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Netflix, Tesla and Intel: Global Week Ahead

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In the Global Week Ahead, S&P500 earnings season gets more exciting, with a few Big Tech reports.

We shall also learn company specifics, about how turmoil in the Red Sea wreaks havoc on supply chains.

Big central banks kick off their 1st meetings of 2024 too. The Bank of Japan (BoJ) and European Central Bank (ECB) boards gather. In emerging markets, the CBs in Türkiye and South Africa take center stage.

On Wednesday, a large set of PMI snapshots land, showing traders how business activity held up in January.

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

(1) In the U.S., the Fed’s preferred DEC PCE inflation data lands late in the week.


Also happening: (MMM - Free Report) (BMO on Tues. Jan 23rd), (NFLX - Free Report) (AMC on Tues. Jan 23rd), (TSLA - Free Report) (AMC on Wed. Jan 24th), and (INTC - Free Report) (AMC on Thur. Jan 25th) earnings.

As some Federal Reserve policymakers push back, opens new tab on market rate-cut bets, a key U.S. inflation gauge on Thursday should shed some light on the timing of such a move.

December's personal consumption expenditures (PCE) reading comes after the price index increased 2.6% in the 12 months to November and monthly prices fell for the first time in more than 3-1/2 years.

Money markets price a 61% chance of a 25 bps March cut versus a 77% chance a week ago.

Higher-than-expected December retail sales numbers have also raised doubts over whether the Fed will be able to cut as early as March, as the central bank continues to wrestle inflation down from the 40-year highs hit in 2022.

(2) Lots of preliminary JAN 2024 PMIs come out on Wednesday, Jan. 24th.

Plus, it is a big earnings report week for European tech.

Investors are betting heavily on the global economy coasting gently to a recession-free soft landing, along with rate cuts this year.

The Wed. Jan. 24th flash Purchasing Managers' Index (PMI) readings will give a sense of how business activity, in contraction territory across much of the world, has held up.

New orders and hiring intentions will come under scrutiny as they are two of the more forward-looking components. New orders have trends lower everywhere, often a sign of firms preparing for tough times ahead — at odds with the rosy outlook in financial markets.

On earnings, it's a big week for European tech, with ASML (ASML - Free Report) , Logitech (LOGI - Free Report) , and SAP (SAP - Free Report) , reporting, as well as luxury powerhouse LVMH (LVMUY - Free Report) .

(3) On Thursday, the European Central Bank (ECB) delivers its monetary verdict.

The ECB meets on Thursday and for all the pushback against rate-cut speculation, traders have merely delayed bets on a first move by a month to April. Markets still expect five cuts this year.

Policymakers are in no hurry to signal cuts and even some doves say it's too early to discuss them. Expect more pushback from ECB boss Christine Lagarde, who warned traders pricing too many cuts would not help the ECB fight inflation.

Eurozone inflation rose in December, and wage growth is still too high for its liking. While it's too early for a pivot, the ECB has halted rate hikes and clarified how it will wind down its pandemic-era bond-buying scheme.

And Lagarde could be pushed on the impact of supply chain disruptions in the Red Sea on inflation.

(4) Across Monday and Tuesday, the Bank of Japan (BoJ) meeting happens.

Just how quickly the frenzy for an imminent end to Bank of Japan stimulus has become a frustration is playing out in currency markets.

The yen has tumbled as much as 5.6% this month alone to beyond 148 per dollar. That move has happened more quickly than December's yen bounce to five-month peaks near 140 from a more than one-year trough near 152 in mid-November.

A New Year's Day earthquake on Japan's west coast cleared any vestigial bets for an exit from negative rates at the BOJ's two-day meeting, starting on Monday.

Those wagers had already been tempered by dovish BOJ commentary, while recent data suggests a cooling of inflation without any central bank assistance.

Dollar/yen's approach to 150 could trigger some jawboning from Tokyo. A weak yen is unpopular with voters, who already take a poor view of Prime Minister Fumio Kishida's administration.

