What happens across this Global Week Ahead?

Summer lull?

Don't even think about it.

• There's a multi-trillion-dollar selloff in AI-linked equities taking place
• Friday's U.S. non-farm payrolls report comes, as traders grow increasingly convinced…
• That the Federal Reserve may have to hike interest rates, again

Then, there are these matters:

• Devastating wildfires are happening across Europe, and 
• The war in the Middle East continues to rage
• In Asia, India holds a crucial central bank meeting, against a complex backdrop

Next are Reuters’ five world market themes, re-ordered for equity traders—
 

(1) Big “AI” Stocks Get Hammered. South Korea’s KOSPI Index Is Turbulent.

The AI-driven bull run has gone from seemingly unstoppable, to spectacularly volatile, in a matter of weeks.

Investors are increasingly uneasy about profitability, competition and who's paying for it all. Unprecedented volatility in chipmakers and other AI-related stocks is the result.

South Korea's KOSPI, which jumped +18% on Friday July 31st after tumbling -40% over the previous six weeks, is the prime example.

Pressure is emerging elsewhere too.

The cost of insuring against default by some AI hyper-scalers has risen as debt levels climb, while earnings reports are triggering increasingly dramatic market reactions.

More turbulence may lie ahead.

Elon Musk's SpaceX (SPCX Quick QuoteSPCX - Free Report) , reports its first results since its blockbuster June IPO. Since then, its market value has slumped by an eye-watering $1 trillion.
 

(2) On Friday morning, the July U.S. Nonfarm Jobs Report Hits the Tape.

Markets get a fresh read on the U.S. economy Friday, when closely watched non-farm payrolls data ‌are released.

Economists polled by Reuters expect the July report to show payrolls increased by 91,000 jobs and the unemployment rate held at 4.3%.

A stronger-than-expected reading could raise bets that the Fed may need to resume raising rates to contain persistently above-target inflation at its next meeting in September.

The central bank held rates steady on Wednesday.

But three policymakers voted for a hike, and Chair Kevin Warsh reiterated the Fed's commitment to returning inflation to its 2% target.
 

(3) The Five-Month Conflict with Iran, in the Middle East? It Keeps Oil Prices High.

Markets will remain focused on the Middle East, where a U.S.-Iran ceasefire announced in mid-June now appears a distant memory and oil prices have climbed back towards $90 a barrel.

A drone strike on two U.S.-owned gas tankers in Egypt's Mediterranean port of Damietta this week has opened a potential new front in the five-month conflict, raising concerns that traffic through the Suez Canal, one of the world's most important trade routes, could come under threat.

In another first, Saudi Arabia publicly joined military strikes alongside U.S. forces this week, targeting Iran-aligned groups in eastern Iraq.

The U.S. military also carried out what it described as a "heavy wave" of strikes against Iran after an attempted ballistic missile attack on U.S. forces in the region.

Diplomatic efforts continue, however.

Saudi Arabia is seeking to lead a 14-country coalition to boost maritime defence in the Bab el-Mandeb strait, the Red Sea and the Gulf of Aden, all critical chokepoints for global energy supplies.
 

(4) Europe Has Strong Wildfires Burning.

Europe's record-breaking heatwave looks set to continue with fears mounting that wildfires that have devastated parts of Spain and France are spreading to Italy, Central Europe and Greece.

Markets should pay attention.

The economic costs are mounting, from healthcare spending and insurance claims to reconstruction bills and higher food prices, at a time when many heavily indebted governments are already grappling with the fallout of the Iran war.

Adding to concerns, a 'super' El Niño event appears increasingly likely, raising the risk of further extreme weather globally.

In Britain, also facing wildfires and drought, major supermarket groups warn another food-price shock could be looming.

In Germany, meanwhile, a contentious cabinet reshuffle has renewed pressure on Chancellor Friedrich Merz as the country also battles record temperatures.
 

(5) The Indian Rupee is Having a Tough Year. India’s Reserve Bank Sets Policy.

The Reserve Bank of India announces its latest policy decision on Wednesday, with most economists polled by Reuters expecting no change to the benchmark interest rate of 5.25%.

However, authorities will be attempting to prop up the rupee, one of Asia's worst-performing currencies this year.

In June, the central bank unveiled measures designed to boost capital inflows and strengthen the balance of payments.

The moves attracted more than $20 billion in their first month, but renewed strength in oil prices has since clouded the outlook.

For those thinking an interest rate increase might help, retail inflation has just breached the central bank's target for the first time in over a year.

Nevertheless, economists still expect the risks to growth to keep policymakers from acting, for now at least.
 

Zacks #1 Rank (STRONG BUY) Stocks

Next are three fresh Zacks #1 (STRONG BUY) large-cap stocks. The first two are major U.S. corporations. The final one is a major Mainland China corporation.

(1) United Health Group (UNH Quick QuoteUNH - Free Report) : This is a $421 a share stock, with a market cap of $382.7B.

It is found in the Zacks Medical-HMO industry. The stock holds a Zacks Value score of B, a Zacks Growth score of A, and a Zacks Momentum score of A.

F12M P/E: 21.5.
 

Image Source: Zacks Investment Research

UnitedHealth Group provides a wide range of health care products and services, such as health maintenance organizations, point of service plans, preferred provider organizations and managed fee-for-service programs.

