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In the Global Week Ahead, a number of U.S. tech mega-caps report earnings.
Just when it looked like Fed policy rate cuts were coming in June 2024, U.S. consumer price inflation reared its head.
The strength of the U.S. dollar is now forcing other central bankers to protect their currencies, and reconsider their policy choices.
So, what was consensus in January 2024 – Fed Chair Powell embarking on a series of markets-friendly rate cuts in 2H-2024 - now seems unlikely.
…Just as Q1-24 S&P500 earnings season ramps up.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Big tech reports Q1 earnings and delivers fresh outlooks on 2024 and 2025.
Earnings from the market’s tech and growth heavyweights and another dose of inflation data are on the docket, as investors face a wobbling rally in U.S. stocks and fading expectations that U.S. rates will drop much this year.
Electric vehicle maker Tesla (TSLA - Free Report) reports earnings AMC Tuesday, April 23rd
Facebook-parent Meta ((META - Free Report) ) AMC on Wednesday, April 24th and
Investors also get another look at price data on Friday, April 26th with the U.S. Personal Consumption Expenditures (PCE) price index, which economists polled by Reuters expect to have risen +0.3% in March.
(2) Will coming European bank earnings turn out solid?
European banks are finally moving off the naughty list, with the STOXX banks index up +12% so far in 2024.
Interest rate rises gave banks a windfall in 2023 by widening the gap between what they charged for loans and paid to savers.
Investors will scrutinize upcoming quarterly earnings reports to gauge how much European Central Bank (ECB) rate cuts, predicted to start in June, will cost the lenders.
Barclays forecasts zero earnings growth for European banks in 2024, then a modest +5% gain in 2025.
But JPMorgan recommends a less pessimistic overall stance on European bank stocks, while its credit analysts view these lenders as less exposed to the troubled commercial property sector than U.S. peers.
(3) Consumer price pressures remain a focus. April PMIs shall update traders.
Sticky U.S. inflation and oil up +14% this year means price pressures are back in focus.
So, when the flash PMIs of April business activity from across global economies are released, attention will fall on any signs that inflation, especially in the Services sector, is returning.
The March U.S. PMI showed a measure of prices paid by businesses for inputs hit a four-year low, euro area inflation meanwhile slowed to 2.4% in March.
Yet the latest U.S. inflation numbers and Middle East tensions keeping oil high means investors are nervous. A key gauge of market euro area inflation expectations has touched its highest since December.
The PMIs could also show the Eurozone isn't doing too badly. The March PMI showed activity expanded for the first time since May.
(4) Japan’s finance minister is preparing to stop further yen depreciation.
Japan's finance minister wants to stem the yen's slide to a 34-year low, potentially without spending anything on intervention.
Shunichi Suzuki held an unprecedented trilateral dialogue with Treasury Secretary Janet Yellen and his South Korean counterpart, yielding a U.S. acknowledgement of the Asian nations' "serious concerns" about the steep drop in their currencies.
Those "concerns" will also inform a G7 statement, reaffirming the undesirability of excessive currency swings, something the G7 hasn't done since October 2022.
Japanese officials might welcome such an outcome, as intervention would very much be swimming against the monetary policy tide.
Fed Chair Jay Powell has signaled U.S. rate cuts will likely take longer than expected, while Bank of Japan (BoJ) officials have indicated hikes at home will be extremely slow, which could be confirmed at the BoJ policy meeting starting Thursday, April 25th.
(5) More Asian currencies are also depreciating against the U.S. dollar.
Asian currencies have been battered by a relentless U.S. dollar for most of the past two years — and it's getting worse.
In one day, Indonesia's rupiah returned from the Eid al-Fitr holidays to a four-year trough, the South Korean won slid to its weakest in over a year, while the Indian rupee and Vietnam dong tumbled to record lows.
The U.S. dollar is charging ahead as the U.S. economy is unfazed by high interest rates. So, emerging Asia central banks are in for a rough time.
Benign inflation in the Asian region and softer growth suggest policymakers may be justified in cutting rates, but going before the Fed would only hurt their currencies further.
Bank Indonesia meets April 23rd to 24th. Analysts see a growing risk of a rate hike from the central bank that was once expected to be among the first in the region to cut.
Zacks #1 Rank (STRONG BUY) Stocks
(1) Prosus (PROSY - Free Report) : This is a $6 stock with a whopping $211.2B market cap in the global Internet-Commerce industry. I see a Zacks Value score of D, a Zacks Growth score of F and a Zacks Momentum score of A.