(5) Türkiye and South Africa central bank (CB) decisions are in focus too.

Türkiye watchers are keen to see what size rate hike the central bank will deliver on Thursday, with a bigger-than-expected rise in the minimum wage, pre-election spending and a sliding lira keeping risks to the projected disinflation path well and truly alive.

As part of an economic policy U-turn, Türkiye's central bank has jacked up rates to 42.5% from 8.5% since June to contain inflation. In December, the central bank said it was set to complete the tightening cycle as soon as possible, though Governor Hafize Gaye Erkan has pledged to maintain tight policy as long as necessary.

Policymakers already downshifted tightening prospects last month, saying rates were close to a level that would keep disinflation on track. Economists expect inflation to hit over 70% by mid-year and decline to around 40% by year-end.

South Africa's central bank also meets on Thursday and is expected to keep rates unchanged. Governor Lesetja Kganyago says disinflation has begun.

Zacks #1 Rank (STRONG BUY) Stocks

Three major names lead our #1 list this week.

(1) NVIDIA (NVDA - Free Report) : This is a $571 stock, with a monster market cap of $1.38T. I see a Zacks Value score of F, a Zacks Growth score of A and a Zacks Momentum score of B.
 

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NVIDIA Corporation is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. Over the years, the company’s focus has evolved from PC graphics to artificial intelligence (AI) based solutions that now support high performance computing (HPC), gaming and virtual reality (VR) platforms.

NVIDIA’s GPU success can be attributed to its parallel processing capabilities supported by thousands of computing cores, which are necessary to run deep learning algorithms. The company’s GPU platforms are playing a major role in developing multi-billion-dollar end-markets like robotics and self-driving vehicles.

NVIDIA is a dominant name in the Data Center, professional visualization and gaming markets where Intel and Advanced Micro Devices are playing a catch-up role. The company’s partnership with almost all major cloud service providers (CSPs) and server vendors is a key catalyst.

NVIDIA’s GPUs are also getting rapid adoption in diverse fields ranging from radiology to precision agriculture. The company’s GPUs power the top supercomputer in the world, located at Oak Ridge National Laboratories in the United States, as well as the top supercomputers in Europe and Japan.

Santa Clara, CA-based NVIDIA reported revenues of $26.97 billion in fiscal 2023, slightly up from $26.91 billion in fiscal 2022.

Beginning first-quarter fiscal 2021, NVIDIA started reporting revenues under two segments – Graphics and Compute & Networking.

  • Graphics includes GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro GPUs for enterprise design; GRID software for cloud-based visual and virtual computing; and automotive platforms for infotainment systems.
  • Compute & Networking comprises Data Center platforms and systems for AI, HPC, and accelerated computing; DRIVE for autonomous vehicles; and Jetson for robotics and other embedded platforms. Mellanox revenues included in this segment beginning second-quarter fiscal 2021.


Graphics and Compute & Networking accounted for 44% and 56% of fiscal 2023 revenues, respectively.

(2) Taiwan Semi (TSM - Free Report) : This is a $113 stock, with a monster market cap of $1.41T.  I see a Zacks Value score of D, a Zacks Growth score of D and a Zacks Momentum score of B.
 

Zacks Investment Research
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Taiwan Semiconductor Manufacturer Co is the world's largest dedicated integrated circuit foundry.

As a foundry, the company manufactures ICs for its customers based on their proprietary IC designs using its advanced production processes.

TSMC's goal is to establish itself as one of the world's leading semiconductor companies by building upon the strengths that have made it the leading IC foundry in the world.

(3) Novo Nordisk (NVO - Free Report) : This is a $108 stock, with a market cap of $482B.  I see a Zacks Value score of D, a Zacks Growth score of A and a Zacks Momentum score of B.
 

Zacks Investment Research
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Bagsværd, Denmark-based Novo Nordisk is a global healthcare company and a leader in the worldwide diabetes market with a full portfolio of GLP-1 receptor agonists, modern insulins and human insulins. The company is also a key player in hemophilia care, growth hormone therapy, hormone replacement therapy and obesity.

