U.S. consumer price inflation (CPI) numbers for March 2024 lit a fuse under world markets, and forced a sharp re-think on future Federal Reserve rate cut bets.
- So, in the Global Week Ahead, upcoming U.S. macro data and S&P500 earnings should keep traders active
- British CPI data and Mainland China's latest GDP numbers are also in focus
Traders will be staying alert to a possible Japanese intervention to prop up the yen.
India gets ready to vote in a major election.
Finally, Finance ministers and central bankers descend on Washington DC for the IMF/World Bank Spring meetings.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) U.S. retail sales data, and fresh S&P500 U.S. company reports, lead the way.
Markets hastily ditched bets for a mid-year Fed rate cut, with September now seen as the likely start date for easing as sticky inflation underlies a strong economy.
That puts the U.S. consumer into sharper focus with retail sales data due on April 15 and a slew of corporate earnings.
March retail sales likely climbed +0.3%, a Reuters poll of economists showed. That follows a lower-than-expected +0.6% rise in February that suggested a slowdown in consumer spending amid rising inflation and high borrowing costs.
Earnings results that could also shed light on consumer spending include Bank of America BAC, credit card companies American Express AXP and Discover Financial Services DFS, and consumer products giant Procter & Gamble PG.
Netflix NFLX and UnitedHealth Group UNH, are also reporting, as are luxury house LVMH and telecom firm Nokia in Europe.
(2) Will the Bank of England (BoE) cut its policy rate in late summer?
British inflation has slowed, putting the Bank of England (BoE) on track to start cutting rates from 16-year highs.
Attention turns to Wednesday's March consumer prices data to confirm the trend.
Companies' expectations for selling prices and pay increases in the year ahead are cooling, according to a BoE survey that its rate-setting Monetary Policy Committee monitors closely. Consumers expect lower inflation too.
But rate setters are divided, over when to call time on their battle against inflation, with no urgency to rescue an economy that entered a shallow recession late last year before manufacturing and mortgage approvals data signaled a recovery.
Traders, who had played with the idea of a June rate cut, now expect easing to start in August. Some of that repricing is related to the pull-back in U.S. rate-cuts bets.
(3) Is China’s massive economy back on track? Fresh GDP data will show traders.
It's another week filled with Chinese data and this time, investors get a first look at how growth in the world's second-largest economy is shaping up.
First quarter gross domestic product numbers are due on Tuesday, alongside data on house prices and retail sales.
Expectations are for the economy to have grown +4.6% on an annual basis, a rocky start for Beijing in meeting its 2024 growth target of around +5%.
The devil is in the details. Granted, there are some green shoots from upbeat manufacturing and services surveys to rising consumer prices, but persistent producer price deflation points to a shaky recovery.
An ailing property market remains a drag — it's hard to write off a sector that once accounted for over a quarter of GDP.
(4) India votes in a nationwide election. This gets held in seven phases.
India, the world's largest democracy by population, starts voting from April 19th in national elections to be held in seven phases until June 1st. It's India's second-longest election, with results expected from June 4th.
Incumbent Prime Minister Narendra Modi seeks a rare third consecutive term, with the BJP-led National Democratic Alliance (NDA) expected to lead the Indian National Congress-led INDIA (Indian National Developmental Inclusive Alliance).
Since the NDA won key state elections in December, markets have rallied on hopes of policy continuity at the national level.
India's benchmark stock indexes Nifty 50 (NSEI) and Sensex (BSESN), as well the broader, domestically focused mid-caps (NIFMDCP100), are at record highs, helped by sustained domestic inflows and a strong economic outlook.
A NDA loss, viewed as a low-probability, could trigger a (temporary) pull back.
(5) Spring brings the IMF/World Bank crowd to Washington DC for their meetings.
Finance ministers and central bank governors across the world descend on Washington, DC, for the annual Spring Meeting of the IMF/World Bank, starting Monday.
A raft of reports on the economic outlook and financial stability will be released, while G20 and G7 policymakers also get together.
There is no shortage of topics to chew over — the dual track trajectory of a U.S. economy marching ahead while the rest of the world more or less sputters — and all the monetary policy and financial market consequences that might entail.
Whether central banks have really won the inflation battle yet (IMF Chief Kristalina Georgieva does not think so), especially as Middle East tensions fire up oil prices. Or how economies, especially emerging markets, will navigate still-elevated debt burdens.
