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Next are Reuters’ five world market themes, reordered for equity traders—
(1) FAANG Stocks Report Q2 Earnings
U.S. earnings are in full swing and investors will now watch tech heavyweights to gauge whether a recent shift away from the reflation trade and into big growth stocks that led markets for the last decade will continue.
FAANG stocks – Facebook, Amazon, Apple, Netflix (NFLX - Free Report) , and Google parent company Alphabet – are usually known for delivering stellar stock market returns.
But only Facebook and Alphabet have beaten the S&P 500 in 2021 as investors piled into financials, energy firms and other companies that should benefit from a powerful U.S. economic rebound.
Worries over "peak growth" and a resurgence of COVID-19 recently stalled that rotation.
Earnings from Apple and Alphabet on Tuesday, Facebook on Wednesday and Amazon on Thursday could accelerate a shift back into growth.
Netflix shares tumbled after it forecast third-quarter paid subscriber additions below estimates. That provides a cautionary tale.
(2) Powell and FOMC Meet Tuesday and Wednesday
The U.S. Fed meets on Tuesday and Wednesday and looks set to debate when and how to kick off a bond taper, even as a surging Delta variant caseload revives economic risks from a pandemic many policymakers had hoped was drawing to a close.
In June, officials launched the discussion over when to start cutting monthly purchases of $120 billion of Treasuries and mortgage-backed securities. It’s unlikely they will put that on ice even though the rate of new daily U.S. infections has doubled since.
The Delta surge is too new to show up in data, but figures reflect a growing conundrum: inflation running much hotter than expected and job growth still well short of the "maximum employment" goal.
Meanwhile a partisan fight over raising the debt ceiling has erupted in Congress, with the Treasury Department on July 31st technically bumping up against its statutory debt limit.
(3) Wither the Major U.S. Large-Cap Indices?
Summertime, and the living is easy. Not for markets swinging wildly from one direction to another as investors try to decide what the future holds for world growth.
Recent days saw the S&P 500 (SPY - Free Report) record its steepest one-day drop in months on concerns that COVID variants could derail the recovery, only to post the biggest one-day jump since March a day later.
Bond market volatility is no less significant — 10-year Treasury yields tumbled then posted their biggest one-day jump in a month days later.
Data could soothe or exacerbate growth angst.
An advanced estimate of U.S. economic growth and a Fed-tracked measure of inflation are out Thursday.
On Friday, flash July Eurozone inflation and Q2 GDP numbers are released.
(4) European Banks Shares Still Lag
Europe's banking sector is one of the few industries yet to reclaim pre-pandemic highs. The euro zone bank index (SX7E) is currently down some -10% from February 2020 and even at the peak of the reflation trade last June it was still -2% away.
By comparison, the pan-European STOXX 600 (STOXX) is +5% above the levels reached prior to the pre-COVID-19 crash. Despite being the darlings of the reopening trade, European lenders are dragged down by bottom-low interest rates biting into margins.
There is a strong link between their performance and benchmark German 10-year Bund yields. With Deutsche Bank (DBK), BNP Paribas (BNPP) and UniCredit (CRDI) reporting in days to come, it might be a good time to break with Bunds.
(5) How Are the Tokyo Olympics Going?
A year late, at empty stadiums in the world's biggest city, the Olympic Games have begun mid-pandemic. Athletes are to compete without mingling, to dine alone and to take their free condoms home.
A spectacle that cost some $15.5 billion will bring no tourism, next to no ticket revenue and no economic boon.
Intended to showcase Japan's recovery from the devastating 2011 earthquake, the Tokyo Olympics has instead become so toxic that even sponsors such as Toyota (T) have decided to give airwaves and the opening ceremony a wide berth.
Some have found a silver lining in a pre-Games pickup in vaccination rates for Japan, where only 20% of the population is fully inoculated.
But for the more than two-thirds who said they don't believe the event can be held safely, it will be a nervous fortnight of hoping the virus is kept behind the sidelines.
Top Zacks #1 Rank Stocks
It may be time to be a bit contrarian. Let’s look into top Zacks Value stocks on our #1 list.
(1) Ford (F - Free Report) : This is a $14 a share stock, with a new all-electric truck in its lineup. I see a $55.5B market cap. The Zacks Value score is A, the Zacks Growth score is B, and the Zacks Momentum score is B.