Novo Nordisk operates through two segments: Diabetes and Obesity Care, and Rare Diseases.

While the Diabetes and Obesity Care segment covers insulins, glucagon-like peptide 1 (GLP-1), other protein-related products, obesity and oral anti-diabetic drugs, the Rare Diseases segment includes hemophilia, growth hormone therapy and hormone replacement therapy.

Novo Nordisk’s most well-known drugs include Levemir, NovoRapid, Victoza, Ozempic, NovoMix, NovoSeven, NovoThirteen, Ryzodeg, Xultophy, Saxenda, Rybelsus, Esperoct, Sogroya and Norditropin, among several others.

The company launched its first product for weight management, Saxenda, in the United States in 2015.

Wegovy, Novo Nordisk’s other obesity care product, was approved by the FDA in June 2021, following which it faced supply issues in the United States, which led to a decline in sales upon launch.

However, the issue was resolved by Novo Nordisk, making all dose strengths of Wegovy available in the United States in December 2022.

The company is also looking to expand the drug’s indication as an adjunctive treatment for the prevention of major adverse cardiovascular events (MACEs) in adults over a period of up to five years, as well as in the treatment of heart failure and obesity.

In October 2022, Novo Nordisk acquired Forma Therapeutics for $1.1 billion. Forma Therapeutics is a company focused on providing innovative treatment to transform the lives of patients suffering from sickle cell disease (SCD) and rare blood disorders.

The acquisition of the company along with Forma’s lead development candidate, etavopivat, complements Novo Nordisk’s vision to accelerate its scientific presence and pipeline in hemoglobinopathies.

Novo Nordisk generated revenues of DKK 177 billion in 2022 compared with DKK 141 billion in 2021. Revenues increased by 26% in Danish kroner and 16% at the currency exchange rate.

Key Global Macro

Lots of CB meetings and macro data will be tugging on the tape this week.

On Monday, there is a People’s Bank of China (PBoC) policy rate decision. The level was kept at 3.45%, in-line with the previous level.

On Tuesday, the Bank of Japan’s (BoJ) monetary policy decisions hit the tape. -0.1% still lingers on. There is a presser too.

On Wednesday, Japan’s Jibun Bank preliminary manufacturing PMI for JAN lands.

So does the HCOB Euro Area preliminary manufacturing PMI for JAN, along with several country level PMI surveys in that region.

The preliminary U.S. S&P global manufacturing PMI for JAN also comes out.

There is a Bank of Canada (BoC) monetary policy report. Plus a presser.

On Thursday, the European Central Bank (ECB) meeting wraps up. The main refi rate is 4.5% now. No change in that policy rate is expected. There is a LaGarde presser.

On Friday, the DEC core PCE price index lands. +3.2% y/y was the prior reading.

Conclusion

Here are the Jan. 17th key points from Zacks Research Director Sheraz Mian—

(1) We are off to a good start in the Q4-23 earnings season, with an above-average proportion of companies beating EPS estimates.

On the flip side, companies appear to be struggling to beat revenue estimates.

(2) Total Q4-23 earnings for the 36 S&P500 members that have reported results are up +4.2% from the same period last year on +5.4% higher revenues.

86.1% are beating EPS estimates. 55.6% are beating revenue estimates.

(3) The revenue growth pace for this group of index members represents a deceleration relative to what we had seen from the group in other recent periods.

The 55.6% revenue beats percentage is a new 20-quarter low for this group of 36 index members.

(4) For the Technology sector, total Q4 earnings are expected to be up +18.7% from the same period last year on +6.6% higher revenues.

Had it not been for the strong Tech sector contribution, Q4 earnings for the remainder of the index would be down -6.4% (instead of up +0.2% as a whole).

That’s it for me.

Have a great week trading and investing.

John Blank
Zacks Chief Equity Strategist and Economist

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