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The U.S. Core PCE Rate for April: Global Week Ahead
Read MoreHide Full Article
Key Takeaways
A Key Economic Measure This Week: April PCE
Bond Yields Rise on Global Oil Price Hikes
Banks Begin Cutting Jobs... Because of AI?
What happens across this short Global Week Ahead?
World markets remain at the mercy of diplomacy, as the Iran war approaches the end of its third month, with no clear resolution in sight
A host of central banks meanwhile brace for their next moves, and
Inflation data piles the pressure on U.S. and Japan monetary policymakers
Next are Reuters’ five world market themes, re-ordered for equity traders—
(1) On Thursday morning, the April U.S. Core Personal Consumption Expenditure (PCE) rate comes out
Thursday brings the latest readout of the U.S. inflation outlook in the form of the April personal consumption expenditures price index, the Fed's favored gauge.
Recent measures showed high readings for consumer and producer prices as higher energy prices weigh.
Investors will also pore over a fresh estimate of first-quarter growth and the latest consumer confidence print.
Corporate results from Salesforce (CRM - Free Report) , Best Buy (BBY - Free Report) and Costco (COST - Free Report) , could shed more light on the AI trade and the health of consumer spending, as a robust Q1 earnings season that has boosted U.S. stocks winds down.
(2) Government bond markets turn higher world oil prices... into higher yields
Put aside buoyant tech-driven stocks for a minute.
From sliding Asian currencies to weakening economic activity in Europe and renewed pressure on the world's biggest bond markets, it's clear that the cracks from the Iran war are deepening.
Thirty-year borrowing costs in the systemically-key U.S. Treasury market hit their highest since 2007 last week.
Bond investors believe that central banks won't be able to look past the inflationary shock unleashed by a war that has shut the Strait of Hormuz.
And if governments increase spending to buffer consumers, a risk Japan has raised, that will exacerbate debt burdens.
Europe bore the brunt of March's bond selloff.
Now it's U.S. Treasuries that stand out, not great if you just took over as head of the U.S. Federal Reserve.
(3) Major banks are using AI to cut jobs now
The upheaval AI could wreak on jobs across finance is in focus after Standard Chartered (SCBFF - Free Report) , said it would eliminate almost 8,000 jobs by replacing what its CEO Bill Winters called "lower-value human capital" with technology.
Winters later said changes would be handled with thought and care but his remarks emphasized the coming disruption from a technology that can consume and process vast amounts of data, completing tasks previously done by people.
JPMorgan (JPM - Free Report) CEO Jamie Dimon and HSBC's (HSBC - Free Report) Georges Elhedery also warned of job changes due to AI.
But change looks already underway with a Morgan Stanley (MS - Free Report) survey last week finding that 11% of positions at banks had been eliminated due to AI and 14% not backfilled, though new hires reduced the net loss.
Expect more planning and action in the coming weeks, both operational decisions and in public relations.
(4) Is the Bank of Japan (BoJ) about to hike its policy rate?
The Bank of Japan has been looking for reasons to normalize monetary policy and Friday's inflation data might provide the evidence they need to continue doing just that.
Markets have grown increasingly certain that the BOJ will hike next month, for the first time since December, after last month's hawkish hold.
Economists forecast Tokyo's core consumer price index rose +1.5%, a key indicator for the nationwide trend, the same reading as April. That was the slowest pace in four years, but the underlying trend was muddied by government subsidies to households to offset the impact of the Middle East crisis.
Ultimately, analysts expect inflation to rise, as oil prices remain elevated, and the weak yen raises import costs.
(5) Turkey’s authoritarian leader Erdogan forced a court to oust the country’s main opposition leader
Turkey is back on the worry list after a court effectively ousted the main opposition leader Ozgur Ozel.
The case was seen as a test of Turkey's shaky balance between democracy and autocracy and the decision could boost President Recep Tayyip Erdogan's chances of extending his rule.
No surprise, markets are nervous. Stocks have plunged and the lira is at a fresh record low.
