In the Global Week Ahead, central banks in Australia, Britain and Sweden will meet.

The make their monetary policy decisions, as stock and bond markets assess how much leeway the U.S. Fed has to cut its policy rate this year.

In Asia, traders are on alert for Japanese currency intervention, while weighing up the effects of U.S. market turbulence.

And last Sunday, an around-the-world election tour made a pit-stop in Panama.

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

(1) Are There Any “Safe Havens” from U.S. Stock and Bond Market Gyrations?

Investors are scouring the globe for shelter from turbulence in U.S. markets shaken by the Fed's reluctance to cut rates.

The S&P500 dropped more than -4% in April, while U.S. Treasuries had their worst month since September.

Investors are trying to diversify.

London's FTSE 100, considered a hedge against tech-dominated S&P weakness because of its large crop of companies in so-called value sectors like oil and mining, is near record highs.

Stocks in high-growth India have logged three months of gains.

But insulating a portfolio from Wall Street's swings is tough. The long-term correlation rate between Europe's Stoxx 600 and the S&P is almost 90%, investment bank Baird estimates.

Barclays calculates that a one percentage point rise for U.S. Treasury yields commonly pulls global yields up 56 basis points.

(2) On Tuesday, the Reserve Bank of Australia (RBA) Offers Policy Decisions

The Reserve Bank of Australia meets on May 7th and it's poignant timing after Q1 inflation were hotter than expected, after the RBA in March watered down a tightening bias.

No policy change is expected, but markets will watch any comments from Governor Michelle Bullock closely.

Having been spooked by the inflation figures, markets narrowed the odds on the RBA having to raise rates once more.

Note, some of those bets were pared after Australian retail sales fell unexpectedly in March.

Even so, the risk of another rate hike has done little to help the Aussie, which continues to struggle below the $0.66 level against the dollar.

(3) On Thursday, the Bank of England (BoE) Makes Policy Decisions Public

Flashes of illumination rather than fireworks are likely to emerge from the Bank of England on Thursday, when it publishes its May rate decision and new quarterly forecasts.

While earlier this year rate-setters talked openly about the possibility of rate cuts, hard data and business surveys have painted a pretty mixed picture of price pressures in Britain's economy, much like in the U.S.

With scant fresh data scheduled between now and Thursday, investors are increasingly betting the BoE could even wait until September before cutting rates.

The results of local elections — which look set to pile yet more pressure on Prime Minister Rishi Sunak — are due from Friday, with monthly economic growth data due on May 10th.

Elsewhere in Europe, Sweden is seen as likely to start cutting rates on May 8 as inflation falls faster than expected.

(4) On Friday, Prelim Reading of U. of Michigan Consumer Sentiment

U.S. consumers are in focus as the University of Michigan's preliminary reading on consumer sentiment in May gives a snapshot of their inflation expectations and economic outlook.

Months of stubborn inflation have threatened to disrupt the so-called Goldilocks narrative of resilient growth and cooling consumer prices that have helped drive stocks higher.

Any signs in the May 10th report that higher prices are weighing on sentiment could encourage the Fed to keep rates elevated, adding to recent pressure on stocks and bonds.

The Fed on Wednesday acknowledged a recent lack of progress on inflation, although Chair Jerome Powell reiterated that rates are likely to fall in 2024.

Economists polled by Reuters expect the consumer sentiment index to rise to 77.9 from 77.2 in April.

(5) On Sunday May 5th, a Panama Presidential Election Happened

Panama elected a new president on May 5th, choosing from among eight candidates.

There is a host of thorny issues for whomever wins. One major policy issue stands out: The Central American country is at serious risk of losing its coveted 'investment grade' status, having already been chopped to 'junk' by Fitch.

Its business-friendly reputation has been tarnished by a decision to close the huge Cobre Panama copper mine that provides some 5% of its GDP.

All this, while the drought-hit Panama Canal's contribution to state coffers is expected to fall nearly -3% this year.

On Sunday May 5th, Panama's former security minister Jose Raul Mulino stormed to victory in a presidential poll dominated by his old boss, the popular ex-leader Ricardo Martinelli, who buttressed his campaign despite being holed up in Nicaragua's embassy.

