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.
Trading Upon the Mercy of FAANG: Global Week Ahead
Read MoreHide Full Article
In the Global Week Ahead, a major wave of Q2 earnings keeps traders on their toes.
In the week’s reports, stock traders can evaluate the massive COVID-19 shock, from the perspective of major company fundamentals: Think revenue growth and profits and their 12M-ahead financial outlooks.
This adds critical depth to a picture drawn solely by Big Bank financials. They reported earlier.
In the USA, no fewer than 180 major S&P 500 firms report Q2 earnings this week.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) $2 Trillion Market Cap Stocks? Wow!
In 2018, Apple (AAPL - Free Report) became the first U.S. company with a $1 trillion stock market value. Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) joined the club last year. Now the race is on for a $2 trillion market cap.
Microsoft’s disappointing second-quarter earnings shifted the focus to Amazon and Apple, which both report on Thursday and have seen shares soar this year, thanks to strong demand for products and services from people staying at home during the pandemic.
Apple’s +32% surge in 2020 increased its market capitalization to $1.65 trillion, Microsoft is snapping at its heels at $1.56 trillion, while Amazon is at $1.51 trillion.
Two others in the FAANG quintet, Facebook and Google parent Alphabet (GOOGL - Free Report) , also have results coming up. But they are out of the race: the latter just barely squeezes into the trillion-dollar club.
(2) A Two-Day Fed Meeting Ends on Wednesday July 29th
After slashing interest rates to near zero and engaging in huge asset buying, the U.S. Federal Reserve will probably sit on its hands at the July 28-29 meeting.
Markets are seeking clues on its next move. The Fed doesn’t seem keen on yield curve control or negative interest rates. But if it wants to rely on asset purchases and forward guidance only, it might eventually need to expand QE, Fedwatchers reckon.
Also, this QE program has spread purchases of Treasuries pretty evenly across the curve, while the last two rounds focused on the long end. Many predict the Fed will opt to up purchases in the 20- to 30-year bracket; that will keep in check the term premium — the extra return earned from holding long-term bonds.
Yet Fed Governor Lael Brainard recently mentioned the “thick fog of uncertainty” surrounding the U.S. economy. So for now, the Fed might just wait for that fog to dissipate.
(3) What to Make of U.S.-China Tensions… in an Election Year
U.S. diplomats are clearing out of the Chengdu consulate after their Chinese counterparts were ordered to quit Houston, TX in the latest round of tensions. Markets sold the moves, but not too much — because nobody’s mentioned tariffs.
Yet caution is warranted. This represents a big push towards de-coupling with Secretary of State Mike Pompeo saying the “old paradigm of blind engagement” is done.
Currency markets are advising care; the yuan had its steepest three-day selloff since late March and the U.S. dollar is tanking for the fourth straight week.
(1) Euro Gains and U.S. Dollar Woes
The euro suddenly looks unstoppable, hitting 21-month highs above $1.16 after the European Union set aside differences and agreed a COVID-19 recovery fund. This signal of solidarity, combined with monetary and budget stimulus, could propel the currency to $1.20, some predict.
The optimism should take the sting out of upcoming German and Eurozone second-quarter gross domestic product data, expected to show steep contractions amid the coronavirus hit.
Euro gains stem partly from dollar woes; coronavirus outbreaks across the U.S. and tensions with China have set the greenback on track for its worst month since Jan. 2018.
One hitch: In nominal trade-weighted terms, the euro is now above 2018 peaks. If exports take a hit, euro strength won’t sit well with policymakers.
(5) Look at the Loan Loss Provisions on European Banks
In the first quarter, Europe’s top 40 banks set aside 22 billion euros in provisions against loans going sour in the wake of COVID-19. As the second-quarter earnings season kicks off, focus is again on provisioning.
British banks set aside more in the first quarter than any other European country. Four of them — Barclays, Standard Chartered, Lloyds and newly rebranded NatWest Group — will disclose more in the coming days.
Following the U.S. pattern, European investment banks should be cushioned by bumper earnings for their trading arms; Deutsche Bank has already signaled better-than-expected profits.
There are fewer bright spots for retail and corporate-focused names. Spain's Santander and BBVA, with large Latin American arms, also face the double whammy of loan loss provisions and exchange rate impact.
Top Zacks #1 Rank Stocks
A. Texas Instruments (TXN - Free Report) : This is a $118B market cap stock at $120 a share. I see a Zacks Value score of D, a Zacks Growth score of B and a Zacks Momentum score of A.
Their Q2 EPS report was a solid one. Can this stock rise still higher? Or is that good news already priced in?
