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, Q4 earnings season kicks off.
After that, a raft of global macro data should shed light on some of those trends and tribulations.
Reuters writes: “A potential shift by the world's most dovish major central bank, inflation pressures abating, a turn in the economic outlook and oil markets suffering their biggest tumble in decades: Welcome to 2023!”
(1) From the USA, Q4 Earnings Season and Consumer Price Inflation
The week ahead brings a critical read into two key themes for Wall Street in 2023: the health of corporate profits and inflation.
Corporate America starts reporting fourth-quarter results and investors will be looking for signs of a potential economic slowdown filtering through to companies' bottom lines.
Consensus analyst estimates call for a -1.6% decline in S&P 500 Q4 earnings versus the year-ago period, according to Refinitiv IBES. Some reckon 2023 projections are still too rosy given recession risks.
Meanwhile, the December U.S. Consumer Price Index (CPI) is out on Thursday. Any signs that inflation continues to ease will not only reinforce the "peak rates" view, but could fuel talk that rate cuts could come later this year.
(2) On Tuesday, CPI numbers from Japan
Investors will have a keen eye on Tokyo's inflation numbers on Tuesday, the data point that first tipped the market to a potential Bank of Japan (BOJ) policy shift.
The Tokyo data — which front-runs the national numbers, often by several weeks — surged to a four-decade high in the previous reading on Nov. 25.
Less than a month later, the BOJ raised the tolerance ceiling for Japan's 10-year government bond yield, catching market players wrong-footed.
The yen has strengthened to seven-month highs on rising expectations for a further hawkish shift, even as BOJ officials maintain the move was a one-off. Their next policy decision comes on Jan. 18.
Australia's inflation data follows on Wednesday, and could be crucial for a Reserve Bank board that is finely poised between pausing rate hikes and accelerating them.
(3) Crude oil markets selling off
Crude oil markets are off to a rocky start, kicking off 2023 with a near double-digit tumble in the worst start to a year in three decades. The outlook is far from certain.
Worries about a recession, especially in the world's top two consumers — the United States and China, weigh heavily.
But potential supply chain problems could provide support. Insuring vessels to ship Kazakh crude, a replacement option for Russian crude for European consumers, via the Black Sea could prove more expensive and challenging. A waiver for Russian oil shipments subject to a price cap introduced in early December runs out on Jan. 19. After that, sanctions kick in for shipments breaching regulations.
With crude oil volatility soaring, 2023 might be anything but plain sailing for producers and consumers alike.
(4) On Friday, big U.K. macro data dump
Transport and public sector strikes, a softening housing market, red-hot inflation and consumers too fearful to spend. That's the backdrop for November UK economic output data on Friday, likely confirming that a lengthy recession is coming.
Following nine consecutive rate rises by the Bank of England, and more to come, British mortgage approvals sunk to their lowest level in November since the coronavirus-induced market slump of June 2020, recent data showed.
As price pressures and higher borrowing costs bite, Prime Minister Rishi Sunak has pledged to halve inflation, grow the economy, reduce public debt and cut health service waiting lists.
Still, Deutsche Bank sees high inflation persisting this year, no rate cuts until 2024 and fiscal policies becoming more austere. Barclays expects the UK economy to keep contracting until the end of the third quarter of 2023.
(5) What of Europe’s economy? Any green shoots?
For the euro area at least, the first green shoots of economic hope are emerging.
Inflation is tumbling, thanks to a decline in wholesale natural gas and power prices. Gas storage tanks boast healthy inventory levels and temperatures are mild, after a vicious cold snap in early December.
Dutch natural gas futures, a benchmark for the region, have wiped out all the gains made after Russia's invasion of Ukraine last February.
It takes time for declines in market prices to filter through into household bills, but signs are positive for cash-strapped consumers and businesses. Average fuel prices are down sharply from the highs of mid-2022 as well.
Economic recovery may still be a way off but the anticipated recession might not be quite as bad as expected — gas prices and data releases in coming days will no doubt be watched closely.
Top Zacks #1 Rank (STRONG BUY) Stocks
Here are three European large-cap names, on our #1 list this week:
(1) Novo Nordisk (NVO - Free Report) : This is a $139 a share large-cap pharma stock, with a market cap of $313.7B. I see a Zacks Value score of D, a Zacks Growth score of A and a Zacks Momentum score of A.
(2) SAP (SAP - Free Report) : This is a $109 a share computer software stock, with a market cap of $128.7B. I see a Zacks Value score of D, a Zacks Growth score of F and a Zacks Momentum score of C.
(3) Stellantis (STLA - Free Report) : This is a $15 a share auto stock, with a market cap of $48.4B. I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks Momentum score of B.
