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In the Global Week Ahead, U.S. S&P500 Q4-23 results continue to pile up.
Tech earnings — at +19.3% y/y, with +6.6% y/y growth in revenues — lead the way.
Meanwhile, tough talk from central bankers has made investors less confident about imminent relief from lower short-term policy rates.
Optimism is still running high in global markets. But a degree of caution means bonds may be gearing up for a strong FEB, even in a bumper Q4-23 earnings season for stocks.
Mainland China’s “Year of the Dragon” starts on Friday. Yet the world's 2nd largest economy is anything but roaring right now.
Next are Reuters five world market themes, reordered for equity traders—
(1) Another big week of U.S. corporate earnings results.
Another big week of U.S. corporate results will help determine if the rally that has taken stocks to record highs can keep going.
While most of the big tech head-liners have already reported for this period, the coming days still bring a huge batch of S&P500 companies giving quarterly updates, including Eli Lilly (LLY - Free Report) , Walt Disney (DIS - Free Report) , ConocoPhillips (COP - Free Report) and PepsiCo (PEP - Free Report) .
S&P500 companies are on pace to have increased fourth-quarter earnings by +6.1% year-on-year, according to LSEG data as of Jan 31st.
So far, 80% have reported earnings above expectations, compared with the 76% average beat rate of the past four quarters.
Investors will be paying attention to any insight companies give about 2024, with earnings expected to grow faster than in 2023.
(2) Bonds higher in FEB, while stocks go down? It’s possible.
If stocks outshone bonds in January, the reverse may be true for February.
Dashed hopes of an early U.S. rate cut and a fresh slide in U.S. regional bank stocks — reviving memories of the March banking crisis — has suddenly cast a pall over stocks.
Yes, world equity markets ended last month higher, but note the S&P500 on Wednesday — and post-Fed meeting — closed with its steepest daily loss since Sept. 21st.
Government bond markets, where yields ended January mostly higher, have been boosted by the safety bid and growing signs that big economies — think U.S. ADP employment index, Eurozone and China factory activity — are weakening.
This should set the tone for the week ahead, with central-bank talk in focus. And the decoupling of bonds and stocks that began at the start of 2024 should continue.
(3) A focus on Mainland China’s latest economic and financial market data.
Chinese inflation data on Thursday will be the next test of the health of its economy, which is plagued by persistently weak demand, a beleaguered property sector and fragile investor sentiment.
January's producer and consumer price inflation figures are likely to underscore the country's struggling recovery, though the bigger question will be whether deflationary pressures have intensified.
Chinese markets have already had a brutal start to the year. The blue-chip index (the CSI300), ended January down -6%, marking a record six-month losing streak.
Beijing's recent support measures seemed to have reassured investors for now and the expectation for further stimulus has driven the benchmark 10-year Chinese government bond yield to a two-decade low.
As the Year of the Dragon looms, some are hoping the buzz of the annual travel rush might be a shot in the arm for animal spirits to come roaring — or creeping — back.
(4) The U.K. has avoided recession. What will the latest U.K. macro data show?
The U.K. has kept calm and avoided recession.
Inflation is falling, wages are holding up and borrowing rates are starting to ease.
Coming days bring data on how consumers are spending their money, with new car sales and mortgage rates, but also property prices and activity.
If there is one thing the Brits love, it is their homes. Some of the biggest builders report earnings, including Barratt, Redrow (RDW - Free Report) and Bellway.
Last quarter, major builders issued fairly dire warnings about 2024. Yet there could be a glimmer of hope. A measure of home affordability fell late in 2023 to its lowest since 2015 in real terms, according to home loans provider Halifax.
Bank of England January data showed British lenders approved the most mortgages since June, while mortgage rates fell for the first time in over three years.
(5) On Thursday, Pakistan votes in a general election. Indonesia on Feb. 14th. There is a presidential election in El Salvador too.
The 2024 election cycle cranks up a gear, with some of the world's most populous nations heading to the polls.
1. Pakistan's general election is scheduled for Thursday amid a flare-up in violence.
The country battles an economic crisis with inflation running at almost 30%, a weak currency and a government that will have to navigate a recovery under a $3 billion International Monetary Fund bailout that runs out in April.