Top Zacks #1 Rank (STRONG BUY) Stocks
(1) The Progressive PGR: This is a $202 stock with a market cap of $120.7B found in the Insurance – Property & Casualty industry. I see a Zacks Value score of D, a Zacks Growth score of C and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
Based in Mayfield Village, OH, The Progressive Corp. is one of the major auto insurers in the country.
Founded in 1965, Progressive is a leading independent agency writer of private passenger auto coverage, and the market share leader for the motorcycle products since 1998. Progressive operates through three business segments.
a. The Personal Lines (77% of 2023 Net Premium earned) segment writes insurance for private passenger automobiles, recreational and other vehicles. This business generally offers more than one program in a single state, with each program targeted toward a specific distribution channel, market, or customer group.
Personal Lines products comprise insurance for personal autos and special lines products.
The agency business includes business written by Progressive’s network of more than 35,000 independent insurance agencies located throughout the United States, as well as brokerages in New York and California and strategic alliance business relationships (other insurance companies, financial institutions, and national agencies).
The direct business includes business written directly by the company online and over the phone.
b. The Commercial Lines (18%) segment writes primary liability and physical damage insurance for automobiles and trucks owned by small businesses. The majority of its Commercial Auto customers insure two or fewer vehicles.
The Commercial Lines business, which is primarily distributed through the independent agency channel, operates in the business auto and specialty truck markets.
The business auto market accounts for one third of its total Commercial Auto premiums and approximately 60% of the vehicles Progressive insures in this business. The remainder is in the specialty truck commercial auto market, which includes dump trucks, logging trucks, tow trucks, local cartage and other short-haul commercial vehicles.
c. The Property (5%) segment writes personal property insurance, for homeowners, other property owners, and renters, in the Agency channel in over 31 states and the District of Columbia for personal property insurance and in over four states for commercial property insurance.
(2) Blackrock BLK: This is a $786 stock with a market cap of $116.7B found in the Financial – Investment Management industry. I see a Zacks Value score of D, a Zacks Growth score of D, and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
BlackRock, Inc., together, with its subsidiaries, is a leading publicly traded investment management firm.
Product offerings include single- and multi-asset portfolios investing in equities, fixed income, alternatives and money market instruments.
Products are offered directly and through intermediaries in a variety of vehicles, including open-end and closed-end mutual funds, iShares™ and BlackRock exchange-traded funds, separate accounts, collective trust funds and other pooled investment vehicles.
BlackRock also offers technology services, including the investment and risk management technology platform, Aladdin™, Aladdin Wealth, eFront and Cachematrix, as well as advisory services and solutions to a broad base of institutional and wealth management clients.
(3) Safran SAFRY: This is a $55 stock with a market cap of $94.5B found in the global Aerospace-Defense industry. I see a Zacks Value score of D, a Zacks Growth score of D, and a Zacks Momentum score of B.
Safran S.A. is a France-based high-tech company, which produces aircraft and rocket engines and propulsion systems.
It divides its work into three segments: Aerospace, Aircraft and Defense.
a. The Aerospace Propulsion division provides engines, turbines and parts for aircraft, and rocket boosters for civil, military and spatial markets.
b. The Aircraft Equipment division produces landing gear, wheels and carbon brakes, aircraft engine nacelles and airborne power electronics.
c. The Defense division includes the subsidiary, Sagem, and makes systems and equipment for inertial navigation and other defense applications to be used on military transport and combat aircraft, helicopters, warships, armored vehicles and artillery systems.
It operates through ISEI, Aerospace Power Distribution Management Solutions and the Integrated Cockpit Solutions business of Eaton Corporation.
Key Global Macro
Various retail sales readings and consumer inflation data will be the focus.
On Monday, U.S. retail sales for March come in. The consensus is for a +0.3% m/m reading, lower than the prior +0.6% m/m February data.
On Tuesday, Mainland China’s GDP for Q1-24 should be +5.0% y/y, with the prior data at +5.2% y/y.
Mainland China’s retail sales for March should be up +4.5% y/y, with the prior February data at +5.5%.
Canada’s core CPI for March comes out. This has been running at +2.1% y/y. Their broad CPI is running at +2.8% y/y.
U.S. building permits for March should be 1.51M, versus a prior 1.52M.
U.S. housing starts for March should be 1.48M, versus a prior 1.52M.
The IMF meetings begin, and run all week long.
On Wednesday, the U.K. core CPI for March comes out. That data in FEB was +4.5% y/y. The broad U.K. CPI was +3.4% y/y.