(2) Dow (DOW - Free Report) : This is a diversified chemical stock, with shares pricing at $60. I see a $45.2B market cap. The Zacks Value score is A, the Zacks Growth score is C, and the Zacks Momentum score is A.
(3) AutoNation (AN - Free Report) : This is a retail and wholesale auto parts player. The shares price at $115. I see a market cap of $8.4B. The Zacks Value score is A, the Zacks Growth score is B, and the Zacks Momentum score is A.
The Ford Growth score of B and the AutoNation Growth score of B are also worth noting.
Growth at a Reasonable Price (GARP) stocks are hard to find these days. These two are in that category, at the moment.
Key Global Macro
I would focus on outputs and presser comments from the 2-day FOMC meeting.
On Monday, Japan’s Jibun Bank manufacturing PMI should be 52.3. In today’s hot terms, that is actually quite weak.
There is a Eurozone Finance Minister’s meeting.
On Tuesday, U.S. Durable Goods orders, ex-transportation, should be up +0.8% in June.
The S&P 500 Case-Shiller index should be up +15.4% y/y in May. Note: U.S. repeat homes sales data used here is two months lagged.
On Wednesday, the Reserve Bank of Australia’s (RBA) trimmed mean CPI should be up +1.6% y/y, while the broader CPI index there should be up +3.8% y/y for Q2.
The 2-day FOMC breaks up. There will be a Fed rate decision, a monetary policy statement, and an FOMC press conference.
On Thursday, U.S. initial jobless claims may sink back to 365K from last week’s rise to 419K.
On Friday, U.S. core personal consumption expenditures price index for June should be +3.7% y/y. That is very similar to RBA broad CPI data in Australia.
Conclusion
On top of the drumbeat of big tech and non-tech names reporting in the Global Week Ahead, please note the sheer number of EPS reports.
I see a whopping 100 + 184 + 232 + 363 + 108 = 987 reports in Zacks system
Last week, in comparison, Zacks system had 30 + 67 + 104 + 145 + 35 = 381
Happy trading and investing to all.
Regards,
John Blank
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A Daily Drumbeat of Key Earnings: Global Week Ahead
In the Global Week Ahead, get ready to hear the drumbeat of key Q2 reports, day after day.
Mega-cap tech stocks will thunder after the market closes (AMC) across most of the week.
Still, don’t overlook the key non-tech names reporting before the market opens (BMO) on Friday.
Abbvie ABBV, Exxon Mobil (XOM - Free Report) , Procter & Gamble (PG - Free Report) and Caterpillar (CAT - Free Report) report BMO on Friday.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) FAANG Stocks Report Q2 Earnings
U.S. earnings are in full swing and investors will now watch tech heavyweights to gauge whether a recent shift away from the reflation trade and into big growth stocks that led markets for the last decade will continue.
FAANG stocks – Facebook, Amazon, Apple, Netflix (NFLX - Free Report) , and Google parent company Alphabet – are usually known for delivering stellar stock market returns.
But only Facebook and Alphabet have beaten the S&P 500 in 2021 as investors piled into financials, energy firms and other companies that should benefit from a powerful U.S. economic rebound.
Worries over "peak growth" and a resurgence of COVID-19 recently stalled that rotation.
Earnings from Apple and Alphabet on Tuesday, Facebook on Wednesday and Amazon on Thursday could accelerate a shift back into growth.
Netflix shares tumbled after it forecast third-quarter paid subscriber additions below estimates. That provides a cautionary tale.
(2) Powell and FOMC Meet Tuesday and Wednesday
The U.S. Fed meets on Tuesday and Wednesday and looks set to debate when and how to kick off a bond taper, even as a surging Delta variant caseload revives economic risks from a pandemic many policymakers had hoped was drawing to a close.
In June, officials launched the discussion over when to start cutting monthly purchases of $120 billion of Treasuries and mortgage-backed securities. It’s unlikely they will put that on ice even though the rate of new daily U.S. infections has doubled since.
The Delta surge is too new to show up in data, but figures reflect a growing conundrum: inflation running much hotter than expected and job growth still well short of the "maximum employment" goal.
Meanwhile a partisan fight over raising the debt ceiling has erupted in Congress, with the Treasury Department on July 31st technically bumping up against its statutory debt limit.
(3) Wither the Major U.S. Large-Cap Indices?
