We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
In the Global Week Ahead, big box U.S. retail earnings update stock traders.
The monster U.S. retailers will reveal how consumers are coping with sky-high inflation.
Across the Atlantic Pond, macro data updates about the health of the sickly U.K. economy. Power supply problems — and drought — will continue to plague Europe.
The central bank spotlight falls on the small guys: New Zealand and Norway.
Next are Reuters’ five world market themes, reordered for equity traders.
(1) Big-box U.S. retailers report Q2 earnings. They also give us key outlooks.
Investors will be looking out for what the biggest U.S. retailers have to say on rising prices, after a rare bit of good news on inflation in the past week.
Walmart (WMT - Free Report) and Target (TGT - Free Report) , which report second-quarter earnings on Tuesday and Wednesday, respectively, have recently cut forecasts and warned inflation was squeezing margins and forcing consumers to reduce discretionary purchases.
Retailers' outlooks for consumer behavior will be key for investors looking to assess the pace of inflation. U.S. consumer prices were unchanged last month, the largest month-on-month deceleration of price increases since 1973.
Other big retailers reporting include Home Depot (HD - Free Report) on Tuesday and Lowe's (LOW - Free Report) the following day, while U.S. retail sales data, set for Wednesday, will give a broad picture of how the consumer is faring.
(2) U.S. housing starts on Tuesday. U.S. existing home sales on Thursday.
The cooling U.S. housing market gets a couple of gut checks in the coming week. July data on housing starts is due on Tuesday, after new U.S. home-building activity fell to a nine-month low in June.
Data on U.S. existing home sales for last month is released on Thursday after such sales fell for a fifth straight month in June to the lowest level in two years.
However, a moderation in mortgage rates could underpin support for housing, with the 30-year rate trending lower since mid-June after doubling in 2022.
The SPDR S&P homebuilders ETF (XHB - Free Report) has rebounded +25% since mid-June, after getting pummeled in the first half of the year.
(3) Europe faces soaring electricity prices and critically low water levels.
Already reeling from gas supply shortages, Europe faces soaring electricity prices and possible power cuts, as blistering summer weather sends water levels to critically low levels in rivers, lakes and reservoirs.
Along the German stretch of the Rhine, barges can only sail with partial loads of coal, threatening output at power plants. Norway, experiencing low rainfall after a winter with relatively little snow, may cap hydropower exports to preserve its reservoirs.
As a result, German baseload 2023 contract, Europe's benchmark, has hit record highs, almost doubling since mid-June.
(4) A raft of U.K. macro data arrives.
With the Bank of England's dire warnings still ringing in their ears, traders can expect no cheer from U.K. upcoming data.
British consumer inflation figures for July due Wednesday will likely top June's +9.4% print, heading towards a +13.3% peak forecast for October.
The BoE predicts a long and deep recession, evidence of which may come from July retail sales data out on Aug. 19th. Sales slumped -5.8% year-on-year in June, while consumer confidence is languishing at its lowest since 1974.
The U.K. labor market has so far been robust; almost 300,000 jobs were added in the quarter to May, leaving unemployment at just 3.8%.
However, adjusted for inflation, pay excluding bonuses fell by the most since records began in 2001. Another such reading may emerge on Tuesday, just as rail workers prepare for more of the strikes that have paralyzed public transport this summer.
(5) Small central banks show us their updated monetary policy hands.
Tight labor markets in New Zealand and Australia are making it difficult for both the inscrutable Reserve Bank of New Zealand and the more vocal Reserve Bank of Australia to find a middle ground on rate hikes.
Investors are certain RBNZ Governor Adrian Orr is not yet ready to compromise on inflation and will raise rates by another 50 basis points on Wednesday, notwithstanding the slight easing of inflation expectations and cooling property prices.
What the RBNZ signals about wage growth could sway current expectations for a peak policy rate of 4% early next year.