The central bank, which halted an easing cycle as the Iran war hits Turkey's energy import-sensitive economy, has already had to sell billions of dollars in forex to ease the fallout.
A host of central banks meet, meanwhile.
Israel will probably kick off with a quarter point cut to 3.75%, as the 20% surge in the shekel over the last year keeps a lid on the war-fuelled inflation seen elsewhere.
In Hungary, where the new post-Viktor Orban government is still getting its feet under the table, rates look set to stay at 6.25% on Tuesday. Sri Lanka's central bank should sit on its hands that day as should New Zealand's at 2.25% on Wednesday.
On Thursday, South Korea's central bank is expected to keep rates at 2.5% despite growing talk of hikes, whereas South Africa is tipped to hike by 25 basis points due to sharply rising inflation.
Zacks #1 Rank (STRONG BUY) Stocks
Next, three Zacks #1 (STRONG BUY) large cap stocks, benefiting from fresh analyst earnings upgrades.
(1) Centene (CNC - Free Report) : This is a cheap $58 a share Healt Care sector stock, with a market cap of $27.8B.
It is found in Zacks Medical HMOs industry. The stock holds a Zacks Value score of B, a Zacks Growth score of A, and a Zacks Momentum score of C.
F12M P/E: 16.8.
Image Source: Zacks Investment Research
Centene Corp. is a well-diversified, multi-national healthcare company that primarily provides a set of services to government sponsored healthcare programs.
The company serves the under-insured and uninsured individuals through member-focused services. It is also engaged in providing education and outreach programs to inform and assist members in accessing quality, appropriate healthcare services.
Through a diversified product portfolio and expanding geographic reach, Centene continues to deliver results by growing premium and service revenues profitably.
The company operates in two segments: Managed Care and Specialty Services.
Managed Care - This segment provides health plan coverage to individuals through Government subsidized programs, including Medicaid
Specialty Services - This segment consists of its specialty companies offering diversified healthcare services and products to state programs, correctional facilities, healthcare organizations, employer groups and other commercial organizations
(2) MACOM Technology Solutions (MTSI - Free Report) : This is a rich $380 a share tech stock, with a market cap of $28.7B.
It is found in the Zacks Semiconductor-Analog industry. The stock holds a Zacks Value score of F, a Zacks Growth score of C, and a Zacks Momentum score of A.
F12M P/E: 76.9.
Image Source: Zacks Investment Research
MACOM Technology Solutions Holdings is a provider of power analog semiconductor solutions to varied markets.
It develops and produces analog radio frequency (RF), microwave and millimeter wave semiconductor devices, and components for applications in optical, wireless and satellite networks.
It primarily serves three markets, namely, data center, industrial & defense and telecom.
The Data Center market supplies demand for complete chip-set solutions. MACOM offers modulator drivers, lasers, silicon photonics and many more, to this market
The Industrial and Defense market requires military and commercial radar, RF jammers, electronic countermeasures and communication data links
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
MACOM competes with both its customers' internal design resources, as well as other high-performance analog semiconductor suppliers.
(3) The Estee Lauder Companies (EL - Free Report) : This is a $79 a share Cosmetics stock, with a market cap of $28.3B.
It is found in the Zacks Cosmetics industry. The stock holds a Zacks Value score of D, a Zacks Growth score of B, and a Zacks Momentum score of C.
F12M P/E: 32.5.
Image Source: Zacks Investment Research
The Estee Lauder Companies is one of the world's leading manufacturers and marketers of skin care, makeup, fragrance and hair care products.
The company's products are sold through department stores, mass retailers, company-owned retail stores, hair salons and travel-related establishments. The company reports operating results in terms of product categories and geographic regions.
In terms of product categories, The Estee Lauder Companies' primary segments include:
Skin Care division - This segment sells skin care products for men and women
Makeup division - This segment manufactures, markets and sells makeup products
Fragrances division - This segment sells fragrance products for men and women
Hair care division - This segment includes hair color and styling products, shampoos, conditioners, and finishing sprays
Other division - This segment sells ancillary products and services
Region-wise, the company reports under America, Europe, the Middle East & Africa and Asia-Pacific.
