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In the Global Week Ahead? The end of 2024 is almost in sight for stock traders.
Yet, this last mile will be anything but slow:
Central banks in the U.S.A., the U.K., and Japan meet this week, and
Germany holds a vote of “no confidence” in its government
Next are Reuters’ five world market themes, re-ordered for equity traders—
(1) On Wednesday, a two-day Fed meeting in the USA wraps.
The U.S. Federal Reserve is expected to continue monetary easing with a 25 basis- point (bps) rate cut on Wednesday, in what would be its 3rd straight reduction, with the latest Consumer Price Index (CPI) rising in line with economists' estimates.
Investors have curtailed expectations for how much the Fed will cut next year.
Traders expect rates to fall to about 3.7% by end-2025 from the current 4.5%-4.75% range, roughly 90 basis points higher than what was priced in back in September.
That puts the focus on the Fed's own rate projections and on any insight from Chair Jerome Powell about his expectations for future easing.
Chair Powell has said the economy is stronger now than the Fed had anticipated in September, and appeared to signal his support for a slower pace of rate cuts ahead.
(2) On Thursday, the Bank of England should keep its policy rate steady.
When it comes to rate cuts, the Bank of England (BoE) has been driving in the slow lane.
Traders expect the BoE to hold rates at 4.75% on Thursday, just 50 bps below a previous 16-year peak, and to resist a third 25 bps cut until February.
Employer tax hikes in the Labour government's October budget motivated big businesses to warn of price rises, fueling inflation concerns and helping propel sterling to 2-1/2 year highs against the euro as the ECB eases policy more rapidly than the BoE.
But bond markets are querying this divergence, with two-year gilt yields, which move on rate forecasts, dropping to about 4.38% from more than 4.5% a month ago.
U.K. employment growth is slowing as tax rises deter hiring plans and consumer confidence is weak. Sterling bulls should watch out for the BoE shifting gears.
(3) On Thursday, the Bank of Japan (BoJ) also makes monetary policy decisions.
The pendulum of BoJ policy expectations has swung widely in the last two weeks, tying traders in knots.
But as the Dec. 19th decision looms, the signal is becoming clearer — even if the outcome is still uncertain.
Reuters reported on Thursday that policymakers are leaning towards a pause, waiting for further data on wages and clarity on President-elect Trump's policies before raising rates for a third time.
A day earlier, Bloomberg reported that BoJ officials see "little cost" from delaying additional tightening.
No doubt the BoJ decision is live, meaning market volatility could be high.
One mooted risk is that the Fed surprises by not cutting rates on Dec. 18th, triggering a jump in dollar/yen.
But analysts note it would be very rare for the Fed to go against the grain when market conviction for a cut is so strong.
(4) This Monday, expect a no-confidence vote in this German government.
Germany's DAX index is this year's best-performing European index, up +22%, hitting record high after record high.
Defense, tech and construction stocks have more than made up for the performance of its out of favor auto sector.
Corporate Germany appears to be weathering sluggish growth and political drama.
A no-confidence vote in the government today should pave the way for a February snap election.
But the devil is in the details.
Goldman Sachs says just 18% of DAX sales come from Germany versus the 33% for companies on the mid-cap MDAX, which is down -1.1% this year.
German corporate earnings shrank -5.4% on an annual basis in the third quarter, versus +8.2% growth for STOXX earnings, based on LSEG data.
German equities may start aligning a little more closely with the underlying economic and political realities.
(5) December Purchasing Manager Indices (PMIs) come out.
Once-robust services sectors across big economies are faltering, bringing a divergence with sluggish manufacturing activity to an end.
That was the takeaway from November PMIs.
December numbers, out across the globe next week, should show if the slowdown is getting deeper.
The November Eurozone composite PMI, seen as a good gauge of overall economic health, sank to 48.3 from October's 50.0.
Britain's all-sector PMI fell to its lowest in a year at 50.9 — just above the marker that separates contraction from expansion.
Even U.S. services sector activity slowed.
U.S. tariff worries, and French and German political ructions, have the potential to hurt business activity.
For some observers, the PMI data paints too pessimistic a picture of underlying activity, with falling interest rates helping to bolster sentiment.
Zacks #1 Rank (STRONG BUY) Stocks
Here are three large-cap stocks that showed impressive price momentum in 2024.
(1) Mastec (MTZ - Free Report) : This is a $137 a share stock in the Building Products-Heavy Construction industry. The market cap is $10.9B. I see a Zacks Value score of C, a Zacks Growth score of A and a Zacks Momentum score of C.
Image Source: Zacks Investment Research
MasTec is a leading infrastructure construction company.
It engages in the engineering, building, installation, maintenance & upgrade of energy, communication & utility and other infrastructure.