Second-quarter wages data in Australia is due the same day, and anecdotal signs suggest the tightest labor market in five decades also will set the RBA up for 50 bps next month, and for 225 bps of tightening in four months – a pace unseen since the 1990s.
Norway’s central bank, meanwhile, is expected to hike rates when it meets on Thursday. It raised rates by 50 bps in June and some economists expect big hikes in August and September.
Top Zacks #1 Rank (STRONG BUY) Stocks
Three large-cap tech stocks made it onto our #1 list.
Substantially, these three picks show us fundamental earnings improvement. I listed them from the cheapest to the most expensive.
(1) ST Microelectronics (STM - Free Report) : This is a $38 general semiconductor stock, with a market cap of $34.2B. I see a Zacks Value score of B, a Zacks Growth score of B and a Zacks Momentum score of A.
(2) Arista Networks (ANET - Free Report) : This is a $126 cloud networking solutions tech stock, with a market cap of $38.3B. I see a Zacks Value score of F, a Zacks Growth score of D and a Zacks Momentum score of B.
(3) EPAM Systems (EPAM - Free Report) : This is a $435 software engineering and IT consulting stock, with a market cap of $100.4B. I see a Zacks Value score of F, a Zacks Growth score of B and a Zacks Momentum score of A.
Is this a bear market rally on tech stocks? The Zacks Momentum (A, B, A) scores are notably good for all three #1 picks.
Key Global Macro
On Monday, Mainland China’s House Price Index for July is out. Its headline came in at -0.9%, while the prior month showed -0.5%. Is there a real estate crisis going on there?
Mainland China’s retail sales for July are disappointing, too: +2.7% on headline was supposed to rise to +5% y/y from a prior +3.1% y/y rate.
On Tuesday, the U.K.’s ILO unemployment rate should be steady at 3.8%. That is very similar to the U.S. 3.5% household unemployment rate showing for July already.
On Wednesday, the Bank of New Zealand gives us a policy rate decision. It is already at 2.5%, in sync with the U.S. Fed. Small CB’s can serve as a Fed bellwether.
The core CPI for the U.K. should be +6.4% y/y in July, up from +5.8% y/y in June.
On Thursday, the Euro Area HICP (the key broad consumer inflation rate there) for July should be +8.9% y/y, the same as last month.
Ex F, E, A, T (their core CPI subtraction acronym, not mine)? The Euro Area HICP goes to +4.0%.
U.S. existing home sales for July should be 4.85M, down from 5.12M the month prior.
On Friday, U.K. retail sales (ex-fuel) should be down -2.8% y/y in July. That is an improvement from the 05.9% y/y rate that showed up in June. But it is still negative.
Conclusion
I conclude this week’s Global Week Ahead with Zacks Research Director Sheraz Mian’s recap of the nearly-over Q2-22 earnings season.
Sheraz Mian’s four key points:
“The overall picture emerging from the Q2 earnings season has turned out to be good enough: not great, but not bad either. Importantly, Q2 results and guidance for the current and coming periods have turned out to be better relative to pre-season fears.”
“Estimates for the last two quarters of this year and for next year have started coming down, even though positive revisions to the Energy sector continue to partly offset negative revisions elsewhere.”
“The +2.4% earnings growth expected for the S&P 500 index in Q3-22 is down from +7.2% at the start of the period. Excluding the Energy sector, Q3 earnings are expected to be down -4% at present, a significant decline from +2.1% in the beginning of July.
“Looking at the calendar-year picture, total S&P 500 earnings are expected to be up +6.5% in 2022 and +7.3% in 2023. On an ex-Energy basis, total 2022 index earnings would be up +0.1% (instead of +6.5%, with Energy).”
“The overall corporate profitability picture emerging from the Q2 earnings season, with a little over 90% of S&P 500 results out, continues to show stability and resilience in key earnings drivers like consumer and business spending.”
Have a successful trading week!