Key Global Macro
Thursday’s U.S. core and broad PCE rates for April are big macro prints this week.
This is the Fed’s preferred measure of U.S. economywide consumer price inflation. The one they use — to set U.S. monetary policy.
On Monday, the U.S. enjoyed a national holiday. Memorial Day.
On Tuesday, Bank of Japan (BoJ) Governor Ueda gives a speech.
The Reserve Bank of New Zealand (RBNZ) makes a monetary policy decision. Consensus is they stay at a 2.25% policy rate.
On Wednesday, the U.S. Fed’s Cook, Logan, and Goolsbee give speeches.
On Thursday, the U.S. core Personal Consumption Expenditures price index (PCE) comes out for April. The prior y/y core PCE reading was +3.2% y/y. The q/q core PCE reading may be +4.3%.
This April U.S. inflation data will be a valuable oil shock era update.
On Friday, the Bank of England (BoE) Governor Bailey gives a speech.
Canada’s annualized Q1 GDP growth rate comes out. The prior reading was -0.6%.
Conclusion
The Q1 earnings season is officially behind us.
On May 20th, Zacks Research Director Sheraz Mian shared a final Q1 EPS update.
His final points:
(1) The Q1 earnings season has come to an end for 9 of the 16 Zacks sectors, with results from 462 S&P 500, or 92.4% of the index’s membership, already out.
Most of the still-to-come reports are from the Retail, Tech, and Industrial Products sectors.
(2) Total Q1 earnings for the 462 S&P 500 companies that have already reported results are up +21.1% from the same period last year on +10.4% higher revenues.
This is a better showing from these companies relative to other recent periods.
(3) The aggregate earnings total for Q1 is on track to be a new all-time quarterly record at $689.8 billion, surpassing the record set in the preceding quarter at $655.4 billion.
(4) The Q1 earnings season showed continued strength and momentum, with companies not only comfortably beating consensus estimates but also providing a reassuring read on the economy despite elevated energy costs and other risks.
The momentum is particularly notable on the revenues side, both in terms of the growth pace as well as the beats percentage.
We are also seeing positive momentum on the revisions front, with estimates for the current and upcoming quarters rising.
Enjoy this short 4-day trading week.
Warm regards,
John Blank, PhD. Zacks Chief Equity Strategist and Economist
View the Zacks #1 Rank List
Image: Bigstock
The U.S. Core PCE Rate for April: Global Week Ahead
Key Takeaways
What happens across this short Global Week Ahead?
Next are Reuters’ five world market themes, re-ordered for equity traders—
(1) On Thursday morning, the April U.S. Core Personal Consumption Expenditure (PCE) rate comes out
Thursday brings the latest readout of the U.S. inflation outlook in the form of the April personal consumption expenditures price index, the Fed's favored gauge.
Recent measures showed high readings for consumer and producer prices as higher energy prices weigh.
Investors will also pore over a fresh estimate of first-quarter growth and the latest consumer confidence print.
Corporate results from Salesforce (CRM - Free Report) , Best Buy (BBY - Free Report) and Costco (COST - Free Report) , could shed more light on the AI trade and the health of consumer spending, as a robust Q1 earnings season that has boosted U.S. stocks winds down.
(2) Government bond markets turn higher world oil prices... into higher yields
Put aside buoyant tech-driven stocks for a minute.
From sliding Asian currencies to weakening economic activity in Europe and renewed pressure on the world's biggest bond markets, it's clear that the cracks from the Iran war are deepening.
Thirty-year borrowing costs in the systemically-key U.S. Treasury market hit their highest since 2007 last week.
Bond investors believe that central banks won't be able to look past the inflationary shock unleashed by a war that has shut the Strait of Hormuz.