UnitedHealth has the most diverse membership base within the managed-care organization market, which gives it significant competitive advantages.

The company has acquired a number of competing healthcare which transformed it from a pure health insurer to a comprehensive healthcare provider.

UnitedHealth reports through two segments: UnitedHealthcare and Optum.

The UnitedHealthcare segment is divided further into:

• UnitedHealthcare Employer & Individual
• UnitedHealthcare Medicare & Retirement
• UnitedHealthcare Community & State, and 
• UnitedHealthcare Global; providing health care benefits globally

The Optum segment is a technology-enabled health services business serving the broad health care marketplace, including those who need care.

That segment is divided into OptumHealth, OptumInsight, OptumRx and Optum eliminations.

(2) The Goldman Sachs Group (GS Quick QuoteGS - Free Report) : This is a $1,024 a share stock, with a market cap of $302.3B. 

It is found in Zacks Financial-Investment Bank industry. The stock holds a Zacks Value score of D, a Zacks Growth score of D, and a Zacks Momentum score of A.

F12M P/E: 14.9.
 

Image Source: Zacks Investment Research

The Goldman Sachs Group is a leading global financial holding company providing investment banking, securities, investment management, and consumer banking services to a diversified client base.

It has 4 broad segments:

1. The Investment Banking (IB) segment comprises the Financial Advisory, Underwriting and lending to corporate clients.

2. The Global Markets segment comprises Fixed Income, Currency and Commodities, which include client-execution activities related to making markets in credit products, interest rate products, mortgages, currencies and commodities.

Equities include client execution activities related to making markets in equities, commissions and fees, and its securities services business, warehouse lending & structured financing to institutional clients, advisory and underwriting assignments.

3. The Consumer & Wealth Management segment includes management and other fees, incentive fees and results from deposit-taking activities related to wealth management business.

4. The Asset Management division comprises management and other fees.

(3) Industrial and Commercial Bank of China (IDCBY Quick QuoteIDCBY - Free Report) : This is a $19 a share stock, with a market cap of $346.4B.

It is found in the Zacks Foreign Bank industry. The stock holds a Zacks Value score of A, a Zacks Growth score of B, and a Zacks Momentum score of F.

F12M P/E: 6.2.

Industrial and Commercial Bank of China Limited provides a wide range of financial products and services to corporate clients and millions of individual customers.

It provides services through outlets across China, overseas subsidiaries and a global network of correspondent banks as well as Internet Banking, Telephone Banking and self-service banking.

It provides corporate and personal banking, treasury operations, investment banking, asset management, trust, financial leasing, and other financial services worldwide.

Its personal banking segment provides personal joint account for fixed deposit or current deposit, personal loan, personal insurance, card business, personal wealth management services, and personal intermediary services to individual customers.

Its corporate segment provides financial products and services to corporations, government agencies, and financial institutions.

Industrial and Commercial Bank of China Ltd. is headquartered in Beijing, the People's Republic of China.
 

Key Global Macro

Friday’s U.S. jobs report will be a major trader focus.

On Monday, the U.S. ISM manufacturing PMI comes out for July. The prior June reading was 53.3.

On Tuesday, U.S. JOLTS job openings for June come out. The prior May data was at 7.59 million.

On Wednesday, the ISM services PMI for July comes out. The prior June reading was 54.0.

On Thursday, the Euro Area’s retail sales data for June comes out. I see a +1.6% y/y prior reading.

On Friday, U.S. nonfarm payrolls for July comes out. The prior June data was +57K.

Reuters consensus looks for +91K U.S. job additions in July, and a U.S. household unemployment rate at 4.3%.
 

Conclusion

On July 29th, Zacks Research Director Sheraz Mian shared a Q2 earnings update.

His four points:

(1) For the 216 S&P500 companies that have reported Q2 results, or 43.2% of the index’s total membership.

• Total earnings are up +58.1% from the same period last year
• On +12.2% higher revenues
• 86.6% beat EPS estimates and 77.3% beat revenue estimates

(2) This is a notably better showing from these 216 index members relative to other recent periods.

Both in terms of the earnings and revenue growth rates as well in terms of the beats percentages.

The EPS and revenue beats percentages for these 216 S&P500 index members are notably tracking above the averages for this group of companies — over the preceding 20 quarters.

(3) The Q2 earnings and revenue growth rates have been boosted by Micron’s (MU) blockbuster quarterly results and Alphabet’s (GOOGL) unrealized gain on its SpaceX stake.

However, the earnings and revenue growth rates would still compare favorably with other recent periods when we exclude Micron and Alphabet from these results.

Excluding Micron and Alphabet?

Q2 earnings for the remaining 214 S&P500 index members that have reported Q2 results would be up +17.8% (versus +58.1% otherwise) on +9.8% higher revenues (versus +12.2% otherwise).

(4) For the Finance sector, we now have Q2 results from 69.7% of the sector’s market capitalization in the S&P500 index.

Total earnings for these Finance companies are up +25.1% from the same period last year on +16.2% higher revenues, with 87.3% of companies beating EPS estimates and 78.2% 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.

Enjoy this busy trading week.

Warm Regards,

John Blank, PhD.
Zacks Chief Equity Strategist and Economist