Warm Regards,
John Blank Zacks Chief Equity Strategist and Economist
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Big Box U.S. Retail Reports: Global Week Ahead
In the Global Week Ahead, big box U.S. retail earnings update stock traders.
The monster U.S. retailers will reveal how consumers are coping with sky-high inflation.
Across the Atlantic Pond, macro data updates about the health of the sickly U.K. economy. Power supply problems — and drought — will continue to plague Europe.
The central bank spotlight falls on the small guys: New Zealand and Norway.
Next are Reuters’ five world market themes, reordered for equity traders.
(1) Big-box U.S. retailers report Q2 earnings. They also give us key outlooks.
Investors will be looking out for what the biggest U.S. retailers have to say on rising prices, after a rare bit of good news on inflation in the past week.
Walmart (WMT - Free Report) and Target (TGT - Free Report) , which report second-quarter earnings on Tuesday and Wednesday, respectively, have recently cut forecasts and warned inflation was squeezing margins and forcing consumers to reduce discretionary purchases.
Retailers' outlooks for consumer behavior will be key for investors looking to assess the pace of inflation. U.S. consumer prices were unchanged last month, the largest month-on-month deceleration of price increases since 1973.
Other big retailers reporting include Home Depot (HD - Free Report) on Tuesday and Lowe's (LOW - Free Report) the following day, while U.S. retail sales data, set for Wednesday, will give a broad picture of how the consumer is faring.
(2) U.S. housing starts on Tuesday. U.S. existing home sales on Thursday.
The cooling U.S. housing market gets a couple of gut checks in the coming week. July data on housing starts is due on Tuesday, after new U.S. home-building activity fell to a nine-month low in June.
Data on U.S. existing home sales for last month is released on Thursday after such sales fell for a fifth straight month in June to the lowest level in two years.
However, a moderation in mortgage rates could underpin support for housing, with the 30-year rate trending lower since mid-June after doubling in 2022.
The SPDR S&P homebuilders ETF (XHB - Free Report) has rebounded +25% since mid-June, after getting pummeled in the first half of the year.
(3) Europe faces soaring electricity prices and critically low water levels.
Already reeling from gas supply shortages, Europe faces soaring electricity prices and possible power cuts, as blistering summer weather sends water levels to critically low levels in rivers, lakes and reservoirs.
Along the German stretch of the Rhine, barges can only sail with partial loads of coal, threatening output at power plants. Norway, experiencing low rainfall after a winter with relatively little snow, may cap hydropower exports to preserve its reservoirs.
As a result, German baseload 2023 contract, Europe's benchmark, has hit record highs, almost doubling since mid-June.
(4) A raft of U.K. macro data arrives.
With the Bank of England's dire warnings still ringing in their ears, traders can expect no cheer from U.K. upcoming data.
British consumer inflation figures for July due Wednesday will likely top June's +9.4% print, heading towards a +13.3% peak forecast for October.
The BoE predicts a long and deep recession, evidence of which may come from July retail sales data out on Aug. 19th. Sales slumped -5.8% year-on-year in June, while consumer confidence is languishing at its lowest since 1974.
The U.K. labor market has so far been robust; almost 300,000 jobs were added in the quarter to May, leaving unemployment at just 3.8%.
However, adjusted for inflation, pay excluding bonuses fell by the most since records began in 2001. Another such reading may emerge on Tuesday, just as rail workers prepare for more of the strikes that have paralyzed public transport this summer.
(5) Small central banks show us their updated monetary policy hands.
Tight labor markets in New Zealand and Australia are making it difficult for both the inscrutable Reserve Bank of New Zealand and the more vocal Reserve Bank of Australia to find a middle ground on rate hikes.
Investors are certain RBNZ Governor Adrian Orr is not yet ready to compromise on inflation and will raise rates by another 50 basis points on Wednesday, notwithstanding the slight easing of inflation expectations and cooling property prices.
What the RBNZ signals about wage growth could sway current expectations for a peak policy rate of 4% early next year.