Ex-prime minister Nawaz Sharif is considered the front-runner with his main rival, former premier Imran Khan, jailed and barred from running.
2. Voters in Indonesia, the world's third-largest democracy heads to an election on Feb. 14, with front-runner Prabowo Subianto expected to clinch victory.
3. Meanwhile, El Salvador's President Nayib Bukele, who calls himself the "World's Coolest Dictator,” looks set for a landslide win on Sunday.
Despite a constitutional bar on immediate re-election, voter worries about the economy, and criticism of his draconian crackdown on civil and human rights.
Zacks #1 Rank (STRONG BUY) Stocks
(1) Trip.com (TCOM - Free Report) : This is a $37 Mainland China stock, with a market cap of $23.6B, found in the Leisure and Recreation industry. I see a Zacks Value score of D, a Zacks Growth score of D, and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Trip.com Group Limited is a one-stop travel service company.
Its service consists of Trip.com, Ctrip, Skyscanner and Qunar.
The company's platform includes mobile apps, Internet websites and 24/7 customer service centers.
Trip.com Group Limited, formerly known as Ctrip.com International Ltd., is based in Shanghai, the People's Republic of China.
(2) Westinghouse Air Brake Technologies (WAB - Free Report) : This is a $133 railroad supplier stock, with a market cap of $23.6B, found in the Transportation – Equipment and Leasing industry. 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
Westinghouse Air Brake Technologies Corp. is a provider of locomotives, value-added, technology-based equipment, systems and services to the freight rail and passenger transit industries across the globe.
The company operates under the name of Wabtec Corp. and is currently based in Wilmerding, PA. Wabtec, which went public on the NYSE in 1995, operates in more than 50 countries.
In February 2019, Wabtec completed the previously announced merger with GE Transportation, a business unit of GE. The combined company has an expanded product portfolio and a larger customer base. It focuses on innovation. Following the completion of the merger with GE Transportation in February 2019, Wabtec was included in the coveted S&P 500 index.
In January 2020, Wabtec acquired RELCO Locomotives to fortify its market capabilities.
Net sales in 2021 inched up 3.5% year over year to $7,822 million. Notably, the company operates under two business segments, namely Transit and Freight segments.
The Transit segment (33% of 2021 revenues) manufactures and provides aftermarket parts and services for new locomotives. Through the segment, the company also provides components for new and existing locomotives and freight cars. In 2020, 14% of segmental sales came from the United States.
Additionally, roughly 50% of the segment’s sales were in the aftermarket. The balance came from the original equipment market.
Segment sales increased 4.4% year over year in 2021, despite supply-chain disruptions, and coronavirus-related woes.
The Freight segment (67%) focuses on manufacturing and offering aftermarket parts and services for new locomotives. The segment also provides components for new and existing locomotives and freight cars.
In 2021, 57% of segmental net sales came from the United States. Roughly, 68% of the segmental net sales were in the aftermarket, with the balance being generated in the original equipment market.
Segment sales increased 3.1% year-over-year in 2021, due to higher demand for services and components, and the Nordco acquisition.
(3) Veolia Environment (VEOEY - Free Report) : This is a $16 stock, with a market cap of $23.6B, found in the Utility – Water Supply industry. 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
Veolia Environment is the only global company to offer the entire range of environmental services in the water, waste management, energy and transportation sectors.
Veolia has been creating global and integrated solutions for public and private sector clients over the world.
The quality of its research, the expertise and synergies developed between its teams, its mastery of the public-private partnership model and our commitment to sustainable development have made us a benchmark player in major environmental matters.
Key Global Macro
Service economies — the world over — continue to mostly show expansion. Europe may be the exception. We shall see, in the latest data out this week.
On Monday, Japan’s Jibun Bank services PMI for JAN comes out. There is a 52.7 prior print.
Mainland China’s Caixin services PMI comes out for JAN. I see a 52.9 prior print.
The HCOB Euro Area services PMI for JAN comes out too. The prior print is 48.4.
The U.S. S&P global services PMI for JAN should be out as well. The prior print is 52.9.
The ISM services PMI comes out for the USA in JAN. 50.6 was the prior print.
