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Thursday, October 5, 2017

A week from today, Wall Street turns open the spigots on Q3 earnings season, with some of its biggest banks reporting quarterly results, followed by three weeks of a constant barrage of earnings data. For today, we will have to be satisfied with several points of reference on the economy, including jobless claims and forthcoming speeches from Fed officials. Oh, and one big earnings beat, which came out ahead of today’s opening bell.

Constellation Brands Blasts Off

Global adult beverage distributor Constellation Brands (STZ - Free Report) posted a big beat in today’s pre-market, putting up earnings of $2.47 per share that easily topped the
$2.16 in the Zacks consensus. This also represents EPS up 40% from this quarter — fiscal Q2 2018, BTW — on $2.08 billion in revenues, which beat consensus and are up 3.1% year over year. Solid growth in its beer business was cited in the earnings report.

Constellation Brands has also raised guidance for fiscal 2018 quite notably: the new EPS range of $8.25-8.40 is a big boost from the previous estimate of $7.90-8.10. The company expects beer sales to continue to grow 9-11% through the remainder of fiscal 2018. The stock is currently up roughly 6.4% in early trading today, and STZ shares are currently cresting at all-time highs. For more details on STZ earnings, click here.

Jobless Claims Work Through Hurricane Effects

Initial jobless claims fell by 12K last week to an even 260K, following an unrevised previous read of 272K. This result remains hotter than the 4-week, 12-week and 12-month ranges, but there is a clear hurricane effect within these numbers. That today’s total gets closer to the long-term range of 225-250K points to quality restoration efforts in Texas and Florida following Hurricanes Harvey and Irma last month, as well as impressive resilience in the U.S. labor market overall. Continuing claims stayed pretty flat week-over-week, at 1.938 million.

Tomorrow’s Bureau of Labor Statistics (BLS) non-farm payroll report will bring us up to date on the unemployment rate and the breakdown of the labor market for the month of September. Some hurricane effect may be anticipated here, as well; yesterday’s ADP (ADP - Free Report) private-sector payroll report charted the lowest total of new job gains in almost a year. Currently, Zacks Chief Strategist John Blank is looking for a headline BLS number of 156K, with 4.4% unemployment.

August Trade Balance

We see a downwardly revised figure this morning for the U.S. August Trade Balance (deficit), from -$43.6 billion last week to -$42.4 billion today. This 2.7% drop follows a further dwindling trade deficit from the previous week — another positive sign for the U.S. economy overall.

Fed Officials Speak

The market indexes continue to climb to higher all-time highs, with pre-market reads on the Dow, Nasdaq and S&P 500 all marginally higher this morning. In short, there appear to be no dampeners to this ongoing good fortune.

And even as we hear from monetary authorities today, such as Fed Governor Jerome Powell, San Francisco Fed President John Williams, Philadelphia President Patrick Harker and Kansas City Fed President Esther George, as we do not see inflation metrics encroaching in any consistently meaningful ways, at this point we don’t expect much verbal bomb-throwing from the officials. Harker, just this morning, was quoted on CNBC as saying he is “still penciling in December” for the next Federal Reserve rate hike, but this statement was again qualified by what effect inflation wil have been having on the U.S. economy.

Mark Vickery
Senior Editor

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