The Eurozone core HICP inflation data for March should be +2.9% y/y, in line with the prior +2.9% y/y reading. The broad Eurozone data for March should be +2.4% y/y, after a FEB prior +2.2% y/y print.
On Thursday, U.S. Existing Home Sales for March should be 4.2M, lower than a prior 4.38M from February.
U.S. Initial Jobless Claims for the week also come out. These have remained low, with the prior data at 211K.
On Friday, U.K. retail sales for March are out. The prior reading for February was flat.
The U.K. annual retail sales reading was at -0.4% y/y. Ex-fuel retail sales in the U.K, also shows weakness. This is down -0.5% y/y.
Conclusion
During a live S&P500 earnings season, it pays stock traders to stay up-to-date.
Here are Zacks Research Director Sheraz Mian’s EPS points, outlined April 12th:
(1) First, Zacks looks at a solid overall S&P500 earnings picture, on an annual basis.
We expect total 2024 S&P500 earnings to be up +8.4% on +1.9% revenue growth.
(2) In turn, we expect total S&P500 earnings for Q1-24 to be up +2.9% from the same period last year on +3.8% higher revenues.
More volatile, Q1-24 EPS growth is to be the weakest of 2024’s four quarters. However, revenue growth is steadily trending upwards, quarter after quarter.
(3) For Q1-24, we expect Tech sector earnings to increase +19.3% y/y on +8.3% higher revenues.
Please keep in mind: Tech isn’t just any other sector. Tech is the biggest earnings contributor to the S&P500 index.
We expect the Tech sector to bring in 28.8% of the S&P500 index’s total earnings over the coming four-quarters. The 2nd and 3rd biggest sector contributors are Finance and Medical, at 17.7% and 12.5%, respectively.
(4) For Q1-24, we expect ‘Magnificent 7’ EPS to lift +33.0% on +13.0% higher revenues.
Exclude the ‘Mag 7’ contribution? Q1-24 earnings for the rest of the index would be down -3.5% from the year-earlier period (versus +2.2% growth otherwise).
In sum, traders need U.S. tech earnings to lead the overall S&P500 index. Unexpected news, from just one tent-pole mega-cap player? That would be a major catalyst.
Have a great trading week!
Warm Regards,
John Blank, PhD
Zacks Chief Equity Strategist and Economist
Image: Bigstock
A New Consensus for SEPT Rate Cuts: Global Week Ahead
U.S. consumer price inflation (CPI) numbers for March 2024 lit a fuse under world markets, and forced a sharp re-think on future Federal Reserve rate cut bets.
Traders will be staying alert to a possible Japanese intervention to prop up the yen.
India gets ready to vote in a major election.
Finally, Finance ministers and central bankers descend on Washington DC for the IMF/World Bank Spring meetings.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) U.S. retail sales data, and fresh S&P500 U.S. company reports, lead the way.
Markets hastily ditched bets for a mid-year Fed rate cut, with September now seen as the likely start date for easing as sticky inflation underlies a strong economy.
That puts the U.S. consumer into sharper focus with retail sales data due on April 15 and a slew of corporate earnings.
March retail sales likely climbed +0.3%, a Reuters poll of economists showed. That follows a lower-than-expected +0.6% rise in February that suggested a slowdown in consumer spending amid rising inflation and high borrowing costs.
Earnings results that could also shed light on consumer spending include Bank of America BAC, credit card companies American Express AXP and Discover Financial Services DFS, and consumer products giant Procter & Gamble PG.
Netflix NFLX and UnitedHealth Group UNH, are also reporting, as are luxury house LVMH and telecom firm Nokia in Europe.
(2) Will the Bank of England (BoE) cut its policy rate in late summer?
British inflation has slowed, putting the Bank of England (BoE) on track to start cutting rates from 16-year highs.
Attention turns to Wednesday's March consumer prices data to confirm the trend.
Companies' expectations for selling prices and pay increases in the year ahead are cooling, according to a BoE survey that its rate-setting Monetary Policy Committee monitors closely. Consumers expect lower inflation too.
But rate setters are divided, over when to call time on their battle against inflation, with no urgency to rescue an economy that entered a shallow recession late last year before manufacturing and mortgage approvals data signaled a recovery.
Traders, who had played with the idea of a June rate cut, now expect easing to start in August. Some of that repricing is related to the pull-back in U.S. rate-cuts bets.
(3) Is China’s massive economy back on track? Fresh GDP data will show traders.
