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First off, this Global Week Ahead is another key week for S&P 500 earnings reports.
Here are worthy names to focus on:
On Monday, AMC Devon (DVN - Free Report) reports. On Tuesday, BMO Pfizer (PFE), Biogen (BIIB) and Hilton (HLT) report. AMC Starbucks (SBUX) and Advanced Micro Devices (AMD) report. On Wednesday, BMO Moderna (MRNA) reports, and AMC Fortinet (FTNT) reports. On Thursday, BMO Shopify (SHOP) and Datadog (DDOG) report. On Friday, BMO Draft Kings (DKNG) reports
Roughly 40% of S&P 500 firms have already reported.
On Wed. April 27th, Zacks Research Director Sheraz Mian summarized the state of play:
For 177 S&P 500 names that reported Q1 results, total earnings are up +1.1%,
On +11.4% higher revenues,
With 80.8% beating EPS estimates, 72.9% beating revenue estimates and 62.7% beating both estimates.
The Q1 EPS and revenue beats percentages are at the lowest level since Q2-2020 for this group of 177 index members.
Looking at Q1 as a whole:
Total S&P 500 earnings for the period are expected to be up +6.6% from the same period last year,
On +11.1% higher revenues.
Earnings growth for the quarter drops to +0.5% on an ex-Energy basis, but improves to +13.3% on an ex-Finance basis.
But that is not the only stock market matter to care about.
Second of all, the central banking world takes center stage over the coming week.
The U.S. Federal Reserve, the Bank of England and the Reserve Bank of Australia each hold policy meetings.
Third, and finally, the U.S. nonfarm payroll report for April lands on Friday.
Here are Reuters’ five world market themes, reordered for equity traders—
(1) An Increasingly Hawkish Fed Reports on Wednesday, May 4th
Increasingly hawkish Fed rhetoric has sparked nasty sell-offs in stock and bond markets. On Wednesday, we will see just how aggressive the central bank plans to get over coming months.
The Fed has flagged a 50 basis-point interest rate rise on May 4th, and investors expect a hefty 240 bps of monetary tightening in 2022.
Many reckon the Fed will continue to surprise on the hawkish side, as it fights to tamp down the worst inflation in four decades.
Markets will also focus on the Fed's plans for its nearly $9 trillion balance sheet, which it could start unwinding as early as May.
(2) The Bank of England (BoE) Meeting Ends One Day After the Fed
The Bank of England's meeting, a day after the Fed, is tipped to lift interest rates for a fourth time in a row, the first time it would have done that since 1997.
BoE boss Andrew Bailey says the bank is treading a "very tight line" between curbing inflation, which at 7.0% is more than three times its target, and avoiding a recession.
A quarter point hike to 1.0% would meet a precondition for the BoE to start actively selling bonds it holds. A big question for markets is when these sales will start; estimates range from June to well into 2023.
Active bond sales would tighten monetary conditions but could hurt a faltering economy and no major central bank has yet started the process.
(3) A 5.0% Rise in the US Dollar is a Consequence of Different Monetary Policies
April is said to be the cruelest month and it's certainly been so for anyone on the wrong side of the dollar trade.
A 5.0% rise in the dollar index, driven by safe-haven flows and an uber-hawkish Fed, has triggered big falls in the euro and yen, as well as emerging market currencies, led by the yuan.
The moves are tightening global financial conditions, which can cause economic growth to slow. Companies in Japan, Germany and elsewhere face higher import costs for dollar-priced materials and components.
Some past Fed tightening cycles weakened the U.S. currency once they kicked off. This time though, comparisons are being drawn with 1994 when 300 bps of rate rises lifted the dollar index 4.6% (following a 10.5% jump in 1993). Those moves were blamed for subsequent waves of emerging market crises.
(4) China’s Yuan Down -4.0% for the Month
The yuan, down -4.0% this past month, may have further to fall if weekend data shows Chinese factory activity still weakening.