Its Communications unit performs engineering, construction & maintenance of communications infrastructure mainly related to wireless & wireline communications & install-to-the-home.
The Oil & Gas unit performs engineering, construction & maintenance services on oil & natural gas pipelines & processing facilities for the energy & utilities industries.
The Electrical Transmission unit primarily serves the energy & utility industries through the engineering, construction & maintenance of electrical transmission lines & substations.
The Clean Energy & Infrastructure unit primarily serves the energy & utility end-markets & other end-markets through the installation & construction of conventional & renewable power plants, related electrical transmission infrastructure, ethanol facilities & various types of industrial infrastructure.
(2) Parsons (PSN - Free Report) : This is a $97 a share stock in the Technology Services industry. The market cap is $10.1B. I see a Zacks Value score of C, a Zacks Growth score of A and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Parsons is a provider of technology-driven solutions.
It is focused on the defense, intelligence and critical infrastructure markets.
The company offers technical design and engineering services and software which consists of cybersecurity, intelligence, defense, military training, connected communities, physical infrastructure and mobility solutions.
Parsons is based in Centreville, Virginia.
(3) MACOM Technology Solutions (MTSI - Free Report) : This is a $136 a share stock in the Semiconductor-Analog and Mixed industry. The market cap is $10.0B. I see a Zacks Value score of F, a Zacks Growth score of C and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
MACOM Technology Solutions is a provider of power analog semiconductor solutions to varied markets.
The company develops and produces analog radio frequency (RF), microwave and millimeter wave semiconductor devices, and components for applications in optical, wireless and satellite networks.
The company, based in Lowell, MA, primarily serves three markets, namely, data center, industrial & defense and telecom.
The Data Center market demands for complete chip-set solutions. MACOM offers modulator drivers, lasers, silicon photonics and many more in this market. It contributed 27.1% of total revenues in fiscal 2024.
The Industrial and Defense (I&D) market requires military and commercial radar, RF jammers, electronic countermeasures and communication data links. It accounted for 48.2% of total revenues in fiscal 2024.
The Telecom market leverages the power of the company's opto-electronic products such as optical post amplifiers, laser clock, modulator drivers, transmitter and receiver applications. This market accounted for 24.7% of total revenues in fiscal 2024.
Geographically, in fiscal 2024, 44.9% of revenues came from the United States, 24.4% from China, 12.2% from Asia-Pacific (excluding China) and 18.5% from other countries.
In fiscal 2023, sales to the top 25 direct customers accounted for an aggregate of 51.5% of the total revenues. However, no direct customer individually accounted for 10% or more of our revenue.
MACOM competes with both customers' internal design resources as well as other high-performance analog semiconductor suppliers.
A few of its competitors include Analog Devices, NXP Semiconductors, Inphi Corp., Broadcom, Semtech Solutions, Cobham, Microsemi Corp. and Qorvo, among others.
Key Global Macro
On Monday, the Euro Area HCOB manufacturing PMI for December comes out. The prior reading was a weak 43.1.
The U.S. S&P global manufacturing PMI for December also come out. The prior reading was 49.7.
On Tuesday, November U.S. retail sales come out. Expect a +0.5% m/m increase, with a +0.4% m/m prior reading in play. Ex-autos should be +0.4% m/m, versus an earlier +0.1% m/m mark.
On Wednesday, U.S. housing starts for November come out. I see 1.31M was the prior reading. U.S. building permits for November come out too. I see 1.42M is the prior.
The FOMC policy rate decision happens. Expect the Fed Funds rate to get to 4.5% from 4.75%. Fresh Summary Economic Projections come out. There is a Chair Powell presser too.
Euro Area core HICP consumer price inflation for November should be +2.7% y/y, down a tick from +2.8% y/y the month prior. Broad HICP inflation should be +2.3% y/y, the same as the prior month.
On Thursday, U.S. leading economic indicators come out. A rise of +0.4% was the prior data.
The Bank of England (BoE) issues its monetary policy report. No change is expected.
The Bank of Japan (BoJ) also issues its policy rate decisions.
On Friday, U.S. PCE economy-wide price inflation for November is out. The prior reading was +2.3% y/y. The core PCE reading was +2.8% y/y in October.
Conclusion
On Dec. 4th, Zacks Research Director Sheraz Mian supplied an update on Q4 earnings.
Key points:
(1) For Q4-24, Zacks expect total S&P500 earnings to be up +7.5% from the same period last year, on +4.7% higher revenues.
(2) Earnings estimates for the Q4-24 period steadily came down since the quarter got underway.
The current +7.5% growth rate is down from +9.8% in early October.
