We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
In the Global Week Ahead, 86 S&P 500 firms release earnings.
Mindful that tech is the leading sector in this rally, here is a list of key names I will be watching:
- IBM and Cadence Design Systems post on Monday
- Snap, Intuitive Surgical and Teradyne post on Tuesday
- Biogen, Netgear, Microsoft and Tesla post on Wednesday
- Twitter, Skyworks, Citrix, Verisign and Intel post on Thursday
- Honeywell and Schlumberger post on Friday
The Q2 EPS season hasn’t been that big of a mess… yet. Entering the week, 85% of the S&P 500 firms that have released have beaten analysts’ expectations.
Next are Reuters’ five world market themes, reordered for equity traders.
(1) European Company Earnings Are Coming Out Too…
We knew Q2 earnings would be dire, but the hope was a) they might turn out to be better than feared, and b) companies could offer guidance on the outlook. So, while expectations are for European Q2 earnings to slump 50%+, there’s margin for error.
Scandinavian banks, first out of the blocks, have surprised positively, with DNB, SEB, Swedbank and Handelsbanken beating forecasts. Trading revenues were a bright spot for them and for many U.S. lenders, so that segment should perform well in the rest of Europe too. Investors will also watch for banks’ loan-loss provisions, after large amounts were set aside in Q1.
There are hopes, too, that sectors such as industrials might have benefited from recovering June activity. Those due to report include Unilever, Philips, chipmaker STMicro and pharma Roche.
(2) Tesla Earnings Are Out (AMC) on Wednesday, July 22nd
This year’s 260% surge in Tesla Inc. shares has widened the divide between the electric carmaker’s skeptics and believers. All eyes, therefore, will be on its Q2 earnings report, due July 22. Higher-than-expected Q2 vehicle deliveries, announced earlier this month, have raised hopes the company will defy Wall Street estimates to show a profit. It would mark Tesla’s first cumulative four-quarter profit, a key hurdle it needs to vault to join the S&P 500.
Tesla doesn’t have a great track record of delivering positive surprises — only in six of the last 17 quarters did it top Wall Street analysts’ mean estimate for GAAP net income. And this time too, a GAAP net loss of $275.2 million is expected, Refinitiv IBES data shows.
(3) How Much Froth in China Stocks?
China’s national drink ‘baijiu’ doesn’t froth like beer, but there was froth a-plenty in the shares of premium baijiu maker Kweichow Moutai Co., China’s most valuable company. So much so that authorities felt the need to temper their rise.
The stock tumbled and Chinese equities had their worst week in five months, after the influential People’s Daily thundered: “Alcohol is meant for drinking, not for speculation or corruption.”
But warnings about the $285 billion Moutai stock were likely aimed at calming tipsy markets, rather than reversing the rally. China has made clear that deeper capital markets are central to its growth strategy; part of that is the upcoming revamp of the Shanghai benchmark and the launch of a Nasdaq-style startup index called the STAR Market.
(4) Lots of PMIs on the Way
PMI data took a bit of a backseat lately. Essentially Q2 figures were dismissed as reflecting, first, the activity collapse sparked by lockdowns, and then a rebound as restrictions lifted. But upcoming July releases will draw attention as investors seek clues on the outlook.
China’s manufacturing PMI is already back above 50 — the line dividing contraction from expansion — and the Eurozone is not far behind. Any signs of recovery taking hold will boost investor sentiment.
Then again, unease could follow as investors fret that the fiscal and monetary life support of the past few months could start to be unwound.
(5) Emerging Markets Feeling Low
Emerging-market policymakers have been busily slashing interest rates to heal economies devastated by the coronavirus. With central bank meetings due in some developing economies, expect more cutting. First — Hungary. It’s expected to trim rates by 0.15 basis points on Tuesday after a surprise June cut.
