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How Did the World Fare from This Year's World Cup?
ECB Set Up for a Rate Pause?
What happens across this busy Global Week Ahead?
Q2 earnings season kicks into gear this week, with
Alphabet, the first of the so-called hyper-scalers, set to report, while
The European Central Bank (ECB) looks ready to hold its policy rate, after a hike last time around
Next are Reuters’ five world market themes, re-ordered for equity traders—
(1) S&P500 Q2-26 Earnings Results Pour In
A high-stakes earnings season for U.S. companies heats up in the coming week, with Alphabet (GOOG - Free Report) headlining a busy slate of results that poses a challenge for a stock market near record highs.
Alphabet is the first of the "hyper-scalers" to report this quarter, and investors will be highly sensitive to any changes the Google parent makes to its capital spending plans. Booming AI capex has been at the heart of this year's rally, propelling soaring shares of semiconductor and other tech companies.
With more than 40 companies having already reported, overall S&P 500 earnings are expected to rise by 25.7% from a year ago, according to LSEG IBES data as of Thursday.
Last week, reports from major U.S. banks showed earnings powered ahead with a strong lift from fees for advising on mergers and acquisitions and surging trading revenue.
(2) The World Cup Finale
After five weeks of drama, shock exits and nail-biting finishes, the world's biggest sporting event came down to Sunday's finale, pitting reigning champions Argentina against European champions Spain. It was an epic duel that went to Extra Time, with Spain eking out a 1-0 victory. It was the nation’s first World Cup win since 2010.
It's been a bonanza not just for football, but for business, with fans splurging on everything from flights and hotels to replica shirts and plenty of beer, creating a windfall for travel firms, sportswear makers and drinks companies.
One clear winner is Adidas (ADDYY - Free Report) , which backed 14 teams for the tournament. The German sportswear giant sponsors both finalists, guaranteeing itself a champion. Rival Nike (NKE - Free Report) “bottled it,” with none of its 12 sponsored teams, including England and France, making the final.
Brewers have had a less straightforward ride. Early departures for big beer-drinking nations such as Brazil, Germany and Colombia curbed expectations for a sales windfall.
But strong performances from several Western European teams, including the U.K., France, Switzerland and Norway, could still leave Carlsberg (CABGY - Free Report) raising a glass.
(3) The European Central Bank (ECB)? It is Set for a Policy Rate Pause.
The ECB is likely to stand pat on Thursday, after last month it became the first of the biggest central banks to hike rates since the Iran war began.
Policymakers' relief at last month's quick retreat in energy prices proved very short-lived following an escalation in the conflict, highlighting the uncertainty ahead.
Luckily for now, oil prices are far lower than levels they reached earlier in the conflict and the futures curve is between the baseline and milder scenarios the ECB laid out in June, so the picture hasn't shifted enough for policymakers to hit the button on Thursday.
That means all focus will be on whatever clues traders sense about September, when they're convinced the bank will hike rates again.
Economists don't buy it, but traders have also boosted their bets on another rate hike following September, so watch whether ECB Chief Christine Lagarde gives them reason to stick with those bets.
(4) A New U.K. Prime Minister
Investors in U.K. assets are feeling a lot more confident that incoming Prime Minister Andy Burnham will keep markets onside by sticking to the government's strict rules on borrowing and spending.
The left-leaning former mayor of Greater Manchester takes on the role on Monday, when incumbent Keir Starmer steps down and his pick for finance minister has had investors on edge for weeks.
Interior minister Shabana Mahmood has emerged as the frontrunner. Her views on the economy are not especially well known among the investment community, but markets appear to be willing to give her the benefit of the doubt.
The pound has hit its highest in over a year against the euro and been one of the best-performing major currencies against the dollar lately. Even notoriously volatile U.K. government bonds have been sanguine.
The question now is whether Burnham and his choice of Chancellor can maintain that calm.
