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A batch of key economic data will shed fresh light on whether the United States is staving off a downturn given Federal Reserve rate hikes.
Tuesday's Retail Sales data will gauge the health of consumer spending, which accounts for more than two-thirds of economic activity.
Retail sales fell more than expected in March, as consumers cut back on buying motor vehicles and other big-ticket items.
Reports are also due on Industrial Production and Housing Starts, while the Philadelphia Fed manufacturing survey could also influence asset prices this week.
Data on Wednesday showed annual U.S. consumer inflation slowed to below 5% in April for the first time in two years.
Still, inflation remained well above the Fed's 2% target.
(2) Fresh Macro Data Arrives for Europe, Too
The week ahead brings current and historic assessments of euro area economic growth, with Q1 GDP data and the influential ZEW Institute surveys of business conditions and sentiment in European power house economy Germany.
Economists polled by Reuters expect to see the "flash" estimate will show the euro area eked out growth of just 0.1% in the three months to March.
Some economists say stagnation has continued and could result in a recession later this year.
Euro area monetary indicators, such as credit demand, point to steep declines in consumption and investment. Household savings rates are rising as borrowing falls.
None of this is guaranteed to dissuade the European Central Bank from continuing to raise rates, as core inflation, at +5.6% in April, remains too far above its 2.0% target to overlook.
(3) Yellen in Spotlight, at the G7 Finance Minister Summit in Japan
Janet Yellen has a three-pronged focus for the G7 finance ministers meeting under way in Niigata, Japan: tackling global inflation, bolstering long-term growth and redoubling support for Ukraine.
But many of her colleagues may well be asking her how a potentially disastrous U.S. default can be averted.
The U.S. Treasury Secretary delayed the start of her trip to devote more time to tackling the issue. However, bipartisan divides run deep, and President Joe Biden has hinted he may not even make it to Hiroshima for the G7 leaders meeting the following weekend.
That would complicate a reported side summit with Japan and South Korea on strengthening security cooperation.
Host nation Japan has more at stake than many in this standoff: It is the largest foreign holder of U.S. debt.
(4) Turkey’s Long-Time President Erdogan On the Ropes
President Tayyip Erdogan has ruled Turkey with a firm grip for more than two decades. He faced a tight race against opposition rival Kemal Kilicdaroglu when the 85-million-people strong nation voted on Sunday.
Their first contest ended with neither getting 50% of the vote. A runoff happens on May 28th.
Polls suggested Kilicdaroglu had a chance, as many Turks are disenchanted with Erdogan, whose unorthodox economic and monetary policy has left them with a sharp decline in living standards, battered by crippling inflation and facing a collapsing lira.
There was also widespread dissatisfaction over how the government responded to a February earthquake that killed more than 50,000 people and left millions homeless.
Erdogan could yet prevail given a strong support base in the devout working-class Anatolian heartland. Even if he doesn't, it's hard to envisage the feisty politician quietly bowing out of office.
Whoever wins has a challenging task to get the economy back on track.
(5) Russia & Ukraine Must Renegotiate Grain Export Deal
Russia and Ukraine have until May 18th to extend the Black Sea grain deal, which last year allowed the safe passage of Ukrainian exports to help tackle a global food crisis.
The two sides could extend the agreement, but Russia says it will walk unless its demands to remove obstacles to its own exports are met. The two are among the world's biggest exporters and supply some of the poorest countries.
Since Russia invaded Ukraine, wheat futures have dropped by more than 50% from record highs. World food prices have cooled off and the upcoming global harvest is projected to be healthy. That suggests an interruption might not have the same impact as the initial blockade.
But the price of staples such as bread remain sky-high.
Bread in the European Union cost almost 20% more in March than a year ago. It's far worse in the developing world, where a larger share of household incomes are spent on food.
Zacks #1 Rank (STRONG BUY) Stocks
Next are 3 large-cap consumer-oriented stocks, showing Zacks Growth ratings of B.
(1) McDonald's (MCD - Free Report) : Another shockingly high $295 sticker price is found in the currently hot Retail-Restaurants industry.
The market cap is $217B. The Zacks Value score is F, the Zacks Growth score is B.
Founded in 1948, Chicago-based McDonald’s is a leading fast-food chain that currently operates more than 39,000 restaurants in more than 100 countries.
The company mainly operates and franchises quick-service restaurants (QSRs) under the McDonald’s brand. Nearly 93% of the company’s restaurant worldwide are owned and operated by independent local business men as well as women.