Prosus N.V., or Prosus, is a global investment group that invests and operates across sectors and markets with long-term growth potential. It is among the largest tech investors in the world.
Prosus has invested across multiple verticals, including social/gaming, classifieds, payments and fintech, edtech, food delivery and ecommerce.
Products and services of its businesses and investments are used by more than 1.5 billion people in 89 markets.
According to Wikipedia, the group's expansion into Internet platforms began in the 1990s, spanning various tech investments, including:
Social - Tencent (26.16%). At one point, they owned a 45% stake
Classifieds - OLX (100%), EPMG
Fintech - PayU (98.8%), Remitly, Red Dot Payment, BUX
Prosus is majority-owned by South African multinational Naspers.
In September 2019, Prosus's ordinary shares got listed on Euronext Amsterdam and, as a secondary inward-listing, on the Johannesburg Stock Exchange.
Subsequent to its IPO, Prosus became the largest consumer Internet company in Europe by asset value. Shares in the company were reported to have "soared on debut," although the company was trading at a significant discount to the value of its portfolio.
Prosus N.V. is based in Amsterdam, the Netherlands.
(2) Wells Fargo (WFC - Free Report) : This is a $59 stock with a $207.9B market cap in the U.S. Major Regional Bank industry. I see a Zacks Value score of D, a Zacks Growth score of D and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Wells Fargo & Co. is one of the largest financial services companies in the U.S.
The company provides banking, insurance, trust and investments, mortgage banking, investment banking, retail banking, brokerage services and consumer and commercial finance through more than 4,700 retail bank branches, broad automated telling machines (ATMs) network, the Internet and other distribution channels globally.
It has 4 segments:
Consumer Banking and Lending offers products and services like checking and savings accounts, credit and debit cards, as well as home, auto, personal and small business lending to consumers and small businesses.
Commercial Banking provides banking and credit products across industries, and treasury management.
Corporate and Investment Banking delivers services related to capital markets, banking and financial products.
Wealth and Investment Management provides personalized wealth management, brokerage, financial planning, lending, private banking, trust and fiduciary products and services.
(3) Uber Technologies (UBER - Free Report) : This is a $71 stock with a $148.4B market cap in the Internet-Services industry. I see a Zacks Value score of D, a Zacks Growth score of B and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Uber Technologies Inc. provides a platform which allows users to access transportation and food ordering services.
The company's operating segments consist of Core Platform and Other Bets.
The Core Platform segment consists of Ridesharing and Uber Eats. The Other Bets segment consists of Uber Freight and New Mobility platforms.
Uber Technologies Inc. is based in San Francisco, CA.
Key Global Macro
On Monday, a Mainland China PBoC rate decision lands. 3,45% is the policy rate.
On Tuesday, the Jibun Bank manufacturing PMI for Japan in April comes out. 48.2 was the prior reading.
The HCOB manufacturing PMI for Europe in April comes out. The prior reading here was 46.1.
The S&P global manufacturing PMI for the U.S. in April comes out. The prior reading was 51.9.
On Wednesday, the Reserve Bank of Australia (RBA) CPI for Q1 come out. +4.1% y/y is the prior reading.
U.S. Durable Goods Orders, ex-Defense, for March come out. The prior reading was +1.4% y/y. Durable Goods, ex-Transportation? Prior was +0.5% y/y.
On Thursday, U.S. core Personal Consumption Expenditures (PCE) in Q1 come out. The prior reading was +2.0% y/y.
A preliminary U.S. real GDP growth number for Q1 comes out too. The prior quarter showed +3.4% y/y growth.
On Friday, there is a Bank of Japan (BoJ) policy rate decision, monetary policy report, and outlook report. 0% is the current policy rate now.
The critical U.S. core PCE price index comes out. The prior core PCE reading was +2.8% y/y, while the broad PCE reading was +2.5%. These are the Fed’s preferred economy-wide inflation measures.
Conclusion
Let’s close matters up — with a fresh update on S&P500 earnings season — from Zacks.
Zacks Research Director Sheraz Mian wrote 4 Q1 earnings points, on April 17th—
(1) We are off to a good start in the Q1-24 earnings season. The earnings growth pace has modestly accelerated from the trend line of the last few quarters.
Though revenue growth remains on a decelerating trend, and positive surprises are tracking below historical average levels.
Importantly, earnings estimates are going up.
(2) Total earnings for the 48 S&P500 members that have reported Q1-24 results are up +9.5% from the same period last year; on +4.5% higher revenues.
