In the Global Week Ahead — after a U.S. centered, government bond market yield rout and wider FX market gyrations — global financial markets are bracing for:

• The Sept. U.S. consumer price inflation (CPI) numbers, and
• The start of Q3 S&P500 earnings season

In the U.K., Britain's opposition Labour party — vying for control of government policy and public administration — will set out its agenda, ahead of next year's major election.

In Morocco, there will be plenty of added data and discussions for macro policy makers meeting at the World Bank/IMF annual meeting.

Next are Reuters five world market themes, reordered for equity traders—

(1) Time to prepare for Q3 S&P500 earnings season. Friday, Oct. 13th is the start.

Reports from major banks kick off third-quarter earnings season for U.S. companies with equity investors eager for a catalyst to revive stocks in the face of surging bond yields.

JPMorgan, Citigroup and Wells Fargo will post results on Friday, Oct. 13th and give a first readout on the fallout from higher rates on issues from loan demand to consumer behavior.

Other companies set to report include snacks and beverages giant PepsiCo on Tuesday, Delta Air Lines on Thursday and insurer UnitedHealth Group on Oct 13th.

Overall, S&P500 companies are expected to increase third-quarter earnings by +1.6% compared to the year-ago period, according to LSEG IBES, after earnings dipped -2.8% in the second quarter.

(2) Where do U.S. Treasury bond yields head, after Thursday’s Sept. CPI report?

With benchmark U.S. Treasury yields around 16-year peaks, stakes are high for Thursday's monthly U.S. consumer price index report, as investors gauge whether the Fed is likely to hike rates again to ensure inflation keeps cooling.

August data showed the fastest inflation increase in 14 months as the cost of gasoline surged, though the annual rise in underlying inflation was the smallest in nearly two years.

With oil prices around $90 a barrel, energy prices are also in focus.

A hot report could spur worries that the Fed's rate posture may grow even more hawkish after its 'higher for longer' mantra in September spooked markets.

The Fed is broadly expected to hold rates steady at its Oct 31st-Nov. 1st meeting, although some traders are betting on another increase.

(3) Where does the Japanese Yen (at 149 to the USD) go from here?

When all were bowing before King Dollar in days gone by, the yen suddenly had other ideas.

Following a grind to a new one-year peak above 150 yen last Tuesday, the bottom fell out, and a minute or so later the dollar was bouncing off 147.

Markets whispered about possible intervention, although many had doubts and the dollar recovered quickly, lacking the shock-and-awe of Japan's move a year ago. Central bank data strongly hints of no official action that day.

But the specter of intervention will likely keep tugging at dollar spikes, maybe all the way until the next central bank decision on Halloween.

Meanwhile, the euro is facing its own ghosts, with resurgent oil prices hurting a deteriorating economy and renewed concerns about Italy's fiscal position raising the risk of a move back towards the psychologically key $1 marker.

(4) The U.K. Labour Party, and its policies on offer, take the center stage.

The U.K.'s governing Conservative party conference was marred by Prime Minister Rishi Sunak's controversial move to downsize plans for a long-awaited high-speed railway.

Now it's time for the opposition Labour Party — riding high in opinion polls and having just clinched a clear by-election victory — to take the stage with business and markets looking out for what the potential next government might have to offer.

Asset managers are clamoring for Labour to listen to their ideas for reviving interest in the U.K.'s moribund stock market — and any sign of changing political winds may bring some respite to underperforming equities, analysts said.

Hopes for an economic bounce, however, will be tempered by the U.K.'s high government debt and Labour's vow for prudent budgets with fiscal rules similar to the current government's ones.

(5) The World Bank/IMF annual meeting happens in Morocco.

Finance officials and investors from around the globe are heading for the Moroccan city of Marrakech for the World Bank International Monetary Fund annual meetings.

The gathering comes at a time when rocketing U.S. government bond yields that have led to a global jump in borrowing costs weigh on hopes that inflation can be lowered without triggering a major crisis.

