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A Busy Start to 2024

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In the Global Week Ahead, this New Year begins the new month of January, a new S&P00 reporting quarter, and a new calendar year.

That makes for a busy start to 2024!

• On Friday, stock traders get the most closely watched U.S. macro release (DEC nonfarm payrolls).
• Also on Friday, key Euro Area consumer price inflation data hits the tape.

Hopes remain high for big central banks to start cutting their short-term policy rates soon. With these fresh and important macro prints, euphoric financial markets could soon be tested.

In Asia, timing a Bank of Japan (BoJ) lift-off from a negative policy rate stays in focus.

Next are Reuters’ five world market themes, reordered for equity traders--

(1) The VIX stock options volatility index has hit three-year lows.

What goes up, must come down.

Rate-cut exuberance means markets start the new year on a high - stocks are at their highest in over a year, government bond yields are at multi-month lows.

Perhaps complacency is too strong given elevated geopolitical risks, the prospects for corporate defaults to rise and key elections starting with Taiwan on Jan 13th.

The VIX index, a well-known market fear gauge, hit over three-year lows in December, and the MOVE Treasury market volatility indicator is well below a March peak.

The coming days will put investor confidence to the test. And if a new year is a moment to reflect on a year gone by, don't forget the curve balls (banking crisis, Hamas-Israel war, Argentine election result) that caught many by surprise.

(2) On Friday, the DEC 2023 U.S. nonfarm jobs number arrives.

The health of the U.S. jobs market is crucial to gauging whether a Goldilocks scenario continues into 2024, putting Friday's December non-farm payrolls report in the spotlight.

Economic growth has cooled and inflation has eased, fueling a massive cross-asset rally and allowing the Federal Reserve to pencil in more rate cuts for 2024. At the same time, the economy has shown little evidence that months of tighter monetary policy are spawning a severe downturn.

Signs of deviation from that scenario - in the form of exceedingly strong jobs growth or a sudden drop in employment - could shake investors’ confidence in a soft landing.

Economists polled by Reuters expect the U.S. economy added +158K jobs in December versus +199K in November.

(3)  Also on Friday, the Euro Area DEC consumer inflation numbers arrive.

For all the joy in markets, data also out on Friday is expected to show euro zone inflation accelerated in December for the first time since April.

A Reuters poll sees it jumping to 3% from 2.4% in November, snapping a sharp drop which saw inflation undershoot expectations for three straight months.

Economists reckon the rise will largely result from energy support measures a year ago, particularly in Germany, where the government had covered household gas bills, meaning a lower "base" to which December 2023 prices are compared.

So, investors will have to sift through the data to assess how current price pressures are evolving. Any surprise higher would unnerve traders, who are expecting more than six quarter-point ECB rate cuts in 2024.

The good news: core inflation, excluding volatile food and energy prices, should continue dropping. The narrowest measure is seen falling to 3.4%, which would be the lowest since March 2022.

(4) What is the next Bank of Japan (BoJ) move?

Building bets for an imminent end to the Bank of Japan's negative rates policy were batted back in December, when it stuck to a resolutely dovish stance.

Yet Governor Kazuo Ueda, with a penchant for the unexpected, offered a tantalizing morsel to hawks, saying that "generally speaking" a stimulus exit could include an element of surprise.

So, while the surface message continues to be one of patience, borne out by data showing inflationary pressures waning, comments from the BOJ ahead of its Jan. 23 meeting are in focus.

In fact, in a Dec. 27th interview, Ueda hinted again that the results of spring wage negotiations are not essential to a hawkish shift, and that "quite a lot of information" could be gleaned from the BOJ's regional branch manager meeting in mid-January.

(5) Would Mainland China’s +5.0% GDP growth target for 2024 be a serious one?

With China's economy on track to meet Beijing's 5% growth goal in 2023, government advisers seem confident in calling for the same target in 2024.

A big issue, though, is that there won't be the same flattering annual comparison with the COVID-lockdown slump of 2022.

That means tough choices for policymakers, particularly around loading up on more debt, as Beijing struggles to shift from construction-led development to consumption-fueled growth.

A private-sector survey on Tuesday showed China's factory activity expanded at a quicker pace last month, while official data over the weekend showed manufacturing activity shrank for a third straight month in December.

Investors, expecting more stimulus, will be watching China headlines closely. Domestic demand is still tepid and the property market, where 70% of household wealth is parked, is teetering near collapse.

Official growth targets won't be announced until March, but what measures emerge before then will say a lot about China's strategy - and the risks of falling foul of a Moody's threat for a ratings downgrade.

Zacks #1 Rank (STRONG BUY) Stocks:

Let’s look at three major retail spending stocks to start the New Year.

(1) Molson Coors (TAP - Free Report) : This is a $61 stock in the Alcoholic Beverages industry. It has a market cap of $13.2B. I see a Zacks Growth score of A, a Zacks Value score of C, and a Zacks Momentum score of D.

Zacks Investment Research
Image Source: Zacks Investment Research  
Molson Coors Beverage Company, previously known as Molson Coors Brewing Company, was formed by the merger of Molson Inc. and Adolph Coors Co. in February 2005.

The global manufacturer and seller of beer and other beverage products has an impressive diverse portfolio of owned and partner brands. These brands include global priority brands such as Blue Moon, Miller Lite, CoorsBanquet, Coors Light, Miller Genuine Draft and Staropramen; as well as regional champion brands like Carling, Molson Canadian. The company also boasts some other major country-specific brands, along with craft and specialty beers, namely, Creemore Springs, Henry's Hard, Cobra, Doom Bar and Leinenkugel's.

