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The Zacks Analyst Blog Highlights Broadcom, Pinduoduo and Baidu
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For Immediate Release
Chicago, IL – July 12, 2022 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Broadcom (AVGO - Free Report) , Pinduoduo (PDD - Free Report) and Baidu (BIDU - Free Report) .
Here are highlights from Monday’s Analyst Blog:
The First Earnings Reports: Global Week Ahead
Starting before the market opens (BMO) on Thursday, the initial earnings reports from Q2 arrive from the major U.S. banks.
In terms of macro circumstances, the U.S. dollar's +12% year-to-date rise has raised global concerns.
This will surely be debated when G20 policymakers meet on July 15th to 16th in Bali.
All the more so, according to Reuters, if the U.S. dollar vaults to parity against the euro for the first time in 20 years.
In the Global Week Ahead, outside the USA, U.K. politics also take center stage.
Next are Reuters' five world market themes, reordered for equity traders—
(1) On Thursday, U.S. Banks Kick Off Q2 Earnings Season
U.S. banks kick off second-quarter earnings, and it's not looking pretty. Yes, higher interest rates are helpful, but economic growth is also slowing.
So while Refinitiv I/B/E/S estimates show overall S&P 500 earnings growing an annualized 6% in Q2, financials are expected to rack up a 20% drop in earnings.
Much of that decline stems from worsening outlooks for loan losses, as interest-rate rises increase the risk of borrower defaults. Accounting standards require banks to factor macro-economic views into loss provisions, and thus results.
Fee income could stutter, too, brokerage Wedbush predicts, citing pressure from mortgages and capital markets revenue.
Morgan Stanley and JPMorgan kick off earnings Thursday, followed by Citi, State Street and Wells Fargo the next day.
Overall, Q2 results should shed light on the outlook for profit margins, input costs and hiring. And listen out for what company bosses say about a potential recession.
(2) The Euro Is the U.S. Dollar's Latest Victim
Europe's single currency is the dollar's latest victim.
Now at 20-year lows around $1.016, it could soon eyeball parity, hit by the dollar's broad safe-haven appeal but also by surging gas prices that have fanned recession risks in the euro area.
Wednesday's data, expected to show headline U.S. inflation rising +8.7% year-on-year in June versus May's +8.6%, could cement bets on another hefty Federal Reserve rate hike and lift the dollar further.
G20 finance ministers and central bankers, meeting July 15-16 in Bali, are watching. Tightening financial conditions have cratered markets, and with the dollar so strong, a kind of 'reverse currency war' is underway, where countries prefer stronger exchange rates to dampen inflation.
(3) Watching U.K. Decisions, as PM Johnson Exits
The resignation of Britain's scandal-ridden Prime Minister Boris Johnson means the world's fifth-biggest economy is further adrift — just as sterling hovers near two-year lows and Britons endure the worst cost-of-living squeeze in decades.
But if the Westminster drama is dominating TV screens, markets have sat quietly watching from the sidelines. That may change once the new government's priorities become clear.
Nadhim Zahawi, appointed finance minister just days ago, may review some tax hike plans and could cut others. But while loosening the purse strings may support sterling, it could inflame inflation, already seen heading past +11%.
May GDP numbers on Wednesday will likely reinforce the growth gloom but don't discount the potential for the Westminster chaos to hit markets.
(4) China's COVID Lockdown Costs Mount
Weeks after lifting an oppressive two-month lockdown, China is racing to contain a cluster of COVID cases centered on a Shanghai karaoke lounge. With new cases flaring, mass testing and fresh activity curbs have been introduced.
The economic cost of draconian zero-COVID policies will come into relief on Friday, when China releases second-quarter GDP figures.
Economists say the official +5.5% GDP target is out of reach, but President Xi Jinping remains committed to the zero-COVID policies, choosing "temporary" economic costs over endangering lives.
Investors are concerned. Shanghai stocks have paused their five-week winning streak, while growth fears have sent iron ore to its lowest level for the year.
(5) What Central Banks Are Going to Raise Policy Rates Another 50 Basis Points?
When even central banking doves such as Switzerland raise interest rates by half a percent, the Royal Bank of Canada and the Reserve Bank of New Zealand can hardly opt for 25 basis-point moves.
The RBNZ has already raised rates five times straight to 2%. Given it projects rates to double to 4% in the coming year, analysts reckon it will deliver another half-point move on July 13.
The same day, the Bank of Canada could lift rates by 75 bps to 2.25%, having delivered back-to-back 50 bps hikes. That would be its biggest move since 1998.
But watch for hints that rate hikes may slow. New Zealand business confidence is worsening and housing markets are softening. Canada, meanwhile, is assigned a 35% chance of recession over the coming year.
Top Zacks #1 Rank (STRONG BUY) Stocks
Let's look at three #1 ranked large-cap Tech stocks this week.
(1) Broadcom : Yes, this chip darling stock is a near $500 a share still. That makes for a market cap of $201.3B. I see a Zacks Value score of D, a Zacks Growth score of C and a Zacks Momentum score of F.
(2) Pinduoduo : This is a Mainland China Internet Commerce stock. It provides an e-commerce platform, primarily thru Tencent's Wechat app. It trades at $62 a share, making for a market cap of $77B. I see a Zacks Value score of F, a Zacks Growth score of D and a Zacks Momentum score of C.