Mulino, 64, was one of the favorites for the presidency. He stepped in to replace Martinelli on the ballot, when the former president was barred from running, due to a money laundering conviction.

Mulino needs to improve Panama’s finances, to win over the ratings firms. Spending cuts were not something any candidate dared to go near, on the campaign trail.

Zacks #1 Rank (STRONG BUY) Stocks

(1) Pulte Group (PHM Quick QuotePHM - Free Report) : This is a $113 stock with a market cap of $23.5B. It is found in the U.S. Homebuilding industry. I see a Zacks Value score of B, a Zacks Growth score of D and a Zacks Momentum score of A.
 

Image Source: Zacks Investment Research

Based in Atlanta, GA, PulteGroup Inc. engages in homebuilding and financial services businesses, primarily in the United States.

The company conducts operations through two primary business segments – Homebuilding (which contributed 98% as of 2023 to total revenues) and Financial Services (2%).

The Homebuilding segment offers a wide variety of home designs, including single-family detached, townhouses, condominiums and duplexes at different prices, with a variety of options and amenities to all major customer segments: first-time, move-up and active adults.

Pulte’s brand portfolio includes Centex, Pulte Homes, Del Webb, DiVosta Homes, John Wieland Homes and Neighborhoods, and American West.

The company operates in 906 active communities in 46 markets in 26 states across the United States in 2023. The homebuilding division is broken down into six reportable segments; Northeast, Southeast, Florida, Texas, Midwest and West.

PulteGroup’s direct subsidiaries under the homebuilding segment include Pulte Diversified Companies Inc., Del Webb Corp. and Centex Corp.

PulteGroup’s Financial Services business includes mortgage banking and title operations through Pulte Mortgage and other subsidiaries. Pulte Mortgage arranges financing by originating mortgage loans for homebuyers.

Backlog at the end of first-quarter 2024 was 13,430 units, up 2.3% year over year. In addition, potential housing revenues from the backlog increased 2.8% from the prior-year quarter to $8.2 billion.

(2) Axon Enterprises (AXON Quick QuoteAXON - Free Report) : This is a $316 stock with a market cap of $23.5B. It is found in the Security and Safety Services industry. I see a Zacks Value score of F, a Zacks Growth score of A and a Zacks Momentum score of F.

Image Source: Zacks Investment Research

Headquartered in Scottsdale, AZ, Axon Enterprise, Inc. develops and manufactures weapons for selling to U.S. state and local governments, the U.S. federal government, international government customers and commercial enterprises.

Focused on global public safety, Axon’s suite of products includes conducted energy devices, body-worn cameras, in-car cameras, cloud-hosted digital evidence management solutions, productivity software and real-time operations capabilities.

The company generates the majority of its revenues through direct sales, including its online store.

Its market for body-worn and in-car cameras is exposed to intense competition from Motorola Solutions, Panasonic Corp., Reveal Media, Safe Fleet and Digital Ally Inc., among others.

The market for software solutions is vulnerable to competition from Motorola Solutions, Panasonic Corp., IBM, Oracle, FotoWare and Vidizmo, among others.

Axon operates under the following two segments:

TASER: This segment caters to the manufacture of conducted energy devices ("CED") sold under its brand name, TASER. It develops tools, such as TASER devices, virtual reality training services and consumer devices, to support public safety officers in de-escalating situations, avoiding or minimizing the use of force and aiding consumer personal protection.

Software and Sensors: This segment focuses on the manufacture of fully integrated hardware and cloud-based software solutions. Within sensors, products such as Axon body cameras and Axon Fleet in-car systems, among other devices, cater to varied needs, including transparency, real-time situational awareness, and capturing evidence and integrating with software workflows.

Within software, Axon is building a suite of cloud-based, software-as-a-service (SaaS) solutions that integrate with its sensors and TASER devices to drive annual recurring revenues.

The company’s fiscal year coincides with the calendar year.

(3) Steel Dynamics (STLD Quick QuoteSTLD - Free Report) : This is a $130 stock with a market cap of $20.5B. It is found in the Steel Producers industry. I see a Zacks Value score of B, a Zacks Growth score of C and a Zacks Momentum score of A.
 