Second-quarter wages data in Australia is due the same day, and anecdotal signs suggest the tightest labor market in five decades also will set the RBA up for 50 bps next month, and for 225 bps of tightening in four months – a pace unseen since the 1990s.
Norway’s central bank, meanwhile, is expected to hike rates when it meets on Thursday. It raised rates by 50 bps in June and some economists expect big hikes in August and September.
Top Zacks #1 Rank (STRONG BUY) Stocks
Three large-cap tech stocks made it onto our #1 list.
Substantially, these three picks show us fundamental earnings improvement. I listed them from the cheapest to the most expensive.
(1) ST Microelectronics (STM - Free Report) : This is a $38 general semiconductor stock, with a market cap of $34.2B. I see a Zacks Value score of B, a Zacks Growth score of B and a Zacks Momentum score of A.
(2) Arista Networks (ANET - Free Report) : This is a $126 cloud networking solutions tech stock, with a market cap of $38.3B. I see a Zacks Value score of F, a Zacks Growth score of D and a Zacks Momentum score of B.
(3) EPAM Systems (EPAM - Free Report) : This is a $435 software engineering and IT consulting stock, with a market cap of $100.4B. I see a Zacks Value score of F, a Zacks Growth score of B and a Zacks Momentum score of A.
Is this a bear market rally on tech stocks? The Zacks Momentum (A, B, A) scores are notably good for all three #1 picks.
Key Global Macro
On Monday, Mainland China’s House Price Index for July is out. Its headline came in at -0.9%, while the prior month showed -0.5%. Is there a real estate crisis going on there?
Mainland China’s retail sales for July are disappointing, too: +2.7% on headline was supposed to rise to +5% y/y from a prior +3.1% y/y rate.
On Tuesday, the U.K.’s ILO unemployment rate should be steady at 3.8%. That is very similar to the U.S. 3.5% household unemployment rate showing for July already.
On Wednesday, the Bank of New Zealand gives us a policy rate decision. It is already at 2.5%, in sync with the U.S. Fed. Small CB’s can serve as a Fed bellwether.
The core CPI for the U.K. should be +6.4% y/y in July, up from +5.8% y/y in June.
On Thursday, the Euro Area HICP (the key broad consumer inflation rate there) for July should be +8.9% y/y, the same as last month.
Ex F, E, A, T (their core CPI subtraction acronym, not mine)? The Euro Area HICP goes to +4.0%.
U.S. existing home sales for July should be 4.85M, down from 5.12M the month prior.
On Friday, U.K. retail sales (ex-fuel) should be down -2.8% y/y in July. That is an improvement from the 05.9% y/y rate that showed up in June. But it is still negative.
Conclusion
I conclude this week’s Global Week Ahead with Zacks Research Director Sheraz Mian’s recap of the nearly-over Q2-22 earnings season.
Sheraz Mian’s four key points:
“The overall picture emerging from the Q2 earnings season has turned out to be good enough: not great, but not bad either. Importantly, Q2 results and guidance for the current and coming periods have turned out to be better relative to pre-season fears.”
“Estimates for the last two quarters of this year and for next year have started coming down, even though positive revisions to the Energy sector continue to partly offset negative revisions elsewhere.”
“The +2.4% earnings growth expected for the S&P 500 index in Q3-22 is down from +7.2% at the start of the period. Excluding the Energy sector, Q3 earnings are expected to be down -4% at present, a significant decline from +2.1% in the beginning of July.
“Looking at the calendar-year picture, total S&P 500 earnings are expected to be up +6.5% in 2022 and +7.3% in 2023. On an ex-Energy basis, total 2022 index earnings would be up +0.1% (instead of +6.5%, with Energy).”
“The overall corporate profitability picture emerging from the Q2 earnings season, with a little over 90% of S&P 500 results out, continues to show stability and resilience in key earnings drivers like consumer and business spending.”
Have a successful trading week!
Warm Regards,
John Blank
Zacks Chief Equity Strategist and Economist