And if governments increase spending to buffer consumers, a risk Japan has raised, that will exacerbate debt burdens.
Europe bore the brunt of March's bond selloff.
Now it's U.S. Treasuries that stand out, not great if you just took over as head of the U.S. Federal Reserve.
(3) Major banks are using AI to cut jobs now
The upheaval AI could wreak on jobs across finance is in focus after Standard Chartered (SCBFF - Free Report) , said it would eliminate almost 8,000 jobs by replacing what its CEO Bill Winters called "lower-value human capital" with technology.
Winters later said changes would be handled with thought and care but his remarks emphasized the coming disruption from a technology that can consume and process vast amounts of data, completing tasks previously done by people.
JPMorgan (JPM - Free Report) CEO Jamie Dimon and HSBC's (HSBC - Free Report) Georges Elhedery also warned of job changes due to AI.
But change looks already underway with a Morgan Stanley (MS - Free Report) survey last week finding that 11% of positions at banks had been eliminated due to AI and 14% not backfilled, though new hires reduced the net loss.
Expect more planning and action in the coming weeks, both operational decisions and in public relations.
(4) Is the Bank of Japan (BoJ) about to hike its policy rate?
The Bank of Japan has been looking for reasons to normalize monetary policy and Friday's inflation data might provide the evidence they need to continue doing just that.
Markets have grown increasingly certain that the BOJ will hike next month, for the first time since December, after last month's hawkish hold.
Economists forecast Tokyo's core consumer price index rose +1.5%, a key indicator for the nationwide trend, the same reading as April. That was the slowest pace in four years, but the underlying trend was muddied by government subsidies to households to offset the impact of the Middle East crisis.
Ultimately, analysts expect inflation to rise, as oil prices remain elevated, and the weak yen raises import costs.
(5) Turkey’s authoritarian leader Erdogan forced a court to oust the country’s main opposition leader
Turkey is back on the worry list after a court effectively ousted the main opposition leader Ozgur Ozel.
The case was seen as a test of Turkey's shaky balance between democracy and autocracy and the decision could boost President Recep Tayyip Erdogan's chances of extending his rule.
No surprise, markets are nervous. Stocks have plunged and the lira is at a fresh record low.
The central bank, which halted an easing cycle as the Iran war hits Turkey's energy import-sensitive economy, has already had to sell billions of dollars in forex to ease the fallout.
A host of central banks meet, meanwhile.
Israel will probably kick off with a quarter point cut to 3.75%, as the 20% surge in the shekel over the last year keeps a lid on the war-fuelled inflation seen elsewhere.
In Hungary, where the new post-Viktor Orban government is still getting its feet under the table, rates look set to stay at 6.25% on Tuesday. Sri Lanka's central bank should sit on its hands that day as should New Zealand's at 2.25% on Wednesday.
On Thursday, South Korea's central bank is expected to keep rates at 2.5% despite growing talk of hikes, whereas South Africa is tipped to hike by 25 basis points due to sharply rising inflation.
Zacks #1 Rank (STRONG BUY) Stocks
Next, three Zacks #1 (STRONG BUY) large cap stocks, benefiting from fresh analyst earnings upgrades.
(1) Centene (CNC - Free Report) : This is a cheap $58 a share Healt Care sector stock, with a market cap of $27.8B.
It is found in Zacks Medical HMOs industry. The stock holds a Zacks Value score of B, a Zacks Growth score of A, and a Zacks Momentum score of C.
F12M P/E: 16.8.
Image Source: Zacks Investment Research
Centene Corp. is a well-diversified, multi-national healthcare company that primarily provides a set of services to government sponsored healthcare programs.
The company serves the under-insured and uninsured individuals through member-focused services. It is also engaged in providing education and outreach programs to inform and assist members in accessing quality, appropriate healthcare services.
Through a diversified product portfolio and expanding geographic reach, Centene continues to deliver results by growing premium and service revenues profitably.
The company operates in two segments: Managed Care and Specialty Services.