(5) The Global Macro Spotlight Shifts to the PBoC & Indonesia’s Central Bank
Macro traders face a challenging week ahead in Asia.
Indonesia is expected to hike interest rates on Wednesday.
The central bank is struggling to stabilize the currency after the country reported its first trade deficit in six years, while the government's economic strategy continues to ???encounter skepticism from credit ratings agencies and global investors.
S&P Dow Jones Global Indices joined MSCI this month in considering whether it should downgrade Indonesia to frontier-market status.
The People's Bank of China (PBoC) will announce its loan prime rate on Monday, and while it is unlikely to change its policy settings, pressure is mounting on policymakers to accelerate growth after Wednesday's GDP data — the country's weakest quarter since the COVID-19 era.
Meanwhile, Japan releases trade balance data on Wednesday, as well as CPI figures and flash PMI readings on Friday.
Zacks #1 Rank (STRONG BUY) Stocks
Next are three Zacks #1 (STRONG BUY) large-cap stocks.
Once again, given market circumstances, these names are re-ordered, using their F12M P/E valuation ratios.
I start with the most over-valued large cap stock, and end with the most reasonable.
(1) Applied Materials (AMAT - Free Report) : This is a $560 a share stock, with a market cap of $445.3B.
It is found in the Zacks Electronics-Semiconductor industry. The stock holds a Zacks Value score of F, a Zacks Growth score of F, and a Zacks Momentum score of C.
F12M P/E: 46.2.
Image Source: Zacks Investment Research
Applied provides manufacturing equipment, services and software to the semiconductor, display and related industries.
With its diverse technology capabilities, Applied delivers products and services that improve device performance, yield and cost.
Applied’s customers include manufacturers of semiconductor chips, liquid crystal and organic light-emitting diode (OLED) displays, and other electronic devices.
These customers may use what they manufacture in their own end products or sell the items to other companies for use in advanced electronic components.
Applied operates in three reportable segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets.
(2) Cisco Systems (CSCO - Free Report) : This is a $110 a share stock, with a market cap of $432.3B.
It is found in Zacks Computer Networking industry. The stock holds a Zacks Value score of F, a Zacks Growth score of F, and a Zacks Momentum score of D.
F12M P/E: 25.6.
Image Source: Zacks Investment Research
Cisco Systems is an IP-based networking company offering products and services to service providers, companies, commercial users and individuals.
Cisco provides Next-Generation Network (NGN) Routers, that transport data, voice and video information from one IP network to another.
Cisco is rapidly currently expanding its presence in network security domain.
Security includes products and services preventing unauthorized access to system resources and protecting from worms, spam, viruses and other malware
The Data Center product category includes Cisco Unified Computing System (UCS) and Server Access Virtualization
It also comprises of The Other products segment and Related Services
The company offers identity and access, advanced threat, and unified threat management solutions. The company has introduced Secure Remote Worker, which leverages Zero Trust Architecture, combined with robust endpoint security portfolio of AnyConnect, Umbrella, Duo and AMP for Endpoints.
(3) Alphabet (GOOG - Free Report) : This is a $354 a share stock, with a market cap of $4.3T.
It is found in the Zacks Internet Services industry. The stock holds a Zacks Value score of D, a Zacks Growth score of B, and a Zacks Momentum score of A.
F12M P/E: 24.7.
Image Source: Zacks Investment Research
Alphabet is engaged in technology business.
The company provides web-based search, advertisements, maps, software applications, mobile operating systems, consumer content, enterprise solutions, commerce and hardware products through its subsidiaries.
Alphabet, formerly known as Google, is headquartered in Mountain View, California.
Key Global Macro
Thursday’s ECB presser will be a major event this week.
On Sunday, the People’s Bank of China (PBoC) made a policy rate decision. They likely stayed at a 3.0% loan policy rate.
On Monday, Canada’s core and broad Consumer Price Index (CPI) for June comes out. I see +3.2% y/y is the prior May broad CPI and +2.2% y/y is the core CPI.