On Tuesday, Australia’s Reserve Bank of Australia (RBA) issues a monetary policy statement. The policy rate there is 4.35%.
On Wednesday, the Swiss unemployment rate for JAN comes out. It is at a low 2.2%.
Mainland China has a whopping $3.24T in official FX reserves. We get a JAN update.
On Thursday, Mainland China’s CPI for JAN comes out. The prior print is -0.3% y/y, and a move to -0.5% y/y is what to expect.
Mainland China’s PPI is also out. -2.7% y/y is the prior print. -2.6% y/y is what to expect.
This day is Mainland China’s New Years Eve.
On Friday, the unemployment rate in Canada gets a refresh. It is at 5.8% now.
Mainland China has officially entered “The Year of the Dragon.”
Conclusion
Here are Zacks Research Director Sheraz Mian’s four key Q4 EPS points:
Written on Jan. 31st, 2024.
(1) Total Q4 earnings for the 176 S&P500 members that have reported results are up +1.7% from the same period last year on +2.6% higher revenues.
81.8% are beating EPS estimates. 69.3% are beating revenue estimates.
(2) Looking at Q4-23 as a whole, combining the actual results that have come out with estimates for the still-to-come companies, total S&P500 index earnings are currently expected to be up +2.4% from the year-earlier level on +2.8% higher revenues.
This would follow the +3.8% earnings growth in 2023 Q3 on +2.0% higher revenues.
(3) For the Info Tech sector, we now have Q4-23 results for 46.8% of the sector’s market capitalization in the index.
Total earnings for these Tech companies are up +19.3% from the same period last year on +6.6% higher revenues.
82.1% are beating EPS estimates. 75% are beating revenue estimates.
(4) The Q4-23 earnings and revenue growth rates for these Info Tech companies are notably tracking higher, than what we have seen from these companies, in other recent periods.
Though, the EPS and revenue beats percentages are tracking modestly below other recent periods, and the 20-quarter average.
Note clear +19.3% EPS leadership from the Tech sector, in the Zacks earnings data.
Enjoy this trading week!
Warm regards,
John Blank Zacks Chief Equity Strategist and Economist
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Tech Earnings Leadership: Global Week Ahead
In the Global Week Ahead, U.S. S&P500 Q4-23 results continue to pile up.
Tech earnings — at +19.3% y/y, with +6.6% y/y growth in revenues — lead the way.
Meanwhile, tough talk from central bankers has made investors less confident about imminent relief from lower short-term policy rates.
Optimism is still running high in global markets. But a degree of caution means bonds may be gearing up for a strong FEB, even in a bumper Q4-23 earnings season for stocks.
Mainland China’s “Year of the Dragon” starts on Friday. Yet the world's 2nd largest economy is anything but roaring right now.
Next are Reuters five world market themes, reordered for equity traders—
(1) Another big week of U.S. corporate earnings results.
Another big week of U.S. corporate results will help determine if the rally that has taken stocks to record highs can keep going.
While most of the big tech head-liners have already reported for this period, the coming days still bring a huge batch of S&P500 companies giving quarterly updates, including Eli Lilly (LLY - Free Report) , Walt Disney (DIS - Free Report) , ConocoPhillips (COP - Free Report) and PepsiCo (PEP - Free Report) .
S&P500 companies are on pace to have increased fourth-quarter earnings by +6.1% year-on-year, according to LSEG data as of Jan 31st.
So far, 80% have reported earnings above expectations, compared with the 76% average beat rate of the past four quarters.
Investors will be paying attention to any insight companies give about 2024, with earnings expected to grow faster than in 2023.
(2) Bonds higher in FEB, while stocks go down? It’s possible.
If stocks outshone bonds in January, the reverse may be true for February.
Dashed hopes of an early U.S. rate cut and a fresh slide in U.S. regional bank stocks — reviving memories of the March banking crisis — has suddenly cast a pall over stocks.
Yes, world equity markets ended last month higher, but note the S&P500 on Wednesday — and post-Fed meeting — closed with its steepest daily loss since Sept. 21st.
Government bond markets, where yields ended January mostly higher, have been boosted by the safety bid and growing signs that big economies — think U.S. ADP employment index, Eurozone and China factory activity — are weakening.