Image: Bigstock
Big Tech Muscles In: Global Week Ahead
In the Global Week Ahead, a number of U.S. tech mega-caps report earnings.
Just when it looked like Fed policy rate cuts were coming in June 2024, U.S. consumer price inflation reared its head.
The strength of the U.S. dollar is now forcing other central bankers to protect their currencies, and reconsider their policy choices.
So, what was consensus in January 2024 – Fed Chair Powell embarking on a series of markets-friendly rate cuts in 2H-2024 - now seems unlikely.
…Just as Q1-24 S&P500 earnings season ramps up.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Big tech reports Q1 earnings and delivers fresh outlooks on 2024 and 2025.
Earnings from the market’s tech and growth heavyweights and another dose of inflation data are on the docket, as investors face a wobbling rally in U.S. stocks and fading expectations that U.S. rates will drop much this year.
Investors also get another look at price data on Friday, April 26th with the U.S. Personal Consumption Expenditures (PCE) price index, which economists polled by Reuters expect to have risen +0.3% in March.
(2) Will coming European bank earnings turn out solid?
European banks are finally moving off the naughty list, with the STOXX banks index up +12% so far in 2024.
Interest rate rises gave banks a windfall in 2023 by widening the gap between what they charged for loans and paid to savers.
Investors will scrutinize upcoming quarterly earnings reports to gauge how much European Central Bank (ECB) rate cuts, predicted to start in June, will cost the lenders.
Barclays forecasts zero earnings growth for European banks in 2024, then a modest +5% gain in 2025.
But JPMorgan recommends a less pessimistic overall stance on European bank stocks, while its credit analysts view these lenders as less exposed to the troubled commercial property sector than U.S. peers.
BNP Paribas (BNPQY - Free Report) , Deutsche Bank (DB - Free Report) and Barclays (BCS - Free Report) are among the big guns reporting in the coming week.
(3) Consumer price pressures remain a focus. April PMIs shall update traders.
Sticky U.S. inflation and oil up +14% this year means price pressures are back in focus.
So, when the flash PMIs of April business activity from across global economies are released, attention will fall on any signs that inflation, especially in the Services sector, is returning.
The March U.S. PMI showed a measure of prices paid by businesses for inputs hit a four-year low, euro area inflation meanwhile slowed to 2.4% in March.
Yet the latest U.S. inflation numbers and Middle East tensions keeping oil high means investors are nervous. A key gauge of market euro area inflation expectations has touched its highest since December.
The PMIs could also show the Eurozone isn't doing too badly. The March PMI showed activity expanded for the first time since May.
(4) Japan’s finance minister is preparing to stop further yen depreciation.
Japan's finance minister wants to stem the yen's slide to a 34-year low, potentially without spending anything on intervention.
Shunichi Suzuki held an unprecedented trilateral dialogue with Treasury Secretary Janet Yellen and his South Korean counterpart, yielding a U.S. acknowledgement of the Asian nations' "serious concerns" about the steep drop in their currencies.
Those "concerns" will also inform a G7 statement, reaffirming the undesirability of excessive currency swings, something the G7 hasn't done since October 2022.
Japanese officials might welcome such an outcome, as intervention would very much be swimming against the monetary policy tide.
Fed Chair Jay Powell has signaled U.S. rate cuts will likely take longer than expected, while Bank of Japan (BoJ) officials have indicated hikes at home will be extremely slow, which could be confirmed at the BoJ policy meeting starting Thursday, April 25th.
(5) More Asian currencies are also depreciating against the U.S. dollar.
Asian currencies have been battered by a relentless U.S. dollar for most of the past two years — and it's getting worse.
In one day, Indonesia's rupiah returned from the Eid al-Fitr holidays to a four-year trough, the South Korean won slid to its weakest in over a year, while the Indian rupee and Vietnam dong tumbled to record lows.
The U.S. dollar is charging ahead as the U.S. economy is unfazed by high interest rates. So, emerging Asia central banks are in for a rough time.
Benign inflation in the Asian region and softer growth suggest policymakers may be justified in cutting rates, but going before the Fed would only hurt their currencies further.
Bank Indonesia meets April 23rd to 24th. Analysts see a growing risk of a rate hike from the central bank that was once expected to be among the first in the region to cut.
Zacks #1 Rank (STRONG BUY) Stocks
(1) Prosus (PROSY - Free Report) : This is a $6 stock with a whopping $211.2B market cap in the global Internet-Commerce industry. I see a Zacks Value score of D, a Zacks Growth score of F and a Zacks Momentum score of A.