The company’s revenues include sales by company-operated restaurants and fees from restaurants, which are managed by franchisees.
(2) Booking Holdings (BKNG - Free Report) : This is a $2,656 stock in the Retail-Wholesale Internet Commerce industry.
The market cap is $98B. The Zacks Value score is C, the Zacks Growth score is A.
Norwalk, CT-based Booking Holdings Inc. is one of the largest online travel companies in the world.
The company’s travel-related offerings cover hotel rooms, airline tickets, rental cars, vacation packages, cruises, “things to do” at customer destinations and travel insurance.
The company has agreements with hotels, airlines companies, cruise ships, transport companies and vacation providers, which enable it to accept bookings on their behalf.
Information on these offerings and customer reviews are available on the company’s owned or operated websites, thus helping customers take informed decisions.
(3) Marriott International (MAR - Free Report) : This is a $174 stock in the Consumer Discretionary- Hotels and Motels industry.
The market cap is $53B. The Zacks Value score is C, the Zacks Growth score is B.
Marriott International Inc. is a leading worldwide hospitality company focused on lodging management and franchising, after the spin-off of its timeshare business into a publicly-traded company in Nov 2011.
During fourth-quarter 2022, the company added 145 new properties (22,589 rooms) to its worldwide lodging portfolio. At the end of fourth-quarter 2022, Marriott's development pipeline totaled 3,028 hotels, with approximately 496,000 rooms. Nearly 199,000 rooms were under construction.
As of Feb 14th, 2023, the company operated, franchised and acted as a licensor of hotels and timeshare properties to more than 8,100 properties across 138 countries and territories under 30 brand names.
Once again, with Zacks Value ratings of F, C and C?
You pay up for strong Zacks Growth stocks.
Key Global Macro
This looks to be a major trading week — for focusing on macro data.
On Monday, the European Commission releases Economic Growth Forecasts.
On Tuesday, the Euro Area’s preliminary Q1-23 real GDP growth rate should be +1.3% y/y, after printing +1.3% y/y in Q4-22.
Mainland China’s Retail Sales should be up +20.1% y/y in April, after printing +10.6% y/y in March. A big post-COVID rebound.
The Mainland China Industrial Production growth at +10.1% y/y for April looks very strong too. The prior read was +3.9% y/y.
U.S. Retail Sales ex-Autos should be +0.5% m/m for April, after a -0.4% m/m print in March.
Canada’s CPI for April should be +3.7% y/y, down from +4.3% y/y in the prior month.
On Wednesday, the Euro Area’s core HICP consumer inflation reading for April should be +5.6% y/y, in line with the prior print at +5.6% y/y. Broad HICP should be +7.0% y/y.
On Thursday, U.S. continuing jobless claims will remain a key focus, now that they are rising. Last week’s data showed 264K.
U.S. Existing Home Sales for April should be 4.35M, after printing 4.44M the month prior.
On Friday, Germany’s PPI for April should be -4.5% m/m, down sharply from a -2.6% m/m print the month prior.
We get the latest Baker Hughes Oil Rig Counts.
Conclusion
I end with Zacks Research Director Sheraz Mian’s May 10th Update—
Four Key Points:
(1) S&P500 earnings estimates for full-year 2023 appear to have reversed course lately, after consistently coming down for almost a year, since the April 2022 peak.
(2) Through the morning session of May 10th, we have seen Q1 results from 452 S&P500 members, or 90.4% of the index’s membership.
Total Q1 earnings for these 452 index members are down -4.0% on +4.5% higher revenues, with 77.2% beating EPS estimates and 75% beating revenue estimates.
(3) These S&P500 earnings aren’t great, but they aren’t bad either, given the uncertain macro backdrop and weak sentiment.
Importantly, the tone and substance of management commentary continue to be favorable enough, helping keep negative estimate revisions in check.
(4) The Q1 season has been one showing consumer spending resilience and stability.
Companies are not only beating estimates, but also providing a “good-enough” outlook in an uncertain macro environment.
This helps the revision trend to turn positive, after remaining negative for nearly a year!
Best of luck in your trading this week!
Warm Regards,
John Blank Zacks Chief Equity Strategist and Economist
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Fresh Macro Data Looks Key: Global Week Ahead
The Global Week Ahead holds many key macro prints.
As to events?
On Sunday, voters in Turkey headed to the polls to select a new President.
