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In the Global Week Ahead, stock and bond markets are hoping for evidence that will solidify a brightening global economic outlook.
Though rising global trade tensions are casting a cloud:
“AI” darling Nvidia ((NVDA - Free Report) ) shares Q1 results AMC on Wed. May 22nd, and
London has set its sights, on a revival in large public stock listings
On Wednesday, New Zealand's central bank won’t offer a policy rate change. That small economy is stuck in a rut, between lackluster GDP growth and sticky inflation.
G7 finance ministers gather in Italy, at the end of the week.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Time for THE A.I. Chip Earnings Report: NVDA
Nvidia's quarterly results on Wednesday could set the tone for U.S. stock markets and reverberate through companies exposed to the burgeoning artificial intelligence field.
The semiconductor company at the center of the excitement over AI's business potential is expected to report a massive jump in revenue and profit for its fiscal first quarter.
Revenue is expected to rise to $24.8 billion, from $7.2 billion a year earlier, with earnings per share soaring to $5.57 from $1.09, according to LSEG data.
Nvidia may need to meet those lofty expectations and then some to keep its soaring stock price moving higher.
Shares have jumped over +90% this year after more than tripling in 2023, making the AI darling the third-largest U.S. company by market value.
(2) Important New London Stock Market Listings Are Coming
Reports on the diminished status of London's stock market have been aplenty: Europe's most popular listing venue during the 2021 boom has been home to just 1% of all European IPO volumes year-to-date, according to Dealogic.
Could this be about to change? A string of household names have emerged as potential London listing contenders.
Chinese “fast fashion" brand Shein is stepping up preparations for a potential London float that could be the venue's largest ever, if its valued at $66 billion. Diamond firm De Beers is another that might bring some sparkle.
A positive driver is the improved global fund flows.
(3) Purchasing Manager Indices (PMIs) Land for a Number of Major World Economies
Upcoming May business activity numbers from big economies should reinforce a brighter global economic outlook.
A slow euro area recovery appears to be underway after six straight quarters of stagnant or negative growth, U.S. inflation just resumed its downward trend and China grew faster than expected in Q1.
So, global PMIs should stay on the right side of the 50 divider between expansion and contraction.
Yet steep U.S. tariff increases on Chinese imports from electric vehicle batteries to computer chips highlight a fragile outlook for global trade and growth. China vows retaliation.
Manufacturers in Germany, Europe's biggest economy, are already experiencing shifts in world trade and geopolitics. Heightened trade tensions — with a U.S. election looming — could hurt them further, upend China's recovery and reignite U.S. inflation.
Global PMIs are pointing up for now. But that could easily change.
(4) A G7 Finance Minister Meeting — on Russian Asset Seizures — Happens from Friday May 24th to Saturday May 25th
Finance chiefs from the Group of Seven major democracies will back a European Union plan to use the income from frozen Russian assets to help Ukraine's war effort at a May 24-25 meeting, according to Italy, which holds the rotating presidency of the group.
The prospect of more funding potentially in the near future comes at a critical time for Ukraine, which faces a new Russian offensive in the north eastern Kharkiv region.
The G7 froze some $300 billion worth of financial assets soon after Moscow's attack on its neighbor in February 2022 — and has debated since then whether and how to use the funds to help Ukraine.
While Washington has proposed seizing the assets in their entirety, Europe has balked at that push, citing risks to the euro and legal repercussions.
Italy has said it will also try to revive an international deal on how to share taxing rights on large corporations which the United States is struggling to ratify in Congress.
(5) On Wednesday, the Reserve Bank of New Zealand (RBNZ) should leave its Policy Rate Unchanged
The central bank that was at the forefront of monetary policy shifts globally has been forced to take a back seat in bringing interest rates down from painful multi-year peaks.
The Reserve Bank of New Zealand, expected to leave rates unchanged on Wednesday for a seventh consecutive meeting, was the first major monetary authority to ease at the start of the pandemic, and the first to hike in the aftermath.
But sticky inflation and a flatlining economy keeps the RBNZ in the "watch, worry and wait" stance it adopted a year ago.
Market wagers for an eventual cut in October put it behind the ECB which is expected to move in June, followed by the BoE in August and the U.S. Fed in September. Switzerland and Sweden have started easing.
The RBNZ itself is even less optimistic, projecting no lowering of rates until next year.
