In the Global Week Ahead, we have a Fed meeting, a nonfarm payroll report for the month of October, and, of course, another big week for S&P 500 Q3 earnings.

Here is what Zacks Research Director Sheraz Mian had to say about Q3 earnings—

“192 S&P 500 members have reported Q3 results through Wednesday, October 27th.

• - Total earnings and revenues are up +37.6% and +15.3%, respectively from the same period last year, with
• - 82.3% beating EPS estimates, and
• - 74.0% beating revenue estimates.
• - The proportion of these 192 index members beating both EPS and revenue estimates is 64.1%.

“Q3 earnings and revenue growth rates and EPS and revenue beats percentages for these 192 index members are below what we saw for the same group of companies in the preceding period.

“But these metrics are tracking above historical averages.

“For the Tech sector, we now have Q3 results from 54.1% of the sector’s market capitalization in the S&P 500 index.

• - Total earnings for these Tech companies are up +31.8% from the same period last year on +16.2% higher revenues, with
• - 87% beating EPS estimates and
• - 56.5% beating revenue estimates.

“Looking at Q3 as a whole,

• - Total S&P 500 earnings are expected to be up +35.9% from the same period last year on +14.5% higher revenues.
• - This would follow the +95.0% earnings growth on +25.2% higher revenues in Q2.

“Rising cost pressures amid supply-chain disruptions and labor/material shortages will keep the spotlight on margins, which are expected to be up year-over-year as well as sequentially in Q3.

“The margins trajectory over the coming periods is a key source of uncertainty in the earnings outlook given the lack of visibility with respect to the duration of inflationary pressures.


“Total S&P 500 earnings for the current period (2021 Q4) are expected to be up +21.1% from the same period last year on +11.0% higher revenues. Importantly, estimates have started going up. Though the pace and magnitude of positive revisions are still relatively on the weak side.

“Looking at the calendar-year picture for the S&P 500 index,

• - Earnings are projected to climb +44.4% on +11.6% higher revenues in 2021 and
• - Increase +8.5% on +6.7% higher revenues in 2022.
• - This would follow the -13.0% earnings decline on -1.7% lower revenues in 2020.”

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

Key meetings loom at the U.S. Fed, the Bank of England (BoE) and the OPEC+ oil producer’s group. Japan goes to the polls.

(1) Time for the Fed to Taper. Policy Meeting Ends Wednesday

The Federal Reserve is widely expected to announce a pullback in asset purchases when its policy meeting ends on Wednesday.

Plans to "taper" $120 billion in monthly purchases of Treasury bonds and mortgage-backed securities are well telegraphed. But that stimulus has been a significant prop for asset prices, so removing it could have unforeseen results.

Investors are also keen for hints about when the Fed might start raising interest rates. Its chief Jerome Powell has said that while it is time to start cutting asset purchases, it's too early to touch the interest rate dial.

We will also get a view of the jobs market from Friday's monthly payrolls report -- especially interesting following below-forecast Q3 GDP and September's steep drop in job creation.

(2) OPEC+ Meets on Thursday

With $80-plus crude prices lifting inflation and clouding growth prospects, governments of energy-consuming nations are urging OPEC+ to stump up more oil. But the group, meeting on Thursday, is likely to stick to the script and raise output in December by no more than what was previously agreed.

Russian Deputy Prime Minister Alexander Novak told Reuters recently he expected the alliance to add 400,000 barrels per day of production, as previously agreed.

Saudi energy minister Prince Abdulaziz bin Salman too has dismissed calls by consumer nations to speed up the rate of production increases. The group does not see crude shortages in the market, he said. Unsurprisingly, oil price forecasts are nudging higher.

(3) A Bank of England (BoE) Meeting on Thursday, Too

The Bank of England is preparing to join the ranks of central banks that have embarked on raising interest rates. The question is only whether it will move at its Thursday meeting or give itself more time.

An expansionary budget may have given the green light for a hike. But BoE action hinges on whether it thinks inflation — forecast to top 5% as the British economy motors out of the pandemic — will prove as transitory as forecast.