On Tuesday, the U.K.’s core and broad CPI for June comes out too. The prior May broad CPI is +2.8% y/y and the prior core CPI was +2.6% y/y.
On Wednesday, Australia’s household unemployment rate for June come out. The prior May reading was 4.4%.
On Thursday, the European Central Bank (ECB) likely keeps its main refi rate at 2.40%.
On Friday, the S&P global manufacturing PMI comes out for July. The June PMI was 53.9.
Conclusion
On July 15th, Zacks Research Director Sheraz Mian shared his Q2-26 earnings update.
Four points:
(1) The big banks have kicked off the Q2 earnings season — with remarkable momentum.
Both earnings and revenue growth rates — along with the percentage of companies beating expectations — are tracking significantly higher than in recent quarters.
While we are still in the opening stages of the Q2 reporting cycle, these early results strongly reinforce the robust corporate earnings trend we've been seeing.
(2) For the 34 S&P 500 companies that have reported Q2 results already, total earnings are up +55.3% from the same period last year, on +18.8% higher revenues.
(3) The Q2 earnings and revenue growth rates have been boosted by Micron’s ((MU - Free Report) ) very strong quarterly results.
But the earnings and revenue growth rates would still compare favorably with other recent periods when we exclude Micron from these results.
Excluding Micron, Q2 earnings for the remaining 33 index members that have reported Q2 results would be up +21.5% (versus +55.3% otherwise) on +12.5% higher revenues (versus +18.8% otherwise).
(4) For the Finance sector, we now have Q2 results from 36.6% of the sector’s market capitalization in the S&P500 index.
Total earnings for these Finance companies are up +30.2% from the same period last year on +20.4% higher revenues, with all the companies beating EPS estimates and 90.9% beating revenue estimates.
This is a notably better performance from these Finance companies relative to what we have seen from the group in other recent periods.
That’s it for me.
Kind Regards,
John Blank, PhD. Zacks Chief Equity Strategist and Economist
View the Zacks #1 Rank List
Image: Shutterstock
Q2 Earnings, in a Higher Gear: Global Week Ahead
Key Takeaways
What happens across this busy Global Week Ahead?
Next are Reuters’ five world market themes, re-ordered for equity traders—
(1) S&P500 Q2-26 Earnings Results Pour In
A high-stakes earnings season for U.S. companies heats up in the coming week, with Alphabet (GOOG - Free Report) headlining a busy slate of results that poses a challenge for a stock market near record highs.
Alphabet is the first of the "hyper-scalers" to report this quarter, and investors will be highly sensitive to any changes the Google parent makes to its capital spending plans. Booming AI capex has been at the heart of this year's rally, propelling soaring shares of semiconductor and other tech companies.
A host of other major companies are also set to report, including Tesla (TSLA - Free Report) , Intel (INTC - Free Report) and American Express (AXP - Free Report) .
With more than 40 companies having already reported, overall S&P 500 earnings are expected to rise by 25.7% from a year ago, according to LSEG IBES data as of Thursday.
Last week, reports from major U.S. banks showed earnings powered ahead with a strong lift from fees for advising on mergers and acquisitions and surging trading revenue.
(2) The World Cup Finale
After five weeks of drama, shock exits and nail-biting finishes, the world's biggest sporting event came down to Sunday's finale, pitting reigning champions Argentina against European champions Spain. It was an epic duel that went to Extra Time, with Spain eking out a 1-0 victory. It was the nation’s first World Cup win since 2010.
It's been a bonanza not just for football, but for business, with fans splurging on everything from flights and hotels to replica shirts and plenty of beer, creating a windfall for travel firms, sportswear makers and drinks companies.
One clear winner is Adidas (ADDYY - Free Report) , which backed 14 teams for the tournament. The German sportswear giant sponsors both finalists, guaranteeing itself a champion. Rival Nike (NKE - Free Report) “bottled it,” with none of its 12 sponsored teams, including England and France, making the final.