This should set the tone for the week ahead, with central-bank talk in focus. And the decoupling of bonds and stocks that began at the start of 2024 should continue.
(3) A focus on Mainland China’s latest economic and financial market data.
Chinese inflation data on Thursday will be the next test of the health of its economy, which is plagued by persistently weak demand, a beleaguered property sector and fragile investor sentiment.
January's producer and consumer price inflation figures are likely to underscore the country's struggling recovery, though the bigger question will be whether deflationary pressures have intensified.
Chinese markets have already had a brutal start to the year. The blue-chip index (the CSI300), ended January down -6%, marking a record six-month losing streak.
Beijing's recent support measures seemed to have reassured investors for now and the expectation for further stimulus has driven the benchmark 10-year Chinese government bond yield to a two-decade low.
As the Year of the Dragon looms, some are hoping the buzz of the annual travel rush might be a shot in the arm for animal spirits to come roaring — or creeping — back.
(4) The U.K. has avoided recession. What will the latest U.K. macro data show?
The U.K. has kept calm and avoided recession.
Inflation is falling, wages are holding up and borrowing rates are starting to ease.
Coming days bring data on how consumers are spending their money, with new car sales and mortgage rates, but also property prices and activity.
If there is one thing the Brits love, it is their homes. Some of the biggest builders report earnings, including Barratt, Redrow (RDW - Free Report) and Bellway.
Last quarter, major builders issued fairly dire warnings about 2024. Yet there could be a glimmer of hope. A measure of home affordability fell late in 2023 to its lowest since 2015 in real terms, according to home loans provider Halifax.
Bank of England January data showed British lenders approved the most mortgages since June, while mortgage rates fell for the first time in over three years.
(5) On Thursday, Pakistan votes in a general election. Indonesia on Feb. 14th. There is a presidential election in El Salvador too.
The 2024 election cycle cranks up a gear, with some of the world's most populous nations heading to the polls.
1. Pakistan's general election is scheduled for Thursday amid a flare-up in violence.
The country battles an economic crisis with inflation running at almost 30%, a weak currency and a government that will have to navigate a recovery under a $3 billion International Monetary Fund bailout that runs out in April.
Ex-prime minister Nawaz Sharif is considered the front-runner with his main rival, former premier Imran Khan, jailed and barred from running.
2. Voters in Indonesia, the world's third-largest democracy heads to an election on Feb. 14, with front-runner Prabowo Subianto expected to clinch victory.
3. Meanwhile, El Salvador's President Nayib Bukele, who calls himself the "World's Coolest Dictator,” looks set for a landslide win on Sunday.
Despite a constitutional bar on immediate re-election, voter worries about the economy, and criticism of his draconian crackdown on civil and human rights.
Zacks #1 Rank (STRONG BUY) Stocks
(1) Trip.com (TCOM - Free Report) : This is a $37 Mainland China stock, with a market cap of $23.6B, found in the Leisure and Recreation industry. I see a Zacks Value score of D, a Zacks Growth score of D, and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Trip.com Group Limited is a one-stop travel service company.
Its service consists of Trip.com, Ctrip, Skyscanner and Qunar.
The company's platform includes mobile apps, Internet websites and 24/7 customer service centers.
Trip.com Group Limited, formerly known as Ctrip.com International Ltd., is based in Shanghai, the People's Republic of China.
(2) Westinghouse Air Brake Technologies (WAB - Free Report) : This is a $133 railroad supplier stock, with a market cap of $23.6B, found in the Transportation – Equipment and Leasing industry. 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
Westinghouse Air Brake Technologies Corp. is a provider of locomotives, value-added, technology-based equipment, systems and services to the freight rail and passenger transit industries across the globe.
The company operates under the name of Wabtec Corp. and is currently based in Wilmerding, PA. Wabtec, which went public on the NYSE in 1995, operates in more than 50 countries.
In February 2019, Wabtec completed the previously announced merger with GE Transportation, a business unit of GE. The combined company has an expanded product portfolio and a larger customer base. It focuses on innovation. Following the completion of the merger with GE Transportation in February 2019, Wabtec was included in the coveted S&P 500 index.
In January 2020, Wabtec acquired RELCO Locomotives to fortify its market capabilities.