Key Global Macro
On Thursday at 8:30 am ET, the U.S. CPI report is the major macro print this week.
On Monday, the BoE’s Pill give a speech, and the Fed’s Bostic gives a speech.
On Tuesday, mainland China’s FDI for DEC comes out. +9.9% y/y was the prior.
The U.S. small business NFIB business optimism index for DEC comes out. 91.9 was the prior reading.
Fed Chair Powell gives a speech.
On Wednesday, mainland China’s CPI for DEC comes out. +1.6% y/y was the prior.
On Thursday, the U.S. CPI for DEC comes out. +7u.1% y/y was the broad prior mark. +6.0% was the core prior reading.
On Friday, the University of Michigan consumer sentiment comes out for JAN. I see a 61.6 is the call, versus a prior reading of 59.7.
Conclusion
Here is what Zacks Research Director Sheraz Mian had for us on the Q4 earnings season:
(1) Q4-2022 earnings are expected to be down -5.6% on +4.3% higher revenues.
Keep in mind that the growth pace is in negative territory despite the strong contribution from the Energy sector.
(2) Excluding the Energy sector, Q4-2022 earnings for the rest of the S&P500 index would be down -10.2% from the same period last year.
Analysts have been steadily lowering their estimates for Q4, a trend that we saw ahead of the start of the Q4 earnings season. Estimates for full-year 2023 have also been coming down.
(3) As we have been pointing out all along, 2023 earnings estimates outside of the Energy sector peaked in April and have been coming down ever since.
Since the mid-April peak, aggregate earnings have declined by -8.8% for the index as a whole and -11.7% for the index on an ex-Energy basis.
(4) Of the 16 Zacks sectors, 2023 estimates have come down for 13 sectors.
The biggest cuts to estimates came from:
Construction (down -27%)
Consumer Discretionary (-20.3%)
Retail (-19.8%)
Technology (-19.1%)
Basic Materials (-14.4%)
Aerospace (-13.9%)
Industrial Products (-13.8%), and
Transportation (-10.2%)
You have likely read about the roughly -20% cuts to S&P 500 earnings estimates, on average, in response to recessions.
That’s it for me.
Happy trading and investing!
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
Q4 Earnings Season: Global Week Ahead
In the Global Week Ahead, Q4 earnings season kicks off.
After that, a raft of global macro data should shed light on some of those trends and tribulations.
Reuters writes: “A potential shift by the world's most dovish major central bank, inflation pressures abating, a turn in the economic outlook and oil markets suffering their biggest tumble in decades: Welcome to 2023!”
(1) From the USA, Q4 Earnings Season and Consumer Price Inflation
The week ahead brings a critical read into two key themes for Wall Street in 2023: the health of corporate profits and inflation.
Corporate America starts reporting fourth-quarter results and investors will be looking for signs of a potential economic slowdown filtering through to companies' bottom lines.
Friday alone sees results from banks Wells Fargo (WFC - Free Report) and Citigroup (C - Free Report) , healthcare titan UnitedHealth Group (UNH - Free Report) , asset manager BlackRock (BLK - Free Report) and Delta Air Lines (DAL - Free Report) .
Consensus analyst estimates call for a -1.6% decline in S&P 500 Q4 earnings versus the year-ago period, according to Refinitiv IBES. Some reckon 2023 projections are still too rosy given recession risks.
Meanwhile, the December U.S. Consumer Price Index (CPI) is out on Thursday. Any signs that inflation continues to ease will not only reinforce the "peak rates" view, but could fuel talk that rate cuts could come later this year.
(2) On Tuesday, CPI numbers from Japan
Investors will have a keen eye on Tokyo's inflation numbers on Tuesday, the data point that first tipped the market to a potential Bank of Japan (BOJ) policy shift.
The Tokyo data — which front-runs the national numbers, often by several weeks — surged to a four-decade high in the previous reading on Nov. 25.
Less than a month later, the BOJ raised the tolerance ceiling for Japan's 10-year government bond yield, catching market players wrong-footed.
The yen has strengthened to seven-month highs on rising expectations for a further hawkish shift, even as BOJ officials maintain the move was a one-off. Their next policy decision comes on Jan. 18.
Australia's inflation data follows on Wednesday, and could be crucial for a Reserve Bank board that is finely poised between pausing rate hikes and accelerating them.
(3) Crude oil markets selling off
Crude oil markets are off to a rocky start, kicking off 2023 with a near double-digit tumble in the worst start to a year in three decades. The outlook is far from certain.
Worries about a recession, especially in the world's top two consumers — the United States and China, weigh heavily.