Brewers have had a less straightforward ride. Early departures for big beer-drinking nations such as Brazil, Germany and Colombia curbed expectations for a sales windfall.
But strong performances from several Western European teams, including the U.K., France, Switzerland and Norway, could still leave Carlsberg (CABGY - Free Report) raising a glass.
(3) The European Central Bank (ECB)? It is Set for a Policy Rate Pause.
The ECB is likely to stand pat on Thursday, after last month it became the first of the biggest central banks to hike rates since the Iran war began.
Policymakers' relief at last month's quick retreat in energy prices proved very short-lived following an escalation in the conflict, highlighting the uncertainty ahead.
Luckily for now, oil prices are far lower than levels they reached earlier in the conflict and the futures curve is between the baseline and milder scenarios the ECB laid out in June, so the picture hasn't shifted enough for policymakers to hit the button on Thursday.
That means all focus will be on whatever clues traders sense about September, when they're convinced the bank will hike rates again.
Economists don't buy it, but traders have also boosted their bets on another rate hike following September, so watch whether ECB Chief Christine Lagarde gives them reason to stick with those bets.
(4) A New U.K. Prime Minister
Investors in U.K. assets are feeling a lot more confident that incoming Prime Minister Andy Burnham will keep markets onside by sticking to the government's strict rules on borrowing and spending.
The left-leaning former mayor of Greater Manchester takes on the role on Monday, when incumbent Keir Starmer steps down and his pick for finance minister has had investors on edge for weeks.
Interior minister Shabana Mahmood has emerged as the frontrunner. Her views on the economy are not especially well known among the investment community, but markets appear to be willing to give her the benefit of the doubt.
The pound has hit its highest in over a year against the euro and been one of the best-performing major currencies against the dollar lately. Even notoriously volatile U.K. government bonds have been sanguine.
The question now is whether Burnham and his choice of Chancellor can maintain that calm.
(5) The Global Macro Spotlight Shifts to the PBoC & Indonesia’s Central Bank
Macro traders face a challenging week ahead in Asia.
Indonesia is expected to hike interest rates on Wednesday.
The central bank is struggling to stabilize the currency after the country reported its first trade deficit in six years, while the government's economic strategy continues to ???encounter skepticism from credit ratings agencies and global investors.
S&P Dow Jones Global Indices joined MSCI this month in considering whether it should downgrade Indonesia to frontier-market status.
The People's Bank of China (PBoC) will announce its loan prime rate on Monday, and while it is unlikely to change its policy settings, pressure is mounting on policymakers to accelerate growth after Wednesday's GDP data — the country's weakest quarter since the COVID-19 era.
Meanwhile, Japan releases trade balance data on Wednesday, as well as CPI figures and flash PMI readings on Friday.
Zacks #1 Rank (STRONG BUY) Stocks
Next are three Zacks #1 (STRONG BUY) large-cap stocks.
Once again, given market circumstances, these names are re-ordered, using their F12M P/E valuation ratios.
I start with the most over-valued large cap stock, and end with the most reasonable.
(1) Applied Materials (AMAT - Free Report) : This is a $560 a share stock, with a market cap of $445.3B.
It is found in the Zacks Electronics-Semiconductor industry. The stock holds a Zacks Value score of F, a Zacks Growth score of F, and a Zacks Momentum score of C.
F12M P/E: 46.2.
Image Source: Zacks Investment Research
Applied provides manufacturing equipment, services and software to the semiconductor, display and related industries.
With its diverse technology capabilities, Applied delivers products and services that improve device performance, yield and cost.
Applied’s customers include manufacturers of semiconductor chips, liquid crystal and organic light-emitting diode (OLED) displays, and other electronic devices.
These customers may use what they manufacture in their own end products or sell the items to other companies for use in advanced electronic components.