Net sales in 2021 inched up 3.5% year over year to $7,822 million. Notably, the company operates under two business segments, namely Transit and Freight segments.
The Transit segment (33% of 2021 revenues) manufactures and provides aftermarket parts and services for new locomotives. Through the segment, the company also provides components for new and existing locomotives and freight cars. In 2020, 14% of segmental sales came from the United States.
Additionally, roughly 50% of the segment’s sales were in the aftermarket. The balance came from the original equipment market.
Segment sales increased 4.4% year over year in 2021, despite supply-chain disruptions, and coronavirus-related woes.
The Freight segment (67%) focuses on manufacturing and offering aftermarket parts and services for new locomotives. The segment also provides components for new and existing locomotives and freight cars.
In 2021, 57% of segmental net sales came from the United States. Roughly, 68% of the segmental net sales were in the aftermarket, with the balance being generated in the original equipment market.
Segment sales increased 3.1% year-over-year in 2021, due to higher demand for services and components, and the Nordco acquisition.
(3) Veolia Environment (VEOEY - Free Report) : This is a $16 stock, with a market cap of $23.6B, found in the Utility – Water Supply industry. 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
Veolia Environment is the only global company to offer the entire range of environmental services in the water, waste management, energy and transportation sectors.
Veolia has been creating global and integrated solutions for public and private sector clients over the world.
The quality of its research, the expertise and synergies developed between its teams, its mastery of the public-private partnership model and our commitment to sustainable development have made us a benchmark player in major environmental matters.
Key Global Macro
Service economies — the world over — continue to mostly show expansion. Europe may be the exception. We shall see, in the latest data out this week.
On Monday, Japan’s Jibun Bank services PMI for JAN comes out. There is a 52.7 prior print.
Mainland China’s Caixin services PMI comes out for JAN. I see a 52.9 prior print.
The HCOB Euro Area services PMI for JAN comes out too. The prior print is 48.4.
The U.S. S&P global services PMI for JAN should be out as well. The prior print is 52.9.
The ISM services PMI comes out for the USA in JAN. 50.6 was the prior print.
On Tuesday, Australia’s Reserve Bank of Australia (RBA) issues a monetary policy statement. The policy rate there is 4.35%.
On Wednesday, the Swiss unemployment rate for JAN comes out. It is at a low 2.2%.
Mainland China has a whopping $3.24T in official FX reserves. We get a JAN update.
On Thursday, Mainland China’s CPI for JAN comes out. The prior print is -0.3% y/y, and a move to -0.5% y/y is what to expect.
Mainland China’s PPI is also out. -2.7% y/y is the prior print. -2.6% y/y is what to expect.
This day is Mainland China’s New Years Eve.
On Friday, the unemployment rate in Canada gets a refresh. It is at 5.8% now.
Mainland China has officially entered “The Year of the Dragon.”
Conclusion
Here are Zacks Research Director Sheraz Mian’s four key Q4 EPS points:
Written on Jan. 31st, 2024.
(1) Total Q4 earnings for the 176 S&P500 members that have reported results are up +1.7% from the same period last year on +2.6% higher revenues.
81.8% are beating EPS estimates. 69.3% are beating revenue estimates.
(2) Looking at Q4-23 as a whole, combining the actual results that have come out with estimates for the still-to-come companies, total S&P500 index earnings are currently expected to be up +2.4% from the year-earlier level on +2.8% higher revenues.
This would follow the +3.8% earnings growth in 2023 Q3 on +2.0% higher revenues.
(3) For the Info Tech sector, we now have Q4-23 results for 46.8% of the sector’s market capitalization in the index.
Total earnings for these Tech companies are up +19.3% from the same period last year on +6.6% higher revenues.
82.1% are beating EPS estimates. 75% are beating revenue estimates.
(4) The Q4-23 earnings and revenue growth rates for these Info Tech companies are notably tracking higher, than what we have seen from these companies, in other recent periods.
Though, the EPS and revenue beats percentages are tracking modestly below other recent periods, and the 20-quarter average.
Note clear +19.3% EPS leadership from the Tech sector, in the Zacks earnings data.
Enjoy this trading week!
Warm regards,
John Blank
Zacks Chief Equity Strategist and Economist