(2) MACOM Technology Solutions (MTSI - Free Report) : This is a rich $380 a share tech stock, with a market cap of $28.7B.
It is found in the Zacks Semiconductor-Analog industry. The stock holds a Zacks Value score of F, a Zacks Growth score of C, and a Zacks Momentum score of A.
F12M P/E: 76.9.
Image Source: Zacks Investment Research
MACOM Technology Solutions Holdings is a provider of power analog semiconductor solutions to varied markets.
It develops and produces analog radio frequency (RF), microwave and millimeter wave semiconductor devices, and components for applications in optical, wireless and satellite networks.
It primarily serves three markets, namely, data center, industrial & defense and telecom.
MACOM competes with both its customers' internal design resources, as well as other high-performance analog semiconductor suppliers.
(3) The Estee Lauder Companies (EL - Free Report) : This is a $79 a share Cosmetics stock, with a market cap of $28.3B.
It is found in the Zacks Cosmetics industry. The stock holds a Zacks Value score of D, a Zacks Growth score of B, and a Zacks Momentum score of C.
F12M P/E: 32.5.
Image Source: Zacks Investment Research
The Estee Lauder Companies is one of the world's leading manufacturers and marketers of skin care, makeup, fragrance and hair care products.
The company's products are sold through department stores, mass retailers, company-owned retail stores, hair salons and travel-related establishments. The company reports operating results in terms of product categories and geographic regions.
In terms of product categories, The Estee Lauder Companies' primary segments include:
Region-wise, the company reports under America, Europe, the Middle East & Africa and Asia-Pacific.
Key Global Macro
Thursday’s U.S. core and broad PCE rates for April are big macro prints this week.
This is the Fed’s preferred measure of U.S. economywide consumer price inflation. The one they use — to set U.S. monetary policy.
On Monday, the U.S. enjoyed a national holiday. Memorial Day.
On Tuesday, Bank of Japan (BoJ) Governor Ueda gives a speech.
The Reserve Bank of New Zealand (RBNZ) makes a monetary policy decision. Consensus is they stay at a 2.25% policy rate.
On Wednesday, the U.S. Fed’s Cook, Logan, and Goolsbee give speeches.
On Thursday, the U.S. core Personal Consumption Expenditures price index (PCE) comes out for April. The prior y/y core PCE reading was +3.2% y/y. The q/q core PCE reading may be +4.3%.
This April U.S. inflation data will be a valuable oil shock era update.
On Friday, the Bank of England (BoE) Governor Bailey gives a speech.
Canada’s annualized Q1 GDP growth rate comes out. The prior reading was -0.6%.
Conclusion
The Q1 earnings season is officially behind us.
On May 20th, Zacks Research Director Sheraz Mian shared a final Q1 EPS update.
His final points:
(1) The Q1 earnings season has come to an end for 9 of the 16 Zacks sectors, with results from 462 S&P 500, or 92.4% of the index’s membership, already out.
Most of the still-to-come reports are from the Retail, Tech, and Industrial Products sectors.
(2) Total Q1 earnings for the 462 S&P 500 companies that have already reported results are up +21.1% from the same period last year on +10.4% higher revenues.
79.9% beat EPS estimates. 78.6% beat revenue estimates.
This is a better showing from these companies relative to other recent periods.
(3) The aggregate earnings total for Q1 is on track to be a new all-time quarterly record at $689.8 billion, surpassing the record set in the preceding quarter at $655.4 billion.
(4) The Q1 earnings season showed continued strength and momentum, with companies not only comfortably beating consensus estimates but also providing a reassuring read on the economy despite elevated energy costs and other risks.
The momentum is particularly notable on the revenues side, both in terms of the growth pace as well as the beats percentage.
We are also seeing positive momentum on the revisions front, with estimates for the current and upcoming quarters rising.
Enjoy this short 4-day trading week.
Warm regards,
John Blank, PhD.
Zacks Chief Equity Strategist and Economist