Prosus N.V., or Prosus, is a global investment group that invests and operates across sectors and markets with long-term growth potential. It is among the largest tech investors in the world.
Prosus has invested across multiple verticals, including social/gaming, classifieds, payments and fintech, edtech, food delivery and ecommerce.
Products and services of its businesses and investments are used by more than 1.5 billion people in 89 markets.
According to Wikipedia, the group's expansion into Internet platforms began in the 1990s, spanning various tech investments, including:
Prosus is majority-owned by South African multinational Naspers.
In September 2019, Prosus's ordinary shares got listed on Euronext Amsterdam and, as a secondary inward-listing, on the Johannesburg Stock Exchange.
Subsequent to its IPO, Prosus became the largest consumer Internet company in Europe by asset value. Shares in the company were reported to have "soared on debut," although the company was trading at a significant discount to the value of its portfolio.
Prosus N.V. is based in Amsterdam, the Netherlands.
(2) Wells Fargo (WFC - Free Report) : This is a $59 stock with a $207.9B market cap in the U.S. Major Regional Bank industry. I see a Zacks Value score of D, a Zacks Growth score of D and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Wells Fargo & Co. is one of the largest financial services companies in the U.S.
The company provides banking, insurance, trust and investments, mortgage banking, investment banking, retail banking, brokerage services and consumer and commercial finance through more than 4,700 retail bank branches, broad automated telling machines (ATMs) network, the Internet and other distribution channels globally.
It has 4 segments:
(3) Uber Technologies (UBER - Free Report) : This is a $71 stock with a $148.4B market cap in the Internet-Services industry. I see a Zacks Value score of D, a Zacks Growth score of B and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Uber Technologies Inc. provides a platform which allows users to access transportation and food ordering services.
The company's operating segments consist of Core Platform and Other Bets.
The Core Platform segment consists of Ridesharing and Uber Eats.
The Other Bets segment consists of Uber Freight and New Mobility platforms.
Uber Technologies Inc. is based in San Francisco, CA.
Key Global Macro
On Monday, a Mainland China PBoC rate decision lands. 3,45% is the policy rate.
On Tuesday, the Jibun Bank manufacturing PMI for Japan in April comes out. 48.2 was the prior reading.
The HCOB manufacturing PMI for Europe in April comes out. The prior reading here was 46.1.
The S&P global manufacturing PMI for the U.S. in April comes out. The prior reading was 51.9.
On Wednesday, the Reserve Bank of Australia (RBA) CPI for Q1 come out. +4.1% y/y is the prior reading.
U.S. Durable Goods Orders, ex-Defense, for March come out. The prior reading was +1.4% y/y. Durable Goods, ex-Transportation? Prior was +0.5% y/y.
On Thursday, U.S. core Personal Consumption Expenditures (PCE) in Q1 come out. The prior reading was +2.0% y/y.
A preliminary U.S. real GDP growth number for Q1 comes out too. The prior quarter showed +3.4% y/y growth.
On Friday, there is a Bank of Japan (BoJ) policy rate decision, monetary policy report, and outlook report. 0% is the current policy rate now.
The critical U.S. core PCE price index comes out. The prior core PCE reading was +2.8% y/y, while the broad PCE reading was +2.5%. These are the Fed’s preferred economy-wide inflation measures.
Conclusion
Let’s close matters up — with a fresh update on S&P500 earnings season — from Zacks.
Zacks Research Director Sheraz Mian wrote 4 Q1 earnings points, on April 17th—
(1) We are off to a good start in the Q1-24 earnings season. The earnings growth pace has modestly accelerated from the trend line of the last few quarters.
Though revenue growth remains on a decelerating trend, and positive surprises are tracking below historical average levels.
Importantly, earnings estimates are going up.
(2) Total earnings for the 48 S&P500 members that have reported Q1-24 results are up +9.5% from the same period last year; on +4.5% higher revenues.
77.1% beat EPS estimates. 64.6% beat revenue estimates.
(3) The earnings growth pace for these 48 S&P500 index members represents an acceleration from what we had seen, in other recent periods.
Though, the EPS and revenue beats percentages track modestly below the 12-quarter averages, for this group of 48 S&P500 index members.
(4) For the Finance sector, we now have Q1-24 results for 39.7% of the sector’s market capitalization in the S&P500 index.
Total earnings for these Finance companies are up +4.6% from the same period last year, on +4.7% higher revenues.
77.8% beat EPS estimates. The same proportion beat revenue estimates.
Have an excellent trading week!
John Blank, PhD.
Zacks Chief Equity Strategist and Economist