Soaring inflation and hawkish comments from policymakers, including Governor Andrew Bailey, have sparked a dramatic repricing of rate expectations — a 0.15% rate rise to 0.25% is priced for Thursday, with another move expected in December.

Fragile economic growth means the BoE must tread carefully. But absent a rate hike, anything short of a significantly hawkish message could prove painful for sterling.

(4) COP26 Happens in Glasgow

World leaders and policymakers from 200 countries are congregating in the city of Glasgow for the COP26 climate talks aimed at tackling global warming.

Recent extreme weather events — floods, droughts and forest fires, among others — leave no doubt there is a pressing need for progress.

But so far, few of the top emitting countries have legislated for net zero emissions. The leaders of Russia and China won't even attend the summit and India has rejected calls to announce zero-carbon goals.

A target of raising $100 billion annually to help developing countries tackle climate change consequences is yet to be met despite an original 2020 deadline.

Amid myriad events and announcements, markets will have plenty to chew over, especially in assessing how new technology, tighter regulations and shifting trends may affect companies and investors.

(5) Japanese Lower House Elections Scheduled for Sunday

Japanese Prime Minister Fumio Kishida took office a month ago but with lower house elections scheduled on Sunday, his job is on the line already.

While polls suggest his Liberal Democratic Party will keep an absolute majority, it is projected to lose seats. A poor showing would set party bosses searching for a new figurehead before crucial upper house elections next year.

Aside from Kishida's career, such an outcome would also put into question pledged fiscal stimulus worth several hundreds of billions of dollars. That is help the economy needs, given recent growth and inflation downgrades by the Bank of Japan.

The election result will show if investors are right to short-sell Japanese government bond futures to bet on higher yields. Or whether domestic life insurers buying long-dated bonds will come out on top.

Top Zacks #1 Rank (STRONG BUY) Stocks

These are the largest, by market cap, Zacks #1 Rank tech stocks in our system now.

(1) Alphabet (GOOGL Quick QuoteGOOGL - Free Report) : This is a $2,922 a share stock. The market cap is an astonishing $1.95T. The Zacks Value score is D, the Growth score is C and the Momentum score is B.

(2) Tesla (TSLA Quick QuoteTSLA - Free Report) : This is a $1,077 a share stock. The market cap is an astonishing $1.08T. The Zacks Value score is F, the Growth score is B and the Momentum score is B.

(3) Salesforce (CRM Quick QuoteCRM - Free Report) : This is a $298 a share stock. The market cap is $292B. The Zacks Value score is F, the Growth score is F and the Momentum score is F.

It is almost beyond comprehension, isn’t it?

Key Global Macro

Don’t forget. This is a nonfarm payroll week. That data hits the tape on Friday.

On Monday, the ISM manufacturing PMI for the US came in at 60.8% in October, above the 60.4% expected and similar to the 61% reading in September.

The Markit manufacturing PMI for the USA reached 58.4, below the estimated 59.2 and the upwardly revised 60.7 for September. This is reportedly the lightest monthly read on Manufacturing PMI in 2021 so far.

On Tuesday, U.S. total vehicle sales come out. They are running 5M units light at 12.2M annualized, due to the chip shortages.

On Wednesday, ADP payrolls should be +369K in October, down from +568K in September.

The Fed rate decision and monetary policy statement hits the tape. There is a Powell presser. It will be on the taper timeline, etc.

On Thursday, the OPEC+ meeting happens.

The Bank of England (BoE) meeting happens.

On Friday, U.S. nonfarm payrolls should be up +385K in October, after a weak +194K in September.

The U.S. household unemployment rate should be 4.6%.

The broader U.S. U6 unemployment rate should be 6.9%.

In comparison, the Canadian household unemployment rate should be 6.9%.

Conclusion

Yes.

The Fed surely starts the Fed bond buying taper.

Still, I want to remind everybody, once again.

The Fed has pre-set serial meetings across the calendar year.

If financial markets (aka stocks) start to react in an adverse fashion, the entire taper and Fed Funds rate hike timeline will be revised, as needed.

In other words, this Fed taper announcement carries much less weight than most observers realize.

That’s it for me.

Regards,

John Blank