Image Source: Zacks Investment Research

Based in Fort Wayne, IN, Steel Dynamics, Inc. is among the leading steel producers and metal recyclers in the United States.

It currently has steelmaking and coating capacity of around 16 million tons.

It is one of the most diversified steel companies in United States with a vast range of specialty products. The company makes and markets steel products, processes and sells recycled ferrous and nonferrous metals, and fabricates and sells steel joist and decking products in the United States and internationally.

Steel Dynamics operates through three segments – Steel Operations (67% of revenues in 2023), Steel Fabrication Operations (15%) and Metals Recycling Operations (12%).

Other operations, which include subsidiary operations, accounted for the balance of revenues in 2023.

Steel Operations: The unit produces steel from ferrous scrap and scrap substitutes and consists of six electric arc furnace steel mills. It mainly consists of steelmaking and coating operations. Products made at the unit are used in a number of industries including construction, automotive, manufacturing and transportation.

Metals Recycling Operations: The operations of the division include ferrous and nonferrous scrap metal processing, transportation, marketing and brokerage services. The unit purchases, processes and resales ferrous and nonferrous scrap metals into reusable forms and grades. End-users of these products include electric arc furnace steel mills, integrated steelmakers, foundries, secondary smelters and metal brokers.

Steel Fabrication Operations: The unit produces steel building components, including steel joists, girders, trusses and steel deck. The division’s main customers are non-residential steel fabricators.

Steel Dynamics, in 2018, acquired Heartland Steel Processing, LLC from CSN Steel, S.L.U., for $400 million.

Heartland produces a range of higher-margin, flat roll steel by further processing hot roll coils into cold roll, pickle and oil and galvanized products. It has the capability to produce 1 million tons of cold roll steel annually. It has a continuous pickle line, a cold mill and a galvanizing line. Moreover, its equipment is well-maintained, upgraded and in excellent operating condition.

Key Global Macro

Trade numbers from Mainland China on Thursday look important, given they turn up.

On Monday, the NY Fed’s Williams will speak.

Mainland China’s Caixin Services PMI for April is out. The March reading was expansionary at 52.7.

The Eurozone’s HCOB Composite PMI for April is out. 50.5 is consensus, following a 50.5 in March. Still shows expansion.

On Tuesday, the Australian RBA central bank decisions land. 4.35% on the policy rate should stick around. There is a presser.

On Wednesday, there is a non-monetary policy ECB meeting.

There is a Christian holiday — Ascension Day — for Switzerland, Germany and France.

On Thursday, Mainland China’s exports for April should be up +1% y/y, after being down -7.5% in March.

Mainland China’s Imports should be up +6% in April, after being down -1.9% in March.

There is a Bank of England (BoE) monetary policy statement.

On Friday, the U.K.’s Q1 real GDP growth rate comes out. The prior reading was -0.2% y/y.

Lots of additional U.K. macro statistics also come out.

Conclusions

It is always worthy to close stock market matters up with a current S&P500 EPS tally.

Here are Zacks Research Director Sheraz Mian’s four key May 1st EPS points:

(1) The picture emerging from the Q1 earnings season continues to be one of steady improvement and resilience.

The earnings growth pace is modestly accelerating, and estimates for the coming periods are starting to increase.

On the flip side, positive surprises are tracking below other recent periods, particularly on the revenues side.

(2) Total earnings for the 310 S&P 500 members that have reported Q1 results are up +5.0% from the same period last year on +4.5% higher revenues.

78.1% beat EPS estimates. 59.4% beat revenue estimates.

(3) As was the case in the preceding two quarters, the Info Tech sector remains a key growth driver in Q1-24.

Had it not been for the robust Tech sector earnings growth, total earnings for the rest of the index would be down -2.6% (instead of +4.8% as a whole).

(4) Looking at the calendar year 2024 picture, total S&P500 earnings are expected to grow by +8.6% this year after last year’s modest decline.

Excluding the hefty Tech sector contribution, whose 2024 earnings are expected to be up +16.0%, earnings for the rest of the S&P500 index would be up only +5.9%.

Have an excellent trading week.

Warm Regards,

John Blank, PhD
Zacks Chief Equity Strategist and Economist