(3) We expect Q4-24 earnings to be above year-earlier levels for 9 of 16 Zacks sectors:
Medical (earnings growth of +16%)
Tech (+14.5%)
Finance (+10.7%), and
Utilities (+9.1%) are the sectors enjoying significant earnings growth
(4) We expect Q4-24 earnings to be below year-earlier levels for 7 of 16 Zack sectors:
Energy (earnings decline of -20.7%)
Aerospace (-17.9%), and
Conglomerates (-14.3%) are the notable decliners
(5) We expect Q4-24 earnings for the ‘Magnificent 7’ group of companies to be up +20.5% from the same period last year, on +12.2% higher revenues.
Exclude that crucial ‘Mag 7’ contribution?
Q4-24 earnings for the rest of the S&P500 index only rise +3.6% (versus +7.5%).
That’s it for me!
Have an excellent trading week.
Warm Regards,
John Blank, PhD. Zacks Chief Equity Strategist and Economist
See More Zacks Research for These Tickers
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The Last Fed Meeting of 2024: Global Week Ahead
In the Global Week Ahead? The end of 2024 is almost in sight for stock traders.
Yet, this last mile will be anything but slow:
Next are Reuters’ five world market themes, re-ordered for equity traders—
(1) On Wednesday, a two-day Fed meeting in the USA wraps.
The U.S. Federal Reserve is expected to continue monetary easing with a 25 basis- point (bps) rate cut on Wednesday, in what would be its 3rd straight reduction, with the latest Consumer Price Index (CPI) rising in line with economists' estimates.
Investors have curtailed expectations for how much the Fed will cut next year.
Traders expect rates to fall to about 3.7% by end-2025 from the current 4.5%-4.75% range, roughly 90 basis points higher than what was priced in back in September.
That puts the focus on the Fed's own rate projections and on any insight from Chair Jerome Powell about his expectations for future easing.
Chair Powell has said the economy is stronger now than the Fed had anticipated in September, and appeared to signal his support for a slower pace of rate cuts ahead.
(2) On Thursday, the Bank of England should keep its policy rate steady.
When it comes to rate cuts, the Bank of England (BoE) has been driving in the slow lane.
Traders expect the BoE to hold rates at 4.75% on Thursday, just 50 bps below a previous 16-year peak, and to resist a third 25 bps cut until February.
Employer tax hikes in the Labour government's October budget motivated big businesses to warn of price rises, fueling inflation concerns and helping propel sterling to 2-1/2 year highs against the euro as the ECB eases policy more rapidly than the BoE.
But bond markets are querying this divergence, with two-year gilt yields, which move on rate forecasts, dropping to about 4.38% from more than 4.5% a month ago.
U.K. employment growth is slowing as tax rises deter hiring plans and consumer confidence is weak. Sterling bulls should watch out for the BoE shifting gears.
(3) On Thursday, the Bank of Japan (BoJ) also makes monetary policy decisions.
The pendulum of BoJ policy expectations has swung widely in the last two weeks, tying traders in knots.
But as the Dec. 19th decision looms, the signal is becoming clearer — even if the outcome is still uncertain.
Reuters reported on Thursday that policymakers are leaning towards a pause, waiting for further data on wages and clarity on President-elect Trump's policies before raising rates for a third time.
A day earlier, Bloomberg reported that BoJ officials see "little cost" from delaying additional tightening.
No doubt the BoJ decision is live, meaning market volatility could be high.
One mooted risk is that the Fed surprises by not cutting rates on Dec. 18th, triggering a jump in dollar/yen.
But analysts note it would be very rare for the Fed to go against the grain when market conviction for a cut is so strong.
(4) This Monday, expect a no-confidence vote in this German government.
Germany's DAX index is this year's best-performing European index, up +22%, hitting record high after record high.
Defense, tech and construction stocks have more than made up for the performance of its out of favor auto sector.
Corporate Germany appears to be weathering sluggish growth and political drama.
A no-confidence vote in the government today should pave the way for a February snap election.
But the devil is in the details.
Goldman Sachs says just 18% of DAX sales come from Germany versus the 33% for companies on the mid-cap MDAX, which is down -1.1% this year.
German corporate earnings shrank -5.4% on an annual basis in the third quarter, versus +8.2% growth for STOXX earnings, based on LSEG data.
German equities may start aligning a little more closely with the underlying economic and political realities.
(5) December Purchasing Manager Indices (PMIs) come out.
Once-robust services sectors across big economies are faltering, bringing a divergence with sluggish manufacturing activity to an end.
That was the takeaway from November PMIs.
December numbers, out across the globe next week, should show if the slowdown is getting deeper.
The November Eurozone composite PMI, seen as a good gauge of overall economic health, sank to 48.3 from October's 50.0.
Britain's all-sector PMI fell to its lowest in a year at 50.9 — just above the marker that separates contraction from expansion.
Even U.S. services sector activity slowed.
U.S. tariff worries, and French and German political ructions, have the potential to hurt business activity.