Ahead of us, this trading week shows key deadlines:
Next are Reuters five world market themes, reordered for equity traders--
(1) Fresh U.S. Macro Data: Retail Sales, Industrial Production, Housing Starts
A batch of key economic data will shed fresh light on whether the United States is staving off a downturn given Federal Reserve rate hikes.
Tuesday's Retail Sales data will gauge the health of consumer spending, which accounts for more than two-thirds of economic activity.
Retail sales fell more than expected in March, as consumers cut back on buying motor vehicles and other big-ticket items.
Reports are also due on Industrial Production and Housing Starts, while the Philadelphia Fed manufacturing survey could also influence asset prices this week.
Data on Wednesday showed annual U.S. consumer inflation slowed to below 5% in April for the first time in two years.
Still, inflation remained well above the Fed's 2% target.
(2) Fresh Macro Data Arrives for Europe, Too
The week ahead brings current and historic assessments of euro area economic growth, with Q1 GDP data and the influential ZEW Institute surveys of business conditions and sentiment in European power house economy Germany.
Economists polled by Reuters expect to see the "flash" estimate will show the euro area eked out growth of just 0.1% in the three months to March.
Some economists say stagnation has continued and could result in a recession later this year.
Euro area monetary indicators, such as credit demand, point to steep declines in consumption and investment. Household savings rates are rising as borrowing falls.
None of this is guaranteed to dissuade the European Central Bank from continuing to raise rates, as core inflation, at +5.6% in April, remains too far above its 2.0% target to overlook.
(3) Yellen in Spotlight, at the G7 Finance Minister Summit in Japan
Janet Yellen has a three-pronged focus for the G7 finance ministers meeting under way in Niigata, Japan: tackling global inflation, bolstering long-term growth and redoubling support for Ukraine.
But many of her colleagues may well be asking her how a potentially disastrous U.S. default can be averted.
The U.S. Treasury Secretary delayed the start of her trip to devote more time to tackling the issue. However, bipartisan divides run deep, and President Joe Biden has hinted he may not even make it to Hiroshima for the G7 leaders meeting the following weekend.
That would complicate a reported side summit with Japan and South Korea on strengthening security cooperation.
Host nation Japan has more at stake than many in this standoff: It is the largest foreign holder of U.S. debt.
(4) Turkey’s Long-Time President Erdogan On the Ropes
President Tayyip Erdogan has ruled Turkey with a firm grip for more than two decades. He faced a tight race against opposition rival Kemal Kilicdaroglu when the 85-million-people strong nation voted on Sunday.
Their first contest ended with neither getting 50% of the vote. A runoff happens on May 28th.
Polls suggested Kilicdaroglu had a chance, as many Turks are disenchanted with Erdogan, whose unorthodox economic and monetary policy has left them with a sharp decline in living standards, battered by crippling inflation and facing a collapsing lira.
There was also widespread dissatisfaction over how the government responded to a February earthquake that killed more than 50,000 people and left millions homeless.
Erdogan could yet prevail given a strong support base in the devout working-class Anatolian heartland. Even if he doesn't, it's hard to envisage the feisty politician quietly bowing out of office.
Whoever wins has a challenging task to get the economy back on track.
(5) Russia & Ukraine Must Renegotiate Grain Export Deal
Russia and Ukraine have until May 18th to extend the Black Sea grain deal, which last year allowed the safe passage of Ukrainian exports to help tackle a global food crisis.
The two sides could extend the agreement, but Russia says it will walk unless its demands to remove obstacles to its own exports are met. The two are among the world's biggest exporters and supply some of the poorest countries.
Since Russia invaded Ukraine, wheat futures have dropped by more than 50% from record highs. World food prices have cooled off and the upcoming global harvest is projected to be healthy. That suggests an interruption might not have the same impact as the initial blockade.
But the price of staples such as bread remain sky-high.
Bread in the European Union cost almost 20% more in March than a year ago. It's far worse in the developing world, where a larger share of household incomes are spent on food.
Zacks #1 Rank (STRONG BUY) Stocks
Next are 3 large-cap consumer-oriented stocks, showing Zacks Growth ratings of B.
(1) McDonald's (MCD - Free Report) : Another shockingly high $295 sticker price is found in the currently hot Retail-Restaurants industry.
The market cap is $217B. The Zacks Value score is F, the Zacks Growth score is B.
Founded in 1948, Chicago-based McDonald’s is a leading fast-food chain that currently operates more than 39,000 restaurants in more than 100 countries.