Beijing, for now at least, seems to see the yuan as its main policy lever, much to the disappointment of stock markets which had hoped for more explicit government help or for a loosening of harsh COVID lockdown rules.
China's slowdown has also applied a discount at the quarry — pushing the Aussie dollar down some -4.5% through April.
With recent data showing Australian first-quarter inflation at 20-year highs, anticipation is building that a hiking cycle could begin as soon as Tuesday.
Swaps pricing and several economists reckon a 15-basis-point rate hike is likely.
(5) Russia Playing Hardball with Oil and Gas Shipments
Moscow has upped the ante in its standoff with Western capitals over payments for gas shipments. It has cut gas to Poland and Bulgaria after they refused to accept its demand for payments in roubles rather than euros.
The European Commission has warned that rouble payments could breach sanctions, but officials are still struggling to clarify the European Union stance on Moscow's payments scheme.
The elephant in the room is Germany — Russian gas comprises around a third of its total gas use, so the economy could slip into recession if supplies are cut.
Meanwhile, the clock is ticking down on Russia to make a payment on its sovereign bonds which had been due April 4th. Failure to pay within a 30-day grace period would tip it into default.
Zacks #1 Rank (STRONG BUY) Stocks
Large-cap energy sector stocks continue to dominate our #1 list.
(1) Exxon Mobil (XOM - Free Report) : Oil prices remain high, so seeing this stock on our #1 list should be no surprise. I see an $86 share price, making for a $369B market cap. I also see a Zacks Value score of C, a Zacks Growth score of A and a Zacks Momentum score of A.
(2) The Williams Companies (WMB - Free Report) : Are pipelines a better play than an oil & gas conglomerate? This is a $34.50 stock, making for a market cap of $42.4B. I see a Zacks Value score of F, a Zacks Growth score of D and a Zacks Momentum score of A.
(3) Devon Energy (DVN - Free Report) : What about a top natural gas provider? This is a $60 a share stock, making for a market cap of $39.5B. I see a Zacks Value score of D, a Zacks Growth score of A and a Zacks Momentum score of B.
Key Global Macro
There is a key U.S. nonfarm payroll report out on Friday.
On Monday, Japan’s Jibun Bank manufacturing PMI should be 53.4 in April, the same as in March.
The S&P global manufacturing PMI for the Eurozone should be 55.3 in April, the same as in March.
The ISM manufacturing PMI for April should be 58, better than the 57.1 in March.
On Tuesday, there is a Eurogroup meeting.
The Reserve Bank of Australia (RBA) offers is rate decision and policy statement.
U.S. total vehicle sales for April come out. 13.3M in March is light from a pre-pandemic 16.5M run rate. That’s the supply chain shortage for you.
On Wednesday, U.S. ADP payrolls should be +370K in April, after a +455K print iN March.
The U.S. ISM services PMI should be 59 in April, after a 58.3 print in March.
The FOMC rate decision hits the tape. Look for a 50 bps move to 1.0% on the Fed Funds rate. That is still incredibly low, folks!
There is a Fed Chair Powell press conference too.
On Thursday, there is a Bank of England (BoE) monetary policy report. They should hike to 1.0% from 0.75%. Just a little faster than the FOMC here.
On Friday, U.S. nonfarm payrolls should be up +400K in April, after a +431K print in March.
The U.S. household unemployment rate should be steady at 3.6%.
Conclusion
A mix of S&P 500 earnings reports, three big monetary policy meetings, and the U.S. nonfarm payroll report, means this will be a varied and critical week for the risk markets.
Hopefully, the major U.S. indices come out the other end in decent shape.
So far this year, it has been rough for equity owners.
According to Bespoke Investments, when incorporating last Friday’s dismal close, 2022 has been the worst start to a year on record for the Nasdaq.
Image: Bigstock
Lots to Focus On: Global Week Ahead
First off, this Global Week Ahead is another key week for S&P 500 earnings reports.