Top Zacks #1 Rank (STRONG BUY) Stocks
(1) Nvidia (NVDA - Free Report) : This is a $940 a share stock, with a market cap of $2.3T now. It is found in Zacks Semiconductor – General industry. I see a Zacks Value Score of F, a Zacks Growth score of B and a Zacks Momentum score of D.
Image Source: Zacks Investment Research
NVIDIA Corp. 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.
(2) Arista Networks (ANET - Free Report) : This is a $320 a share stock, with a market cap of $100.3B. It is found in Zacks Communication Components industry. I see a Zacks Value Score of F, a Zacks Growth score of C and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Santa Clara, CA-based Arista Networks, Inc. is engaged in providing cloud networking solutions for data centers and cloud computing environments.
The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next generation data center networks.
Arista uses multiple silicon architectures across its products. At the core of the company’s cloud networking solutions is the Linux-based Extensible Operating System (EOS), which was architected to be fully programmable and highly modular.
EOS supports leading cloud and virtualization solutions, including Microsoft System Center, OpenStack and other cloud management frameworks.
The company co-authored the Virtual Extensible LAN (VXLAN) protocol specification with VMware and was the first to demonstrate VXLAN integration. Moreover, it has now expanded VXLAN routing and integration.
In 2015, Arista introduced CloudVision, a network-wide approach for workload orchestration and workflow automation delivering a turnkey solution for cloud networking.
In 2019, Arista introduced 10 new 400G platforms:
In the Leaf/Spine High Network Radix category, it offers two new fixed 32 port 400G switches, and a 128 port 100G/32 port 400G modular switch
For the Universal Leaf and Spine category of switching, the company introduced R3 series 100G and 400G products supporting up to 2.5M routes on its 7280R3 series fixed and 7500R3 series modular platforms
Arista introduced a modular family called the 7800R3, a high density 100G and 400G platform supporting up to 460 Tbps of system throughput
Also, it launched the 720XP Series of fixed Power over Ethernet (PoE) leaf switches with 60W PoE, enabling it to offer a complete end-to-end solution for cognitive campus Ethernet as well as the introduction of WiFi-6 wireless Access Points (APs)
The company serves five verticals namely – cloud titans (customers that deploy more than one million servers), cloud specialty providers, service providers, financial services and rest of enterprise.
Arista’s customers include six of the largest cloud service providers based on annual revenues. In 2023, total revenues were $5.86 billion.
(3) Coinbase Global (COIN - Free Report) : This is a $200 a share stock, with a market cap of $48.9B. It is found in Zacks Finance – Securities and Exchanges industry. I see a Zacks Value Score of F, a Zacks Growth score of F and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
Coinbase is the largest U.S. cryptocurrency exchange, trading some 50 different digital assets.
Key Global Macro
There is an excess of FOMC speeches across this week. Not sure why that is the case.
On Monday, the People’s Bank of China (PBoC) policy rate decision came in at an expected 3.45%. Yawn!
The Fed’s Bostic, Barr, Waller (best to listen to this one) and Jefferson speak.
On Tuesday, Canada’s CPI for April comes out. The prior reading was up +2.9% y/y.
We get still more Fed speeches from Barr (again!), Bostic (again!), Collins, Mester, Waller (again!) and Williams.
The BoE’s Bailey also gives a speech.
The RBA’s latest meeting minutes come out.
On Wednesday, we get the RBNZ policy rate decision. 5.5% is not expected to change.
The U.K. CPI for April comes out. The broad CPI was +3.2% y/y in the prior month. The core CPI is expected to fall to +3.7% y/y from +4.2% y/y.
U.S. Existing Home Sales for April should be 4.18M, in line with the prior reading of 4.19M.
On Thursday, Japan’s Jibun Bank manufacturing PMI for May (preliminary) comes out. 49.6 was the prior reading.
The HCOB manufacturing PMI for May (preliminary) for the Eurozone also comes out. 46.6 is the consensus for April. It follows a 45.7 number in March.
The U.S. S&P global manufacturing PMI for May (preliminary) comes out. 50 is the prior reading.
On Friday, the U of Michigan consumer sentiment index for May comes out. The prior 67.4 is not expected to change much.
The Fed’s Waller gives a third speech (will they all be different? I doubt it!).
Conclusion
Zacks Research Director Sheraz Mian shared that Q1 annualized S&P500 earnings growth are getting closer to a +5.0% y/y number —
The bulk of the Q1-24 earnings season is now behind us, with results from 460 S&P500 companies already out through Friday, May 10th.
Last week, we had almost 400 companies report Q1 results this week, including 7 S&P500 members.