Slowing inflation may also leave room for South Africa to trim its benchmark rate on Thursday. The same day, Turkey must square its rising inflation with industrial production and retail sales data that show some recovery, but not to pre-COVID-19 levels. Odds are it will keep rates unchanged.
Russia rounds off the grand slam on Friday, with central bank chief Elvira Nabullina expected to follow through on her signal for more rate cuts.
Top Zacks #1 Rank Stocks
Let’s look solely into chip stocks this week.
(1) Advanced Micro Devices (AMD - Free Report) : This is a frothy $55 chip stock, creating a $64B market cap for this stock. I see an F for Zacks Value, a C for Zacks Growth, and a D for Zacks Momentum.
Why the recent share price success? Partly because AMD has emerged as a strong challenger to NVIDIA’s dominance in the graphic processing unit or GPU market based on its Radeon technology.
This stock’s price has been stalled for the last 3 months. The earnings date is AMC on July 28.
(2) Micron (MU - Free Report) : This is a $50 a share chip stock too, in the memory chip space this time. This makes for a $54.9B market cap stock. I see a Zacks Value of A, a Zacks Growth score of D and a Zacks Momentum score of C.
Through global brands, namely Micron, Crucial and Ballistix, Micron manufactures and markets high-performance memory and storage technologies including Dynamic Random Access Memory (DRAM), NAND flash memory, NOR Flash, 3D XPoint memory and other technologies. Its solutions are used in leading-edge computing, consumer, networking and mobile products.
A major portion of the revenues is derived from DRAM sales.
This was a $60 stock back in February 2020.
They won’t report again until Sept. 24th.
(3) Microchip Technology (MCHP - Free Report) : This is a $105 a share analog and mixed chip stock. That huge markup is making this a $25.3B market cap stock. I see a Zacks Value of C, a Zacks Growth of C, and a Zacks Momentum of A.
Chandler, AZ-based, Microchip Technology Inc. develops and manufactures microcontrollers, memory and analog and interface products for embedded control systems, which are small, low-power computers designed to perform specific tasks.
Microchip reported total revenues of $5.27 billion in fiscal 2020.
After a nice steady run from the virus lows, this stock is almost back to its $110 share price seen in February 2020.
They report on August 4th, 2020.
Key Global Macro
Keep your eyes on Asian macro developments at the top of the week.
On Monday, the conclusion of the EU Summit on Saturday didn’t deliver a deal. Stock markets barely reacted to the news in Asia. This likely reflected not only that few thought consensus would be achieved on this occasion, but also that a deal will be eventually reached.
The People’s Bank of China is expected to keep its 1- and 5-year Loan Prime Rates on hold at 3.85% and 4.75%, respectively. This was Sunday night, heading into the Asian Monday market open.
On Tuesday, Japan will update its Jibun purchasing managers’ indices for June on Tuesday night. They have generally lagged progress elsewhere across PMIs in the Eurozone, UK, US and China. July’s readings may close some of the gap (from the prior at 40.1) and indicate further progress toward an economic rebound.
On Wednesday, U.S. existing home sales come out for June. There was a massive +44% rise in pending home sales during May. June’s completed sales are penciled in at +28% m/m. Consensus shows +23.2% m/m.
On Thursday, U.S. jobless claims get another weekly update. I see another 1.28M folks hitting the pavement, looking for a new job.
On Friday, U.S. new home sales come out. I see 700K is the consensus.
Markit’s U.S. PMIs come out. These could get across that critical 50 line for the first time in months. Services PMI consensus is 51.0 and Manufacturing PMI consensus is 52.0.
France’s Manufacturing PMI should be 53.2 and Services should be 52.3.
Germany’s Manufacturing PMI should be 48.0 and Services should be 50.2.
Russia should leave its 1-week auction monetary policy rate at 4.25%.
In conclusion, the big question we get answered is this: Will the major S&P 500 tech stocks move higher with strong earnings reports?
Given the huge share price run-ups in the bag already, the good news may be all priced in.
Let’s stay focused and learn from the Q2 tech earnings reports this week.