Here are worthy names to focus on:
On Monday, AMC Devon (DVN - Free Report) reports.
On Tuesday, BMO Pfizer (PFE), Biogen (BIIB) and Hilton (HLT) report. AMC Starbucks (SBUX) and Advanced Micro Devices (AMD) report.
On Wednesday, BMO Moderna (MRNA) reports, and AMC Fortinet (FTNT) reports.
On Thursday, BMO Shopify (SHOP) and Datadog (DDOG) report.
On Friday, BMO Draft Kings (DKNG) reports
Roughly 40% of S&P 500 firms have already reported.
On Wed. April 27th, Zacks Research Director Sheraz Mian summarized the state of play:
The Q1 EPS and revenue beats percentages are at the lowest level since Q2-2020 for this group of 177 index members.
Looking at Q1 as a whole:
Earnings growth for the quarter drops to +0.5% on an ex-Energy basis, but improves to +13.3% on an ex-Finance basis.
But that is not the only stock market matter to care about.
Second of all, the central banking world takes center stage over the coming week.
The U.S. Federal Reserve, the Bank of England and the Reserve Bank of Australia each hold policy meetings.
Third, and finally, the U.S. nonfarm payroll report for April lands on Friday.
Here are Reuters’ five world market themes, reordered for equity traders—
(1) An Increasingly Hawkish Fed Reports on Wednesday, May 4th
Increasingly hawkish Fed rhetoric has sparked nasty sell-offs in stock and bond markets. On Wednesday, we will see just how aggressive the central bank plans to get over coming months.
The Fed has flagged a 50 basis-point interest rate rise on May 4th, and investors expect a hefty 240 bps of monetary tightening in 2022.
Many reckon the Fed will continue to surprise on the hawkish side, as it fights to tamp down the worst inflation in four decades.
Markets will also focus on the Fed's plans for its nearly $9 trillion balance sheet, which it could start unwinding as early as May.
(2) The Bank of England (BoE) Meeting Ends One Day After the Fed
The Bank of England's meeting, a day after the Fed, is tipped to lift interest rates for a fourth time in a row, the first time it would have done that since 1997.
BoE boss Andrew Bailey says the bank is treading a "very tight line" between curbing inflation, which at 7.0% is more than three times its target, and avoiding a recession.
A quarter point hike to 1.0% would meet a precondition for the BoE to start actively selling bonds it holds. A big question for markets is when these sales will start; estimates range from June to well into 2023.
Active bond sales would tighten monetary conditions but could hurt a faltering economy and no major central bank has yet started the process.
(3) A 5.0% Rise in the US Dollar is a Consequence of Different Monetary Policies
April is said to be the cruelest month and it's certainly been so for anyone on the wrong side of the dollar trade.
A 5.0% rise in the dollar index, driven by safe-haven flows and an uber-hawkish Fed, has triggered big falls in the euro and yen, as well as emerging market currencies, led by the yuan.
The moves are tightening global financial conditions, which can cause economic growth to slow. Companies in Japan, Germany and elsewhere face higher import costs for dollar-priced materials and components.
Some past Fed tightening cycles weakened the U.S. currency once they kicked off. This time though, comparisons are being drawn with 1994 when 300 bps of rate rises lifted the dollar index 4.6% (following a 10.5% jump in 1993). Those moves were blamed for subsequent waves of emerging market crises.
(4) China’s Yuan Down -4.0% for the Month
The yuan, down -4.0% this past month, may have further to fall if weekend data shows Chinese factory activity still weakening.
Beijing, for now at least, seems to see the yuan as its main policy lever, much to the disappointment of stock markets which had hoped for more explicit government help or for a loosening of harsh COVID lockdown rules.
China's slowdown has also applied a discount at the quarry — pushing the Aussie dollar down some -4.5% through April.
With recent data showing Australian first-quarter inflation at 20-year highs, anticipation is building that a hiking cycle could begin as soon as Tuesday.