In addition to Walmart and Home Depot, last week’s line-up included Cisco Systems, Deere & Company, China’s Alibaba, JD.com, and many others.
Total Q1 earnings for the 460 index members were up +4.8% from the same period last year on +4.2% higher revenues.
Image: Bigstock
NVDA Shares a Fresh A.I. Story: Global Week Ahead
In the Global Week Ahead, stock and bond markets are hoping for evidence that will solidify a brightening global economic outlook.
Though rising global trade tensions are casting a cloud:
On Wednesday, New Zealand's central bank won’t offer a policy rate change. That small economy is stuck in a rut, between lackluster GDP growth and sticky inflation.
G7 finance ministers gather in Italy, at the end of the week.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Time for THE A.I. Chip Earnings Report: NVDA
Nvidia's quarterly results on Wednesday could set the tone for U.S. stock markets and reverberate through companies exposed to the burgeoning artificial intelligence field.
The semiconductor company at the center of the excitement over AI's business potential is expected to report a massive jump in revenue and profit for its fiscal first quarter.
Revenue is expected to rise to $24.8 billion, from $7.2 billion a year earlier, with earnings per share soaring to $5.57 from $1.09, according to LSEG data.
Nvidia may need to meet those lofty expectations and then some to keep its soaring stock price moving higher.
Shares have jumped over +90% this year after more than tripling in 2023, making the AI darling the third-largest U.S. company by market value.
(2) Important New London Stock Market Listings Are Coming
Reports on the diminished status of London's stock market have been aplenty: Europe's most popular listing venue during the 2021 boom has been home to just 1% of all European IPO volumes year-to-date, according to Dealogic.
Could this be about to change? A string of household names have emerged as potential London listing contenders.
Chinese “fast fashion" brand Shein is stepping up preparations for a potential London float that could be the venue's largest ever, if its valued at $66 billion. Diamond firm De Beers is another that might bring some sparkle.
A positive driver is the improved global fund flows.
(3) Purchasing Manager Indices (PMIs) Land for a Number of Major World Economies
Upcoming May business activity numbers from big economies should reinforce a brighter global economic outlook.
A slow euro area recovery appears to be underway after six straight quarters of stagnant or negative growth, U.S. inflation just resumed its downward trend and China grew faster than expected in Q1.
So, global PMIs should stay on the right side of the 50 divider between expansion and contraction.
Yet steep U.S. tariff increases on Chinese imports from electric vehicle batteries to computer chips highlight a fragile outlook for global trade and growth. China vows retaliation.
Manufacturers in Germany, Europe's biggest economy, are already experiencing shifts in world trade and geopolitics. Heightened trade tensions — with a U.S. election looming — could hurt them further, upend China's recovery and reignite U.S. inflation.
Global PMIs are pointing up for now. But that could easily change.
(4) A G7 Finance Minister Meeting — on Russian Asset Seizures — Happens from Friday May 24th to Saturday May 25th
Finance chiefs from the Group of Seven major democracies will back a European Union plan to use the income from frozen Russian assets to help Ukraine's war effort at a May 24-25 meeting, according to Italy, which holds the rotating presidency of the group.
The prospect of more funding potentially in the near future comes at a critical time for Ukraine, which faces a new Russian offensive in the north eastern Kharkiv region.
The G7 froze some $300 billion worth of financial assets soon after Moscow's attack on its neighbor in February 2022 — and has debated since then whether and how to use the funds to help Ukraine.
While Washington has proposed seizing the assets in their entirety, Europe has balked at that push, citing risks to the euro and legal repercussions.
Italy has said it will also try to revive an international deal on how to share taxing rights on large corporations which the United States is struggling to ratify in Congress.
(5) On Wednesday, the Reserve Bank of New Zealand (RBNZ) should leave its Policy Rate Unchanged
The central bank that was at the forefront of monetary policy shifts globally has been forced to take a back seat in bringing interest rates down from painful multi-year peaks.
The Reserve Bank of New Zealand, expected to leave rates unchanged on Wednesday for a seventh consecutive meeting, was the first major monetary authority to ease at the start of the pandemic, and the first to hike in the aftermath.
But sticky inflation and a flatlining economy keeps the RBNZ in the "watch, worry and wait" stance it adopted a year ago.
Market wagers for an eventual cut in October put it behind the ECB which is expected to move in June, followed by the BoE in August and the U.S. Fed in September. Switzerland and Sweden have started easing.
The RBNZ itself is even less optimistic, projecting no lowering of rates until next year.