Molson Coors crafts high-quality, innovative products with an aim of delighting the world's beer drinkers, thus targeting to become the first choice for its consumers. Its brands are designed to resonate well with consumer tastes and preferences, styles and prices. Its largest markets are the United States, Canada and Europe.

Molson Coors remains well on track with its First Choice plan. This strategy aims at solidifying and preimmunizing portfolio, enhancing customer relations and generating significant profits from international businesses via enhanced capability, productivity and continued cost savings.

The company operates in two segments:

Americas: The Americas business unit includes operations in the United States, Canada and various countries in the Caribbean, Latin and South America. The segment contributed nearly 81.4% to its net sales in 2022.

EMEA & APAC: The Europe unit includes operations in Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, the Republic of Ireland, Romania, Serbia, the U.K., various other European countries and certain countries within the Middle East, Africa and Asia Pacific. The segment contributed nearly 18.6% to net sales in 2022.

(2) Casey’s General Stores (CASY - Free Report) : This is a $275 stock in the Retail Convenience Store industry. It has a market cap of $10.2B. I see a Zacks Growth score of B, a Zacks Value score of B, and a Zacks Momentum score of B.

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Founded in 1959 and based in Ankeny, IA, Casey's General Stores, Inc. operates convenience stores under the Casey's and Casey's General Store names in 16 states, mainly Iowa, Missouri and Illinois. As of Jul 31, 2023, there were a total of 2,536 stores in operation.

Casey's offers a comprehensive range of products and services to meet the needs of its customers. In addition to fuel, the stores provide a wide variety of merchandise, including groceries, prepared food, snacks, beverages, tobacco products, health and beauty aids, school supplies, housewares, pet supplies and automotive supplies.

Casey's is known for its signature made-from-scratch pizza, which has gained a dedicated following among customers. As of Jul 31, 2023, 216 store locations offered car washes. All but seven Casey's Stores offer fuel for sale on a self-service basis.

Casey's has also made significant strides in embracing digital technologies to enhance customer experiences. The company offers a mobile app and online ordering capabilities, allowing customers to easily order food, locate stores, and access exclusive deals and promotions.

The company primarily derives revenues under the following categories —

• Fuel (66.3% of Q2 FY24 total revenues)
• Grocery & General Merchandise (24.1% of Q2 FY24 total revenues)
• Prepared Food & Dispensed Beverage (9.6% of Q2 FY24 total revenues)
• Other category accounts for 1.9% of total revenues

Three distribution centers are in operation (in Ankeny, Iowa adjacent to the Store Support Center, in Terre Haute, Indiana and in Joplin, Missouri) from which grocery and general merchandise items as well as prepared food and dispensed beverage items are supplied to stores. As of fiscal 2023 end, the company has a fleet of 397 tractors used for distribution.

(3) e.l.f. Beauty (ELF - Free Report) : This is a $144 stock in the Cosmetics industry. It has a market cap of $8.0B. I see a Zacks Growth score of F, a Zacks Value score of C, and a Zacks Momentum score of F.

Zacks Investment Research
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e.l.f. Beauty, Inc. operates as a cosmetic company. Its cosmetic category primarily consists of face makeup, eye makeup, lip products, nail products and cosmetics sets/kits, excludes beauty tools and accessories, such as brushes and applicators.

e.l.f. Beauty, Inc. is based in Oakland, United States.

Given the Zacks Share Price, Earnings and EPS Surprise charts of these three major U.S. retail players?

Entering 2024, the U.S. consumer appears quite robust.

Key Global Macro

On Monday, Mainland China’s Caixin manufacturing PMI for DEC came out at 50.8. The consensus was for 50.4.

On Tuesday, the final HCOB Euro Area manufacturing PMI for DEC was 44.4. The consensus was for 44.2.

The S&P 500 U.S. global manufacturing PMI should be 48.2 for DEC.

On Wednesday, U.S. JOLTS jobs openings for DEC should rise to 8.85M from 8.73M in NOV. The U.S. labor markets remain tight.

The ISM manufacturing PMI for DEC should be 47.1, rising from aa 46.7 print in NOV.

FOMC minutes from the latest meeting come out.

On Thursday, U.S. ADP private payrolls should rise +113K in DEC, after rising +103K in NOV.

On Friday, the flash Euro Area broad consumer inflation rate should be +3.0% y/y in DEC, after a +2.4% print in NOV. The core CPI should be +3.5% after a +3.6% prior print.

U.S. nonfarm payrolls for DEC should be +163K, after +199K was seen in NOV. That labor market data still looks solid too.

U.S. household unemployment should tick up to 3.8% in DEC from 3.7% in NOV.


Let’s finish with a short update, on the upcoming Q4-23 S&P500 earnings season.

Zacks Research Director Sheraz Mian shared his update on Dec. 29th, 2023—

“Q4-23 earnings are expected to be down -0.4% on +2.3% higher revenues. This follows the +3.8% earnings growth reading in Q3-23, and three back-to-back quarters of declining earnings before that.”

“The Q4 reporting cycle will really get going when the big banks start reporting their results on January 12th.”

“But the earnings season has actually gotten underway already, with results from 17 S&P 500 members out through Friday, December 29th.”

“All of these 17 index members, including bellwethers like FedEx, Nike, Costco, and others, have reported results for their fiscal quarters ending in November. We count all such November-quarter results as part of our December-quarter tally.”

“We have another four S&P500 members on deck to come out with their fiscal November-quarter results in the first week of the New Year.”

“These include Conagra (CAG), Lamb Weston (LW), and Walgreens Boots Alliance (WBA) on Thursday, January 4th, and Constellation Brands (STZ) on Friday, January 5th.”

Have a great start to the New Year!

Warm Regards,

John Blank
Zacks Chief Equity Strategist and Economist


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