Happy Trading!
Regards,
John Blank
Will you retire a millionaire? One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.” Click to get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
A Big Batch of Tech Earnings: Global Week Ahead
In the Global Week Ahead, 86 S&P 500 firms release earnings.
Mindful that tech is the leading sector in this rally, here is a list of key names I will be watching:
The Q2 EPS season hasn’t been that big of a mess… yet. Entering the week, 85% of the S&P 500 firms that have released have beaten analysts’ expectations.
Next are Reuters’ five world market themes, reordered for equity traders.
(1) European Company Earnings Are Coming Out Too…
We knew Q2 earnings would be dire, but the hope was a) they might turn out to be better than feared, and b) companies could offer guidance on the outlook. So, while expectations are for European Q2 earnings to slump 50%+, there’s margin for error.
Scandinavian banks, first out of the blocks, have surprised positively, with DNB, SEB, Swedbank and Handelsbanken beating forecasts. Trading revenues were a bright spot for them and for many U.S. lenders, so that segment should perform well in the rest of Europe too. Investors will also watch for banks’ loan-loss provisions, after large amounts were set aside in Q1.
There are hopes, too, that sectors such as industrials might have benefited from recovering June activity. Those due to report include Unilever, Philips, chipmaker STMicro and pharma Roche.
(2) Tesla Earnings Are Out (AMC) on Wednesday, July 22nd
This year’s 260% surge in Tesla Inc. shares has widened the divide between the electric carmaker’s skeptics and believers. All eyes, therefore, will be on its Q2 earnings report, due July 22. Higher-than-expected Q2 vehicle deliveries, announced earlier this month, have raised hopes the company will defy Wall Street estimates to show a profit. It would mark Tesla’s first cumulative four-quarter profit, a key hurdle it needs to vault to join the S&P 500.
Tesla doesn’t have a great track record of delivering positive surprises — only in six of the last 17 quarters did it top Wall Street analysts’ mean estimate for GAAP net income. And this time too, a GAAP net loss of $275.2 million is expected, Refinitiv IBES data shows.
(3) How Much Froth in China Stocks?
China’s national drink ‘baijiu’ doesn’t froth like beer, but there was froth a-plenty in the shares of premium baijiu maker Kweichow Moutai Co., China’s most valuable company. So much so that authorities felt the need to temper their rise.
The stock tumbled and Chinese equities had their worst week in five months, after the influential People’s Daily thundered: “Alcohol is meant for drinking, not for speculation or corruption.”
But warnings about the $285 billion Moutai stock were likely aimed at calming tipsy markets, rather than reversing the rally. China has made clear that deeper capital markets are central to its growth strategy; part of that is the upcoming revamp of the Shanghai benchmark and the launch of a Nasdaq-style startup index called the STAR Market.
(4) Lots of PMIs on the Way
PMI data took a bit of a backseat lately. Essentially Q2 figures were dismissed as reflecting, first, the activity collapse sparked by lockdowns, and then a rebound as restrictions lifted. But upcoming July releases will draw attention as investors seek clues on the outlook.
China’s manufacturing PMI is already back above 50 — the line dividing contraction from expansion — and the Eurozone is not far behind. Any signs of recovery taking hold will boost investor sentiment.
Then again, unease could follow as investors fret that the fiscal and monetary life support of the past few months could start to be unwound.
(5) Emerging Markets Feeling Low
Emerging-market policymakers have been busily slashing interest rates to heal economies devastated by the coronavirus. With central bank meetings due in some developing economies, expect more cutting. First — Hungary. It’s expected to trim rates by 0.15 basis points on Tuesday after a surprise June cut.
Slowing inflation may also leave room for South Africa to trim its benchmark rate on Thursday. The same day, Turkey must square its rising inflation with industrial production and retail sales data that show some recovery, but not to pre-COVID-19 levels. Odds are it will keep rates unchanged.