Top Zacks #1 Rank (STRONG BUY) Stocks
(1) Nvidia (NVDA - Free Report) : This is a $940 a share stock, with a market cap of $2.3T now. It is found in Zacks Semiconductor – General industry. I see a Zacks Value Score of F, a Zacks Growth score of B and a Zacks Momentum score of D.
Image Source: Zacks Investment Research
NVIDIA Corp. 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.
(2) Arista Networks (ANET - Free Report) : This is a $320 a share stock, with a market cap of $100.3B. It is found in Zacks Communication Components industry. I see a Zacks Value Score of F, a Zacks Growth score of C and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Santa Clara, CA-based Arista Networks, Inc. is engaged in providing cloud networking solutions for data centers and cloud computing environments.
The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next generation data center networks.
Arista uses multiple silicon architectures across its products. At the core of the company’s cloud networking solutions is the Linux-based Extensible Operating System (EOS), which was architected to be fully programmable and highly modular.
EOS supports leading cloud and virtualization solutions, including Microsoft System Center, OpenStack and other cloud management frameworks.
The company co-authored the Virtual Extensible LAN (VXLAN) protocol specification with VMware and was the first to demonstrate VXLAN integration. Moreover, it has now expanded VXLAN routing and integration.
In 2015, Arista introduced CloudVision, a network-wide approach for workload orchestration and workflow automation delivering a turnkey solution for cloud networking.
In 2019, Arista introduced 10 new 400G platforms:
The company serves five verticals namely – cloud titans (customers that deploy more than one million servers), cloud specialty providers, service providers, financial services and rest of enterprise.
Arista’s customers include six of the largest cloud service providers based on annual revenues. In 2023, total revenues were $5.86 billion.
(3) Coinbase Global (COIN - Free Report) : This is a $200 a share stock, with a market cap of $48.9B. It is found in Zacks Finance – Securities and Exchanges industry. I see a Zacks Value Score of F, a Zacks Growth score of F and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
Coinbase is the largest U.S. cryptocurrency exchange, trading some 50 different digital assets.
Key Global Macro
There is an excess of FOMC speeches across this week. Not sure why that is the case.
On Monday, the People’s Bank of China (PBoC) policy rate decision came in at an expected 3.45%. Yawn!
The Fed’s Bostic, Barr, Waller (best to listen to this one) and Jefferson speak.
On Tuesday, Canada’s CPI for April comes out. The prior reading was up +2.9% y/y.
We get still more Fed speeches from Barr (again!), Bostic (again!), Collins, Mester, Waller (again!) and Williams.
The BoE’s Bailey also gives a speech.
The RBA’s latest meeting minutes come out.
On Wednesday, we get the RBNZ policy rate decision. 5.5% is not expected to change.
The U.K. CPI for April comes out. The broad CPI was +3.2% y/y in the prior month. The core CPI is expected to fall to +3.7% y/y from +4.2% y/y.
U.S. Existing Home Sales for April should be 4.18M, in line with the prior reading of 4.19M.
On Thursday, Japan’s Jibun Bank manufacturing PMI for May (preliminary) comes out. 49.6 was the prior reading.
The HCOB manufacturing PMI for May (preliminary) for the Eurozone also comes out. 46.6 is the consensus for April. It follows a 45.7 number in March.
The U.S. S&P global manufacturing PMI for May (preliminary) comes out. 50 is the prior reading.
On Friday, the U of Michigan consumer sentiment index for May comes out. The prior 67.4 is not expected to change much.
The Fed’s Waller gives a third speech (will they all be different? I doubt it!).
Conclusion
Zacks Research Director Sheraz Mian shared that Q1 annualized S&P500 earnings growth are getting closer to a +5.0% y/y number —
The bulk of the Q1-24 earnings season is now behind us, with results from 460 S&P500 companies already out through Friday, May 10th.
Last week, we had almost 400 companies report Q1 results this week, including 7 S&P500 members.
In addition to Walmart and Home Depot, last week’s line-up included Cisco Systems, Deere & Company, China’s Alibaba, JD.com, and many others.
Total Q1 earnings for the 460 index members were up +4.8% from the same period last year on +4.2% higher revenues.
77.4% beat EPS estimates. 60% beating revenue estimates.
Earnings growth for these companies would have been +7.9% instead of +4.8% — had it not been for the substantial Energy sector drag.
Have an excellent trading week!
Warm Regards,
John Blank, PhD
Zacks Chief Equity Strategist and Economist