(3) Baidu : This is the Mainland Chinese search giant. Shares trade at $154, making for a market cap of $53.4B. I see a Zacks Value score of C, a Zacks Growth score of D and a Zacks Momentum score of D.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights Broadcom, Pinduoduo and Baidu
For Immediate Release
Chicago, IL – July 12, 2022 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Broadcom (AVGO - Free Report) , Pinduoduo (PDD - Free Report) and Baidu (BIDU - Free Report) .
Here are highlights from Monday’s Analyst Blog:
The First Earnings Reports: Global Week Ahead
Starting before the market opens (BMO) on Thursday, the initial earnings reports from Q2 arrive from the major U.S. banks.
In terms of macro circumstances, the U.S. dollar's +12% year-to-date rise has raised global concerns.
This will surely be debated when G20 policymakers meet on July 15th to 16th in Bali.
All the more so, according to Reuters, if the U.S. dollar vaults to parity against the euro for the first time in 20 years.
In the Global Week Ahead, outside the USA, U.K. politics also take center stage.
Next are Reuters' five world market themes, reordered for equity traders—
(1) On Thursday, U.S. Banks Kick Off Q2 Earnings Season
U.S. banks kick off second-quarter earnings, and it's not looking pretty. Yes, higher interest rates are helpful, but economic growth is also slowing.
So while Refinitiv I/B/E/S estimates show overall S&P 500 earnings growing an annualized 6% in Q2, financials are expected to rack up a 20% drop in earnings.
Much of that decline stems from worsening outlooks for loan losses, as interest-rate rises increase the risk of borrower defaults. Accounting standards require banks to factor macro-economic views into loss provisions, and thus results.
Fee income could stutter, too, brokerage Wedbush predicts, citing pressure from mortgages and capital markets revenue.
Morgan Stanley and JPMorgan kick off earnings Thursday, followed by Citi, State Street and Wells Fargo the next day.
Overall, Q2 results should shed light on the outlook for profit margins, input costs and hiring. And listen out for what company bosses say about a potential recession.
(2) The Euro Is the U.S. Dollar's Latest Victim
Europe's single currency is the dollar's latest victim.
Now at 20-year lows around $1.016, it could soon eyeball parity, hit by the dollar's broad safe-haven appeal but also by surging gas prices that have fanned recession risks in the euro area.
Wednesday's data, expected to show headline U.S. inflation rising +8.7% year-on-year in June versus May's +8.6%, could cement bets on another hefty Federal Reserve rate hike and lift the dollar further.
G20 finance ministers and central bankers, meeting July 15-16 in Bali, are watching. Tightening financial conditions have cratered markets, and with the dollar so strong, a kind of 'reverse currency war' is underway, where countries prefer stronger exchange rates to dampen inflation.
(3) Watching U.K. Decisions, as PM Johnson Exits
The resignation of Britain's scandal-ridden Prime Minister Boris Johnson means the world's fifth-biggest economy is further adrift — just as sterling hovers near two-year lows and Britons endure the worst cost-of-living squeeze in decades.
But if the Westminster drama is dominating TV screens, markets have sat quietly watching from the sidelines. That may change once the new government's priorities become clear.
Nadhim Zahawi, appointed finance minister just days ago, may review some tax hike plans and could cut others. But while loosening the purse strings may support sterling, it could inflame inflation, already seen heading past +11%.
May GDP numbers on Wednesday will likely reinforce the growth gloom but don't discount the potential for the Westminster chaos to hit markets.
(4) China's COVID Lockdown Costs Mount
Weeks after lifting an oppressive two-month lockdown, China is racing to contain a cluster of COVID cases centered on a Shanghai karaoke lounge. With new cases flaring, mass testing and fresh activity curbs have been introduced.
The economic cost of draconian zero-COVID policies will come into relief on Friday, when China releases second-quarter GDP figures.
Economists say the official +5.5% GDP target is out of reach, but President Xi Jinping remains committed to the zero-COVID policies, choosing "temporary" economic costs over endangering lives.
Investors are concerned. Shanghai stocks have paused their five-week winning streak, while growth fears have sent iron ore to its lowest level for the year.
(5) What Central Banks Are Going to Raise Policy Rates Another 50 Basis Points?
When even central banking doves such as Switzerland raise interest rates by half a percent, the Royal Bank of Canada and the Reserve Bank of New Zealand can hardly opt for 25 basis-point moves.
The RBNZ has already raised rates five times straight to 2%. Given it projects rates to double to 4% in the coming year, analysts reckon it will deliver another half-point move on July 13.
The same day, the Bank of Canada could lift rates by 75 bps to 2.25%, having delivered back-to-back 50 bps hikes. That would be its biggest move since 1998.
But watch for hints that rate hikes may slow. New Zealand business confidence is worsening and housing markets are softening. Canada, meanwhile, is assigned a 35% chance of recession over the coming year.
Top Zacks #1 Rank (STRONG BUY) Stocks
Let's look at three #1 ranked large-cap Tech stocks this week.
(1) Broadcom : Yes, this chip darling stock is a near $500 a share still. That makes for a market cap of $201.3B. I see a Zacks Value score of D, a Zacks Growth score of C and a Zacks Momentum score of F.
(2) Pinduoduo : This is a Mainland China Internet Commerce stock. It provides an e-commerce platform, primarily thru Tencent's Wechat app. It trades at $62 a share, making for a market cap of $77B. I see a Zacks Value score of F, a Zacks Growth score of D and a Zacks Momentum score of C.
(3) Baidu : This is the Mainland Chinese search giant. Shares trade at $154, making for a market cap of $53.4B. I see a Zacks Value score of C, a Zacks Growth score of D and a Zacks Momentum score of D.
Large-cap China Tech is indeed heating up.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.