For some observers, the PMI data paints too pessimistic a picture of underlying activity, with falling interest rates helping to bolster sentiment.
Zacks #1 Rank (STRONG BUY) Stocks
Here are three large-cap stocks that showed impressive price momentum in 2024.
(1) Mastec (MTZ - Free Report) : This is a $137 a share stock in the Building Products-Heavy Construction industry. The market cap is $10.9B. I see a Zacks Value score of C, a Zacks Growth score of A and a Zacks Momentum score of C.
Image Source: Zacks Investment Research
MasTec is a leading infrastructure construction company.
It engages in the engineering, building, installation, maintenance & upgrade of energy, communication & utility and other infrastructure.
(2) Parsons (PSN - Free Report) : This is a $97 a share stock in the Technology Services industry. The market cap is $10.1B. I see a Zacks Value score of C, a Zacks Growth score of A and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Parsons is a provider of technology-driven solutions.
It is focused on the defense, intelligence and critical infrastructure markets.
The company offers technical design and engineering services and software which consists of cybersecurity, intelligence, defense, military training, connected communities, physical infrastructure and mobility solutions.
Parsons is based in Centreville, Virginia.
(3) MACOM Technology Solutions (MTSI - Free Report) : This is a $136 a share stock in the Semiconductor-Analog and Mixed industry. The market cap is $10.0B. I see a Zacks Value score of F, a Zacks Growth score of C and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
MACOM Technology Solutions is a provider of power analog semiconductor solutions to varied markets.
The company develops and produces analog radio frequency (RF), microwave and millimeter wave semiconductor devices, and components for applications in optical, wireless and satellite networks.
The company, based in Lowell, MA, primarily serves three markets, namely, data center, industrial & defense and telecom.
Geographically, in fiscal 2024, 44.9% of revenues came from the United States, 24.4% from China, 12.2% from Asia-Pacific (excluding China) and 18.5% from other countries.
In fiscal 2023, sales to the top 25 direct customers accounted for an aggregate of 51.5% of the total revenues. However, no direct customer individually accounted for 10% or more of our revenue.
MACOM competes with both customers' internal design resources as well as other high-performance analog semiconductor suppliers.
A few of its competitors include Analog Devices, NXP Semiconductors, Inphi Corp., Broadcom, Semtech Solutions, Cobham, Microsemi Corp. and Qorvo, among others.
Key Global Macro
On Monday, the Euro Area HCOB manufacturing PMI for December comes out. The prior reading was a weak 43.1.
The U.S. S&P global manufacturing PMI for December also come out. The prior reading was 49.7.
On Tuesday, November U.S. retail sales come out. Expect a +0.5% m/m increase, with a +0.4% m/m prior reading in play. Ex-autos should be +0.4% m/m, versus an earlier +0.1% m/m mark.
On Wednesday, U.S. housing starts for November come out. I see 1.31M was the prior reading. U.S. building permits for November come out too. I see 1.42M is the prior.
The FOMC policy rate decision happens. Expect the Fed Funds rate to get to 4.5% from 4.75%. Fresh Summary Economic Projections come out. There is a Chair Powell presser too.
Euro Area core HICP consumer price inflation for November should be +2.7% y/y, down a tick from +2.8% y/y the month prior. Broad HICP inflation should be +2.3% y/y, the same as the prior month.
On Thursday, U.S. leading economic indicators come out. A rise of +0.4% was the prior data.
The Bank of England (BoE) issues its monetary policy report. No change is expected.
The Bank of Japan (BoJ) also issues its policy rate decisions.
On Friday, U.S. PCE economy-wide price inflation for November is out. The prior reading was +2.3% y/y. The core PCE reading was +2.8% y/y in October.
Conclusion
On Dec. 4th, Zacks Research Director Sheraz Mian supplied an update on Q4 earnings.
Key points:
(1) For Q4-24, Zacks expect total S&P500 earnings to be up +7.5% from the same period last year, on +4.7% higher revenues.
(2) Earnings estimates for the Q4-24 period steadily came down since the quarter got underway.
The current +7.5% growth rate is down from +9.8% in early October.
(3) We expect Q4-24 earnings to be above year-earlier levels for 9 of 16 Zacks sectors:
(4) We expect Q4-24 earnings to be below year-earlier levels for 7 of 16 Zack sectors:
(5) We expect Q4-24 earnings for the ‘Magnificent 7’ group of companies to be up +20.5% from the same period last year, on +12.2% higher revenues.
Exclude that crucial ‘Mag 7’ contribution?
Q4-24 earnings for the rest of the S&P500 index only rise +3.6% (versus +7.5%).
That’s it for me!
Have an excellent trading week.
Warm Regards,
John Blank, PhD.
Zacks Chief Equity Strategist and Economist