Summertime, and the living is easy. Not for markets swinging wildly from one direction to another as investors try to decide what the future holds for world growth.
Recent days saw the S&P 500 (SPY - Free Report) record its steepest one-day drop in months on concerns that COVID variants could derail the recovery, only to post the biggest one-day jump since March a day later.
Bond market volatility is no less significant — 10-year Treasury yields tumbled then posted their biggest one-day jump in a month days later.
Data could soothe or exacerbate growth angst.
An advanced estimate of U.S. economic growth and a Fed-tracked measure of inflation are out Thursday.
On Friday, flash July Eurozone inflation and Q2 GDP numbers are released.
(4) European Banks Shares Still Lag
Europe's banking sector is one of the few industries yet to reclaim pre-pandemic highs. The euro zone bank index (SX7E) is currently down some -10% from February 2020 and even at the peak of the reflation trade last June it was still -2% away.
By comparison, the pan-European STOXX 600 (STOXX) is +5% above the levels reached prior to the pre-COVID-19 crash. Despite being the darlings of the reopening trade, European lenders are dragged down by bottom-low interest rates biting into margins.
There is a strong link between their performance and benchmark German 10-year Bund yields. With Deutsche Bank (DBK), BNP Paribas (BNPP) and UniCredit (CRDI) reporting in days to come, it might be a good time to break with Bunds.
(5) How Are the Tokyo Olympics Going?
A year late, at empty stadiums in the world's biggest city, the Olympic Games have begun mid-pandemic. Athletes are to compete without mingling, to dine alone and to take their free condoms home.
A spectacle that cost some $15.5 billion will bring no tourism, next to no ticket revenue and no economic boon.
Intended to showcase Japan's recovery from the devastating 2011 earthquake, the Tokyo Olympics has instead become so toxic that even sponsors such as Toyota (T) have decided to give airwaves and the opening ceremony a wide berth.
Some have found a silver lining in a pre-Games pickup in vaccination rates for Japan, where only 20% of the population is fully inoculated.
But for the more than two-thirds who said they don't believe the event can be held safely, it will be a nervous fortnight of hoping the virus is kept behind the sidelines.
Top Zacks #1 Rank Stocks
It may be time to be a bit contrarian. Let’s look into top Zacks Value stocks on our #1 list.
(1) Ford (F - Free Report) : This is a $14 a share stock, with a new all-electric truck in its lineup. I see a $55.5B market cap. The Zacks Value score is A, the Zacks Growth score is B, and the Zacks Momentum score is B.
(2) Dow (DOW - Free Report) : This is a diversified chemical stock, with shares pricing at $60. I see a $45.2B market cap. The Zacks Value score is A, the Zacks Growth score is C, and the Zacks Momentum score is A.
(3) AutoNation (AN - Free Report) : This is a retail and wholesale auto parts player. The shares price at $115. I see a market cap of $8.4B. The Zacks Value score is A, the Zacks Growth score is B, and the Zacks Momentum score is A.
The Ford Growth score of B and the AutoNation Growth score of B are also worth noting.
Growth at a Reasonable Price (GARP) stocks are hard to find these days. These two are in that category, at the moment.
Key Global Macro
I would focus on outputs and presser comments from the 2-day FOMC meeting.
On Monday, Japan’s Jibun Bank manufacturing PMI should be 52.3. In today’s hot terms, that is actually quite weak.
There is a Eurozone Finance Minister’s meeting.
On Tuesday, U.S. Durable Goods orders, ex-transportation, should be up +0.8% in June.
The S&P 500 Case-Shiller index should be up +15.4% y/y in May. Note: U.S. repeat homes sales data used here is two months lagged.
On Wednesday, the Reserve Bank of Australia’s (RBA) trimmed mean CPI should be up +1.6% y/y, while the broader CPI index there should be up +3.8% y/y for Q2.
The 2-day FOMC breaks up. There will be a Fed rate decision, a monetary policy statement, and an FOMC press conference.
On Thursday, U.S. initial jobless claims may sink back to 365K from last week’s rise to 419K.
On Friday, U.S. core personal consumption expenditures price index for June should be +3.7% y/y. That is very similar to RBA broad CPI data in Australia.
Conclusion
On top of the drumbeat of big tech and non-tech names reporting in the Global Week Ahead, please note the sheer number of EPS reports.
Happy trading and investing to all.
Regards,
John Blank