But potential supply chain problems could provide support. Insuring vessels to ship Kazakh crude, a replacement option for Russian crude for European consumers, via the Black Sea could prove more expensive and challenging. A waiver for Russian oil shipments subject to a price cap introduced in early December runs out on Jan. 19. After that, sanctions kick in for shipments breaching regulations.
With crude oil volatility soaring, 2023 might be anything but plain sailing for producers and consumers alike.
(4) On Friday, big U.K. macro data dump
Transport and public sector strikes, a softening housing market, red-hot inflation and consumers too fearful to spend. That's the backdrop for November UK economic output data on Friday, likely confirming that a lengthy recession is coming.
Following nine consecutive rate rises by the Bank of England, and more to come, British mortgage approvals sunk to their lowest level in November since the coronavirus-induced market slump of June 2020, recent data showed.
As price pressures and higher borrowing costs bite, Prime Minister Rishi Sunak has pledged to halve inflation, grow the economy, reduce public debt and cut health service waiting lists.
Still, Deutsche Bank sees high inflation persisting this year, no rate cuts until 2024 and fiscal policies becoming more austere. Barclays expects the UK economy to keep contracting until the end of the third quarter of 2023.
(5) What of Europe’s economy? Any green shoots?
For the euro area at least, the first green shoots of economic hope are emerging.
Inflation is tumbling, thanks to a decline in wholesale natural gas and power prices. Gas storage tanks boast healthy inventory levels and temperatures are mild, after a vicious cold snap in early December.
Dutch natural gas futures, a benchmark for the region, have wiped out all the gains made after Russia's invasion of Ukraine last February.
It takes time for declines in market prices to filter through into household bills, but signs are positive for cash-strapped consumers and businesses. Average fuel prices are down sharply from the highs of mid-2022 as well.
Economic recovery may still be a way off but the anticipated recession might not be quite as bad as expected — gas prices and data releases in coming days will no doubt be watched closely.
Top Zacks #1 Rank (STRONG BUY) Stocks
Here are three European large-cap names, on our #1 list this week:
(1) Novo Nordisk (NVO - Free Report) : This is a $139 a share large-cap pharma stock, with a market cap of $313.7B. I see a Zacks Value score of D, a Zacks Growth score of A and a Zacks Momentum score of A.
(2) SAP (SAP - Free Report) : This is a $109 a share computer software stock, with a market cap of $128.7B. I see a Zacks Value score of D, a Zacks Growth score of F and a Zacks Momentum score of C.
(3) Stellantis (STLA - Free Report) : This is a $15 a share auto stock, with a market cap of $48.4B. I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks Momentum score of B.
Key Global Macro
On Thursday at 8:30 am ET, the U.S. CPI report is the major macro print this week.
On Monday, the BoE’s Pill give a speech, and the Fed’s Bostic gives a speech.
On Tuesday, mainland China’s FDI for DEC comes out. +9.9% y/y was the prior.
The U.S. small business NFIB business optimism index for DEC comes out. 91.9 was the prior reading.
Fed Chair Powell gives a speech.
On Wednesday, mainland China’s CPI for DEC comes out. +1.6% y/y was the prior.
On Thursday, the U.S. CPI for DEC comes out. +7u.1% y/y was the broad prior mark. +6.0% was the core prior reading.
On Friday, the University of Michigan consumer sentiment comes out for JAN. I see a 61.6 is the call, versus a prior reading of 59.7.
Conclusion
Here is what Zacks Research Director Sheraz Mian had for us on the Q4 earnings season:
(1) Q4-2022 earnings are expected to be down -5.6% on +4.3% higher revenues.
Keep in mind that the growth pace is in negative territory despite the strong contribution from the Energy sector.
(2) Excluding the Energy sector, Q4-2022 earnings for the rest of the S&P500 index would be down -10.2% from the same period last year.
Analysts have been steadily lowering their estimates for Q4, a trend that we saw ahead of the start of the Q4 earnings season. Estimates for full-year 2023 have also been coming down.
(3) As we have been pointing out all along, 2023 earnings estimates outside of the Energy sector peaked in April and have been coming down ever since.
Since the mid-April peak, aggregate earnings have declined by -8.8% for the index as a whole and -11.7% for the index on an ex-Energy basis.
(4) Of the 16 Zacks sectors, 2023 estimates have come down for 13 sectors.
The biggest cuts to estimates came from:
You have likely read about the roughly -20% cuts to S&P 500 earnings estimates, on average, in response to recessions.
That’s it for me.
Happy trading and investing!
John Blank
Zacks Chief Equity Strategist and Economist