Applied operates in three reportable segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets.
(2) Cisco Systems (CSCO - Free Report) : This is a $110 a share stock, with a market cap of $432.3B.
It is found in Zacks Computer Networking industry. The stock holds a Zacks Value score of F, a Zacks Growth score of F, and a Zacks Momentum score of D.
F12M P/E: 25.6.
Image Source: Zacks Investment Research
Cisco Systems is an IP-based networking company offering products and services to service providers, companies, commercial users and individuals.
Cisco provides Next-Generation Network (NGN) Routers, that transport data, voice and video information from one IP network to another.
Cisco is rapidly currently expanding its presence in network security domain.
The company offers identity and access, advanced threat, and unified threat management solutions. The company has introduced Secure Remote Worker, which leverages Zero Trust Architecture, combined with robust endpoint security portfolio of AnyConnect, Umbrella, Duo and AMP for Endpoints.
(3) Alphabet (GOOG - Free Report) : This is a $354 a share stock, with a market cap of $4.3T.
It is found in the Zacks Internet Services industry. The stock holds a Zacks Value score of D, a Zacks Growth score of B, and a Zacks Momentum score of A.
F12M P/E: 24.7.
Image Source: Zacks Investment Research
Alphabet is engaged in technology business.
The company provides web-based search, advertisements, maps, software applications, mobile operating systems, consumer content, enterprise solutions, commerce and hardware products through its subsidiaries.
Alphabet, formerly known as Google, is headquartered in Mountain View, California.
Key Global Macro
Thursday’s ECB presser will be a major event this week.
On Sunday, the People’s Bank of China (PBoC) made a policy rate decision. They likely stayed at a 3.0% loan policy rate.
On Monday, Canada’s core and broad Consumer Price Index (CPI) for June comes out. I see +3.2% y/y is the prior May broad CPI and +2.2% y/y is the core CPI.
On Tuesday, the U.K.’s core and broad CPI for June comes out too. The prior May broad CPI is +2.8% y/y and the prior core CPI was +2.6% y/y.
On Wednesday, Australia’s household unemployment rate for June come out. The prior May reading was 4.4%.
On Thursday, the European Central Bank (ECB) likely keeps its main refi rate at 2.40%.
On Friday, the S&P global manufacturing PMI comes out for July. The June PMI was 53.9.
Conclusion
On July 15th, Zacks Research Director Sheraz Mian shared his Q2-26 earnings update.
Four points:
(1) The big banks have kicked off the Q2 earnings season — with remarkable momentum.
Both earnings and revenue growth rates — along with the percentage of companies beating expectations — are tracking significantly higher than in recent quarters.
While we are still in the opening stages of the Q2 reporting cycle, these early results strongly reinforce the robust corporate earnings trend we've been seeing.
(2) For the 34 S&P 500 companies that have reported Q2 results already, total earnings are up +55.3% from the same period last year, on +18.8% higher revenues.
91.2% beat EPS estimates. 82.4% beat revenue estimates.
(3) The Q2 earnings and revenue growth rates have been boosted by Micron’s ((MU - Free Report) ) very strong quarterly results.
But the earnings and revenue growth rates would still compare favorably with other recent periods when we exclude Micron from these results.
Excluding Micron, Q2 earnings for the remaining 33 index members that have reported Q2 results would be up +21.5% (versus +55.3% otherwise) on +12.5% higher revenues (versus +18.8% otherwise).
(4) For the Finance sector, we now have Q2 results from 36.6% of the sector’s market capitalization in the S&P500 index.
Total earnings for these Finance companies are up +30.2% from the same period last year on +20.4% higher revenues, with all the companies beating EPS estimates and 90.9% beating revenue estimates.
This is a notably better performance from these Finance companies relative to what we have seen from the group in other recent periods.
That’s it for me.
Kind Regards,
John Blank, PhD.
Zacks Chief Equity Strategist and Economist