It's another week filled with Chinese data and this time, investors get a first look at how growth in the world's second-largest economy is shaping up.
First quarter gross domestic product numbers are due on Tuesday, alongside data on house prices and retail sales.
Expectations are for the economy to have grown +4.6% on an annual basis, a rocky start for Beijing in meeting its 2024 growth target of around +5%.
The devil is in the details. Granted, there are some green shoots from upbeat manufacturing and services surveys to rising consumer prices, but persistent producer price deflation points to a shaky recovery.
An ailing property market remains a drag — it's hard to write off a sector that once accounted for over a quarter of GDP.
(4) India votes in a nationwide election. This gets held in seven phases.
India, the world's largest democracy by population, starts voting from April 19th in national elections to be held in seven phases until June 1st. It's India's second-longest election, with results expected from June 4th.
Incumbent Prime Minister Narendra Modi seeks a rare third consecutive term, with the BJP-led National Democratic Alliance (NDA) expected to lead the Indian National Congress-led INDIA (Indian National Developmental Inclusive Alliance).
Since the NDA won key state elections in December, markets have rallied on hopes of policy continuity at the national level.
India's benchmark stock indexes Nifty 50 (NSEI) and Sensex (BSESN), as well the broader, domestically focused mid-caps (NIFMDCP100), are at record highs, helped by sustained domestic inflows and a strong economic outlook.
A NDA loss, viewed as a low-probability, could trigger a (temporary) pull back.
(5) Spring brings the IMF/World Bank crowd to Washington DC for their meetings.
Finance ministers and central bank governors across the world descend on Washington, DC, for the annual Spring Meeting of the IMF/World Bank, starting Monday.
A raft of reports on the economic outlook and financial stability will be released, while G20 and G7 policymakers also get together.
There is no shortage of topics to chew over — the dual track trajectory of a U.S. economy marching ahead while the rest of the world more or less sputters — and all the monetary policy and financial market consequences that might entail.
Whether central banks have really won the inflation battle yet (IMF Chief Kristalina Georgieva does not think so), especially as Middle East tensions fire up oil prices. Or how economies, especially emerging markets, will navigate still-elevated debt burdens.
Top Zacks #1 Rank (STRONG BUY) Stocks
(1) The Progressive PGR: This is a $202 stock with a market cap of $120.7B found in the Insurance – Property & Casualty industry. I see a Zacks Value score of D, a Zacks Growth score of C and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
Based in Mayfield Village, OH, The Progressive Corp. is one of the major auto insurers in the country.
Founded in 1965, Progressive is a leading independent agency writer of private passenger auto coverage, and the market share leader for the motorcycle products since 1998. Progressive operates through three business segments.
a. The Personal Lines (77% of 2023 Net Premium earned) segment writes insurance for private passenger automobiles, recreational and other vehicles. This business generally offers more than one program in a single state, with each program targeted toward a specific distribution channel, market, or customer group.
Personal Lines products comprise insurance for personal autos and special lines products.
The agency business includes business written by Progressive’s network of more than 35,000 independent insurance agencies located throughout the United States, as well as brokerages in New York and California and strategic alliance business relationships (other insurance companies, financial institutions, and national agencies).
The direct business includes business written directly by the company online and over the phone.
b. The Commercial Lines (18%) segment writes primary liability and physical damage insurance for automobiles and trucks owned by small businesses. The majority of its Commercial Auto customers insure two or fewer vehicles.
The Commercial Lines business, which is primarily distributed through the independent agency channel, operates in the business auto and specialty truck markets.
The business auto market accounts for one third of its total Commercial Auto premiums and approximately 60% of the vehicles Progressive insures in this business. The remainder is in the specialty truck commercial auto market, which includes dump trucks, logging trucks, tow trucks, local cartage and other short-haul commercial vehicles.
c. The Property (5%) segment writes personal property insurance, for homeowners, other property owners, and renters, in the Agency channel in over 31 states and the District of Columbia for personal property insurance and in over four states for commercial property insurance.
(2) Blackrock BLK: This is a $786 stock with a market cap of $116.7B found in the Financial – Investment Management industry. I see a Zacks Value score of D, a Zacks Growth score of D, and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
BlackRock, Inc., together, with its subsidiaries, is a leading publicly traded investment management firm.
Product offerings include single- and multi-asset portfolios investing in equities, fixed income, alternatives and money market instruments.
Products are offered directly and through intermediaries in a variety of vehicles, including open-end and closed-end mutual funds, iShares™ and BlackRock exchange-traded funds, separate accounts, collective trust funds and other pooled investment vehicles.