Policy makers also face deepening global divides and calls from large emerging economies such as China to reform the Bretton Woods global financial architecture almost 80 years after it was established and make it more representative.

Amid these tensions, the IMF and World Bank are trying to boost their lending.

Meanwhile, the Group of 20 leading economies' flagship debt restructuring initiative, the Common Framework, will also be in focus as it continues to face intense criticism for delays and a lack of concrete outcomes.

Zacks #1 Rank (STRONG BUY) Stocks

I noted three major Info Tech stocks on our list this week.

After the latest stock selling, their long-term Zacks metrics still don’t look attractive.

Keep that in mind.

(1) VMware : This is a $166 stock in the Computer Software industry. The market cap is $71.7B. I see a Zacks Value score of F, a Zacks Growth score of D and a Zacks Momentum score of D.
 

Image Source: Zacks Investment Research

VMware is the pioneer in developing core x86 server virtualization software solutions. With innovative virtualization products and cloud suit solutions, the company is helping businesses in their digital transformation journey.

VMware assists its customers in managing their IT resources across private clouds and complex multi-cloud, multi-device environments by offering solutions across three categories: Software-Defined Data Center (SDDC), Hybrid and Multi-Cloud Computing and Digital Workspace — End-User Computing (EUC).

VMware Cloud Services enables its customers to run, manage, connect and better secure their applications across hybrid and multiple public clouds including Amazon Web Services (AWS), Microsoft Azure, Google Cloud and IBM Cloud.

VMware’s SDDC architecture consists of four main product categories: Compute (vSphere — flagship data center platform), Cloud Management (vRealize Operations, vRealize Automation, Wavefront, CloudHealth), Networking (NSX, VeloCloud, Network Insight, VMware NSX Advanced Load Balancer by Avi Networks), and Storage and Availability (vSAN, VxRail).

EUC solution consists of VMware Workspace ONE, powered by Unified Endpoint Management (formerly known as AirWatch), and Horizon application and desktop virtualization.

In September 2016, VMware's parent company EMC was acquired by Dell for $67 billion. In fourth-quarter fiscal 2022, VMware completed a spin-off from Dell Technologies.

In fiscal 2023, VMware reported revenues worth $13.35 billion.

• Subscription and SaaS revenues represented 30% of VMware’s fiscal 2023 total revenues. Subscription and SaaS revenues were $4.01 billion.
• Services accounted for 48.7% of total revenues while License contributed 21.2%.
• Region wise, the United States and International represented 49% and 51% of revenues, respectively.

(2) Synopsis (SNPS Quick QuoteSNPS - Free Report) : This is a $460 stock in the Computer Software industry. The market cap is $70.2B. I see a Zacks Value score of F, a Zacks Growth score of C and a Zacks Momentum score of D.
 

Image Source: Zacks Investment Research

Synopsys is a vendor of electronic design automation (EDA) software to the semiconductor and electronics industries. The company offers a full suite of products used in the logic synthesis and functional verification phases of chip design, including a broad array of reusable design building blocks. It also sells physical synthesis and physical design products as well as physical verification products.

The company’s products are used to design a chip, from concept to the point of delivery to the manufacturer for fabrication.

Synopsis provides software and hardware, which are used to develop electronic systems that incorporate chips. Additionally, the company provides Intellectual Property (IP) used in semiconductor design and manufacturing to simplify the design process and accelerate time-to-market for its customers.

Synopsis reports revenues in three segments, namely Time-Based Products, Upfront Products and Maintenance and Service.

• Time-Based Products (59% of fiscal 2022 revenues): Segment revenues are recognized as Technology Subscription License (TSL) revenues. Under this segment, the company recognizes revenues from fees over the period of the license or as and when the installments are paid by the customer, whichever is later.
• Upfront Products (24%): These revenues are recognized as Term License revenues. Under this segment, the company recognizes revenues from term licenses in full after the completion of the shipment of the software, wherein at least 75% of the license fee is paid within a year of shipment, after fulfilling all other revenue recognition criteria.
• Maintenance and Service (17%): Under this segment revenues come from maintenance fees that are generated over the maintenance period; along with revenues generated from professional service and training fees.

