentages.
(3) Looking at Q1 as a whole, total S&P500 earnings are now expected to be down -8.8% from the same period last year on +2.1% higher revenues.
This would follow the -5.4% decline in the preceding period’s earnings (2022 Q4) on +5.9% higher revenues.
Have a great week trading and investing.
Warm Regards,
John Blank
Zacks Chief Equity Strategist and Economist