Russia rounds off the grand slam on Friday, with central bank chief Elvira Nabullina expected to follow through on her signal for more rate cuts.
Top Zacks #1 Rank Stocks
Let’s look solely into chip stocks this week.
(1) Advanced Micro Devices (AMD - Free Report) : This is a frothy $55 chip stock, creating a $64B market cap for this stock. I see an F for Zacks Value, a C for Zacks Growth, and a D for Zacks Momentum.
Why the recent share price success? Partly because AMD has emerged as a strong challenger to NVIDIA’s dominance in the graphic processing unit or GPU market based on its Radeon technology.
This stock’s price has been stalled for the last 3 months. The earnings date is AMC on July 28.
(2) Micron (MU - Free Report) : This is a $50 a share chip stock too, in the memory chip space this time. This makes for a $54.9B market cap stock. I see a Zacks Value of A, a Zacks Growth score of D and a Zacks Momentum score of C.
Through global brands, namely Micron, Crucial and Ballistix, Micron manufactures and markets high-performance memory and storage technologies including Dynamic Random Access Memory (DRAM), NAND flash memory, NOR Flash, 3D XPoint memory and other technologies. Its solutions are used in leading-edge computing, consumer, networking and mobile products.
A major portion of the revenues is derived from DRAM sales.
This was a $60 stock back in February 2020.
They won’t report again until Sept. 24th.
(3) Microchip Technology (MCHP - Free Report) : This is a $105 a share analog and mixed chip stock. That huge markup is making this a $25.3B market cap stock. I see a Zacks Value of C, a Zacks Growth of C, and a Zacks Momentum of A.
Chandler, AZ-based, Microchip Technology Inc. develops and manufactures microcontrollers, memory and analog and interface products for embedded control systems, which are small, low-power computers designed to perform specific tasks.
Microchip reported total revenues of $5.27 billion in fiscal 2020.
After a nice steady run from the virus lows, this stock is almost back to its $110 share price seen in February 2020.
They report on August 4th, 2020.
Key Global Macro
Keep your eyes on Asian macro developments at the top of the week.
On Monday, the conclusion of the EU Summit on Saturday didn’t deliver a deal. Stock markets barely reacted to the news in Asia. This likely reflected not only that few thought consensus would be achieved on this occasion, but also that a deal will be eventually reached.
The People’s Bank of China is expected to keep its 1- and 5-year Loan Prime Rates on hold at 3.85% and 4.75%, respectively. This was Sunday night, heading into the Asian Monday market open.
On Tuesday, Japan will update its Jibun purchasing managers’ indices for June on Tuesday night. They have generally lagged progress elsewhere across PMIs in the Eurozone, UK, US and China. July’s readings may close some of the gap (from the prior at 40.1) and indicate further progress toward an economic rebound.
On Wednesday, U.S. existing home sales come out for June. There was a massive +44% rise in pending home sales during May. June’s completed sales are penciled in at +28% m/m. Consensus shows +23.2% m/m.
On Thursday, U.S. jobless claims get another weekly update. I see another 1.28M folks hitting the pavement, looking for a new job.
On Friday, U.S. new home sales come out. I see 700K is the consensus.
Markit’s U.S. PMIs come out. These could get across that critical 50 line for the first time in months. Services PMI consensus is 51.0 and Manufacturing PMI consensus is 52.0.
France’s Manufacturing PMI should be 53.2 and Services should be 52.3.
Germany’s Manufacturing PMI should be 48.0 and Services should be 50.2.
Russia should leave its 1-week auction monetary policy rate at 4.25%.
In conclusion, the big question we get answered is this: Will the major S&P 500 tech stocks move higher with strong earnings reports?
Given the huge share price run-ups in the bag already, the good news may be all priced in.
Let’s stay focused and learn from the Q2 tech earnings reports this week.
Happy Trading!
Regards,
John Blank
Will you retire a millionaire?
One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”
Click to get it free >>