Swaps pricing and several economists reckon a 15-basis-point rate hike is likely.
(5) Russia Playing Hardball with Oil and Gas Shipments
Moscow has upped the ante in its standoff with Western capitals over payments for gas shipments. It has cut gas to Poland and Bulgaria after they refused to accept its demand for payments in roubles rather than euros.
The European Commission has warned that rouble payments could breach sanctions, but officials are still struggling to clarify the European Union stance on Moscow's payments scheme.
The elephant in the room is Germany — Russian gas comprises around a third of its total gas use, so the economy could slip into recession if supplies are cut.
Meanwhile, the clock is ticking down on Russia to make a payment on its sovereign bonds which had been due April 4th. Failure to pay within a 30-day grace period would tip it into default.
Zacks #1 Rank (STRONG BUY) Stocks
Large-cap energy sector stocks continue to dominate our #1 list.
(1) Exxon Mobil (XOM - Free Report) : Oil prices remain high, so seeing this stock on our #1 list should be no surprise. I see an $86 share price, making for a $369B market cap. I also see a Zacks Value score of C, a Zacks Growth score of A and a Zacks Momentum score of A.
(2) The Williams Companies (WMB - Free Report) : Are pipelines a better play than an oil & gas conglomerate? This is a $34.50 stock, making for a market cap of $42.4B. I see a Zacks Value score of F, a Zacks Growth score of D and a Zacks Momentum score of A.
(3) Devon Energy (DVN - Free Report) : What about a top natural gas provider? This is a $60 a share stock, making for a market cap of $39.5B. I see a Zacks Value score of D, a Zacks Growth score of A and a Zacks Momentum score of B.
Key Global Macro
There is a key U.S. nonfarm payroll report out on Friday.
On Monday, Japan’s Jibun Bank manufacturing PMI should be 53.4 in April, the same as in March.
The S&P global manufacturing PMI for the Eurozone should be 55.3 in April, the same as in March.
The ISM manufacturing PMI for April should be 58, better than the 57.1 in March.
On Tuesday, there is a Eurogroup meeting.
The Reserve Bank of Australia (RBA) offers is rate decision and policy statement.
U.S. total vehicle sales for April come out. 13.3M in March is light from a pre-pandemic 16.5M run rate. That’s the supply chain shortage for you.
On Wednesday, U.S. ADP payrolls should be +370K in April, after a +455K print iN March.
The U.S. ISM services PMI should be 59 in April, after a 58.3 print in March.
The FOMC rate decision hits the tape. Look for a 50 bps move to 1.0% on the Fed Funds rate. That is still incredibly low, folks!
There is a Fed Chair Powell press conference too.
On Thursday, there is a Bank of England (BoE) monetary policy report. They should hike to 1.0% from 0.75%. Just a little faster than the FOMC here.
On Friday, U.S. nonfarm payrolls should be up +400K in April, after a +431K print in March.
The U.S. household unemployment rate should be steady at 3.6%.
Conclusion
A mix of S&P 500 earnings reports, three big monetary policy meetings, and the U.S. nonfarm payroll report, means this will be a varied and critical week for the risk markets.
Hopefully, the major U.S. indices come out the other end in decent shape.
So far this year, it has been rough for equity owners.
According to Bespoke Investments, when incorporating last Friday’s dismal close, 2022 has been the worst start to a year on record for the Nasdaq.
Here is their list of the losers, in order.
YTD thru April:
2022: -21.2%
1973: -19.4%
2001: -14.3%
2002: -13.4%
2005: -11.7%
1984: -11.2%
Tech stocks have really taken it on the chin.
A look ahead, after the coming week’s events, may become a shade brighter for those growth names.
In particular, look for a stock market bounce after the Fed meeting and Powell presser.
That’s it for me.
Warm Regards,
John Blank
Zacks Chief Equity Strategist and Economist