The company mainly operates and franchises quick-service restaurants (QSRs) under the McDonald’s brand. Nearly 93% of the company’s restaurant worldwide are owned and operated by independent local business men as well as women.
The company’s revenues include sales by company-operated restaurants and fees from restaurants, which are managed by franchisees.
(2) Booking Holdings (BKNG - Free Report) : This is a $2,656 stock in the Retail-Wholesale Internet Commerce industry.
The market cap is $98B. The Zacks Value score is C, the Zacks Growth score is A.
Norwalk, CT-based Booking Holdings Inc. is one of the largest online travel companies in the world.
The company’s travel-related offerings cover hotel rooms, airline tickets, rental cars, vacation packages, cruises, “things to do” at customer destinations and travel insurance.
The company has agreements with hotels, airlines companies, cruise ships, transport companies and vacation providers, which enable it to accept bookings on their behalf.
Information on these offerings and customer reviews are available on the company’s owned or operated websites, thus helping customers take informed decisions.
(3) Marriott International (MAR - Free Report) : This is a $174 stock in the Consumer Discretionary- Hotels and Motels industry.
The market cap is $53B. The Zacks Value score is C, the Zacks Growth score is B.
Marriott International Inc. is a leading worldwide hospitality company focused on lodging management and franchising, after the spin-off of its timeshare business into a publicly-traded company in Nov 2011.
During fourth-quarter 2022, the company added 145 new properties (22,589 rooms) to its worldwide lodging portfolio. At the end of fourth-quarter 2022, Marriott's development pipeline totaled 3,028 hotels, with approximately 496,000 rooms. Nearly 199,000 rooms were under construction.
As of Feb 14th, 2023, the company operated, franchised and acted as a licensor of hotels and timeshare properties to more than 8,100 properties across 138 countries and territories under 30 brand names.
Once again, with Zacks Value ratings of F, C and C?
You pay up for strong Zacks Growth stocks.
Key Global Macro
This looks to be a major trading week — for focusing on macro data.
On Monday, the European Commission releases Economic Growth Forecasts.
On Tuesday, the Euro Area’s preliminary Q1-23 real GDP growth rate should be +1.3% y/y, after printing +1.3% y/y in Q4-22.
Mainland China’s Retail Sales should be up +20.1% y/y in April, after printing +10.6% y/y in March. A big post-COVID rebound.
The Mainland China Industrial Production growth at +10.1% y/y for April looks very strong too. The prior read was +3.9% y/y.
U.S. Retail Sales ex-Autos should be +0.5% m/m for April, after a -0.4% m/m print in March.
Canada’s CPI for April should be +3.7% y/y, down from +4.3% y/y in the prior month.
On Wednesday, the Euro Area’s core HICP consumer inflation reading for April should be +5.6% y/y, in line with the prior print at +5.6% y/y. Broad HICP should be +7.0% y/y.
On Thursday, U.S. continuing jobless claims will remain a key focus, now that they are rising. Last week’s data showed 264K.
U.S. Existing Home Sales for April should be 4.35M, after printing 4.44M the month prior.
On Friday, Germany’s PPI for April should be -4.5% m/m, down sharply from a -2.6% m/m print the month prior.
We get the latest Baker Hughes Oil Rig Counts.
Conclusion
I end with Zacks Research Director Sheraz Mian’s May 10th Update—
Four Key Points:
(1) S&P500 earnings estimates for full-year 2023 appear to have reversed course lately, after consistently coming down for almost a year, since the April 2022 peak.
(2) Through the morning session of May 10th, we have seen Q1 results from 452 S&P500 members, or 90.4% of the index’s membership.
Total Q1 earnings for these 452 index members are down -4.0% on +4.5% higher revenues, with 77.2% beating EPS estimates and 75% beating revenue estimates.
(3) These S&P500 earnings aren’t great, but they aren’t bad either, given the uncertain macro backdrop and weak sentiment.
Importantly, the tone and substance of management commentary continue to be favorable enough, helping keep negative estimate revisions in check.
(4) The Q1 season has been one showing consumer spending resilience and stability.
Companies are not only beating estimates, but also providing a “good-enough” outlook in an uncertain macro environment.
This helps the revision trend to turn positive, after remaining negative for nearly a year!
Best of luck in your trading this week!
Warm Regards,
John Blank
Zacks Chief Equity Strategist and Economist