The company conducts its business across four geographic regions namely: North America (47% of fiscal 2022 revenues), China (16%), Europe (10%), Korea (10%) and others (17%).

Synopsys’ competitors include EDA vendors like Cadence Design Systems Inc. and Mentor Graphics Corp.

(3) Dell Technologies (DELL Quick QuoteDELL - Free Report) : This is a $94 stock in the Semiconductor – Analog and Mixed industry. The market cap is $39.7B. I see a Zacks Value score of F, a Zacks Growth score of D and a Zacks Momentum score of C.
 

Image Source: Zacks Investment Research

Dell Technologies Inc. is a provider of information technology solutions.

The company's operating segment consists of Client Solutions, Enterprise Solutions Group and Dell Software Group.

• Client Solutions segment includes sales to commercial and consumer customers of desktops, thin client products, notebooks as well as services and third-party software and peripherals of Client Solutions hardware.
• ESG segment includes servers, networking and storage as well as services and third-party software and peripherals of ESG hardware.
• DSG segment includes systems management, security software solutions and information management software offerings.

Dell Technologies Inc. is headquartered in Round Rock, Texas.

Key Global Macro

Thursday’s Sept. CPI data out of the USA is the primary macro print this week.

On Monday, the Columbus Day/Indigenous People’s Day holiday happens in the USA. Banks and bond markets stay closed. Stock markets in the USA will open for trading.

The World Bank/IMF annual meeting begins in Morocco.

On Tuesday, the U.S. NFIB small business optimism index for Sept. comes out. 91.3 was the prior reading.

Mainland China’s Foreign Direct Investment (FD) data for Sept. comes out. The prior reading showed a weak -5.1% y/y contraction That speaks for itself.

On Wednesday, we get the U.S. Sept PPI data. The +1.6% y/y number that stands is low now. The monthly call is for a +0.4% m/m rise, after an August +0.7% m/m rise.

Minutes from the FOMC’s Sept. meeting get released.

On Thursday, the Sept. U.S. CPI data gets released at 8:30 am ET. The prior August print was +0.6% m/m, while the broad CPI in August stood at +3.7% y/y. The August core CPI was higher at +4.3% y/y.

On Friday, we get a preliminary report on U of Michigan consumer sentiment. I see a 68.1 August mark could get to 68.0. Not much movement.

Mainland China’s CPI for Sept. also comes out. The look is for an anemic +0.2% y/y reading, up slightly from a +0.1% y/y mark in August.

Conclusion

Let’s finish with Zacks house view on the coming Q3 earnings season.

On Wednesday, October 4th, Zacks Research Director Sheraz Mian laid out his four key Q3 earnings season points—

Here are the key points:

(1) For 2023 Q3, total S&P 500 earnings are currently expected to be down -2.0% from the same period last year on +0.6% higher revenues, the 4th back-to-back quarter of declining earnings for the index.

(2) Excluding the drag from the Energy sector, whose earnings are expected to decline -3.7% in Q3, earnings for the other 15 Zacks sectors in the S&P 500 index would be up +2.9% on +3.2% higher revenues.

(3) Estimates for Q3-23 held up much better than had been the case in the comparable periods of other recent quarters. In fact, Q3 earnings estimates in the aggregate were barely down since the start of the period, with estimates modestly up when negative revisions to the Energy or Finance sector estimates are excluded.

(4) For the 17 S&P500 companies that have already reported results in recent days for their fiscal quarters ending in August that we count as part of the Q3 tally, total earnings are up +0.6% on +4.0% higher revenues, with 82.4% beating EPS estimates and 70.6% beating revenue estimates.

Happy trading and investing!

Regards,

John Blank
Zacks Chief Equity Strategist and Economist