BlackRock also offers technology services, including the investment and risk management technology platform, Aladdin™, Aladdin Wealth, eFront and Cachematrix, as well as advisory services and solutions to a broad base of institutional and wealth management clients.
(3) Safran SAFRY: This is a $55 stock with a market cap of $94.5B found in the global Aerospace-Defense industry. I see a Zacks Value score of D, a Zacks Growth score of D, and a Zacks Momentum score of B.
Safran S.A. is a France-based high-tech company, which produces aircraft and rocket engines and propulsion systems.
It divides its work into three segments: Aerospace, Aircraft and Defense.
a. The Aerospace Propulsion division provides engines, turbines and parts for aircraft, and rocket boosters for civil, military and spatial markets.
b. The Aircraft Equipment division produces landing gear, wheels and carbon brakes, aircraft engine nacelles and airborne power electronics.
c. The Defense division includes the subsidiary, Sagem, and makes systems and equipment for inertial navigation and other defense applications to be used on military transport and combat aircraft, helicopters, warships, armored vehicles and artillery systems.
It operates through ISEI, Aerospace Power Distribution Management Solutions and the Integrated Cockpit Solutions business of Eaton Corporation.
Key Global Macro
Various retail sales readings and consumer inflation data will be the focus.
On Monday, U.S. retail sales for March come in. The consensus is for a +0.3% m/m reading, lower than the prior +0.6% m/m February data.
On Tuesday, Mainland China’s GDP for Q1-24 should be +5.0% y/y, with the prior data at +5.2% y/y.
Mainland China’s retail sales for March should be up +4.5% y/y, with the prior February data at +5.5%.
Canada’s core CPI for March comes out. This has been running at +2.1% y/y. Their broad CPI is running at +2.8% y/y.
U.S. building permits for March should be 1.51M, versus a prior 1.52M.
U.S. housing starts for March should be 1.48M, versus a prior 1.52M.
The IMF meetings begin, and run all week long.
On Wednesday, the U.K. core CPI for March comes out. That data in FEB was +4.5% y/y. The broad U.K. CPI was +3.4% y/y.
The Eurozone core HICP inflation data for March should be +2.9% y/y, in line with the prior +2.9% y/y reading. The broad Eurozone data for March should be +2.4% y/y, after a FEB prior +2.2% y/y print.
On Thursday, U.S. Existing Home Sales for March should be 4.2M, lower than a prior 4.38M from February.
U.S. Initial Jobless Claims for the week also come out. These have remained low, with the prior data at 211K.
On Friday, U.K. retail sales for March are out. The prior reading for February was flat.
The U.K. annual retail sales reading was at -0.4% y/y. Ex-fuel retail sales in the U.K, also shows weakness. This is down -0.5% y/y.
Conclusion
During a live S&P500 earnings season, it pays stock traders to stay up-to-date.
Here are Zacks Research Director Sheraz Mian’s EPS points, outlined April 12th:
(1) First, Zacks looks at a solid overall S&P500 earnings picture, on an annual basis.
We expect total 2024 S&P500 earnings to be up +8.4% on +1.9% revenue growth.
(2) In turn, we expect total S&P500 earnings for Q1-24 to be up +2.9% from the same period last year on +3.8% higher revenues.
More volatile, Q1-24 EPS growth is to be the weakest of 2024’s four quarters. However, revenue growth is steadily trending upwards, quarter after quarter.
(3) For Q1-24, we expect Tech sector earnings to increase +19.3% y/y on +8.3% higher revenues.
Please keep in mind: Tech isn’t just any other sector. Tech is the biggest earnings contributor to the S&P500 index.
We expect the Tech sector to bring in 28.8% of the S&P500 index’s total earnings over the coming four-quarters. The 2nd and 3rd biggest sector contributors are Finance and Medical, at 17.7% and 12.5%, respectively.
(4) For Q1-24, we expect ‘Magnificent 7’ EPS to lift +33.0% on +13.0% higher revenues.
Exclude the ‘Mag 7’ contribution? Q1-24 earnings for the rest of the index would be down -3.5% from the year-earlier period (versus +2.2% growth otherwise).
In sum, traders need U.S. tech earnings to lead the overall S&P500 index. Unexpected news, from just one tent-pole mega-cap player? That would be a major catalyst.
Have a great trading week!
Warm Regards,
John Blank, PhD
Zacks Chief Equity Strategist and Economist