B. Dollar General (DG - Free Report) : This is a $48.2B market cap stock at $191 a share. I see a Zacks Value score of B a Zacks Growth score of A and a Zacks Momentum score of C.
Those are solid long-term metrics. This discount retailer is in the right niche during a job-loss pandemic.
C. The Kroger Co. (KR - Free Report) : This is a $27B market cap stock at around $35 a share. I see a Zacks Value score of A, a Zacks Growth score of A, and a Zacks Momentum score of D.
People are eating more at home now. So, grocers like this have become growth stocks. How long does that trend last, once vaccines get distributed?
Key Global Macro
GDP reports late in the week are key catalysts. The USA is out with Q2 data on Thursday. Eurozone Q3 data is out on Friday.
Canada and Mexico — and sovereigns in Europe like Germany and France and Spain — are set to report GDP growth too.
On Monday, U.S. durable goods orders should be up +6.8% m/m for June.
Germany’s retail sales should be down -3.0% m/m in June.
However, Germany IFO indexes are improving. Business climate should get to 89.3 for 86.2, Current Assessment should get to 85.0 from 81.3, and Expectations should get to 93.4 from 91.4.
Japan’s All Industry Activity Index should be down -3.5% in May. A backward looking number.
On Tuesday, Spain’s unemployment rate should be 16.1%, up from 14.4%. This is not too different than the USA right now.
On Wednesday, the FOMC ends its 2-day meeting. It concludes with just a 2pm ET statement and Chair Powell’s press conference a half-hour later.
There will be no forecasts or ‘dot plots,’ after having delivered best guesses at the June meeting. Barring unseen circumstances, the Fed hits snooze until September 16th.
On Thursday, the first swing at Q2 USA GDP gets released. It won’t be the last, as two rounds of revisions always follow.
Q2 GDP gets updated by Germany. Then by France, Italy and Spain (alongside the overall Eurozone) on Friday.
Eurozone contraction is expected at around -12% q/q in seasonally adjusted terms. 60% of Europe’s economies went into virus lockdown mode ahead of the U.S.
China updates the state version of its purchasing managers’ indices (PMIs) for July. Little further traction is expected compared to the ‘V’ shaped recovery already past. Consensus has 50.8 for manufacturing and 54.5 for non-manufacturing.
On Friday, Columbia’s BanRep monetary decision likely cuts the policy rate by 25 basis points. Columbia’s core inflation rate has sunk to +1.4% y/y. Growth concerns abound. And the country's COVID-19 case count shows no signs of flattening.
Normally, Canada’s GDP release on Friday would cover just the month of May. This time, we may get much of June and Q2 overall too. StatsCan guided on June 30th. Its prelim estimates for May GDP showed a +3.0% m/m rise.
Mexico’s Q2 GDP arrives in a 1st estimate. Expect revisions at the end of August. Consensus sees about a -19% rate of contraction in y/y terms.
Inflation reports will include the Fed’s preferred PCE gauges along with Eurozone CPI. Little change is expected. The prior month’s U.S. and Eurozone core readings are +1.0% y/y and +0.8% y/y, respectively.
Conclusion
In the Global Week Ahead, what is likely all that matters for most stock traders?
Answer: When the tape reflects…
- Apple (AMC on Thursday July 30th),
- Amazon (AMC on Thursday July 30th),
- Facebook (AMC on Thursday July 30th), and
- Google (AMC on Thursday July 30th) reports.
Early this week, make sure to update yourself with the latest Zacks consensus earnings estimates on these key companies, online.
Happy trading to all!
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
Trading Upon the Mercy of FAANG: Global Week Ahead
In the Global Week Ahead, a major wave of Q2 earnings keeps traders on their toes.
In the week’s reports, stock traders can evaluate the massive COVID-19 shock, from the perspective of major company fundamentals: Think revenue growth and profits and their 12M-ahead financial outlooks.
This adds critical depth to a picture drawn solely by Big Bank financials. They reported earlier.
In the USA, no fewer than 180 major S&P 500 firms report Q2 earnings this week.
Major names reporting results include: Apple, Amazon, Facebook, Alphabet, eBay, Pfizer, McDonald’s, Starbucks, GM, Ford, Merck, GE, Boeing, UPS, Caterpillar and 3M.
The Q2 earnings calendar also fills up globally.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) $2 Trillion Market Cap Stocks? Wow!
In 2018, Apple (AAPL - Free Report) became the first U.S. company with a $1 trillion stock market value. Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) joined the club last year. Now the race is on for a $2 trillion market cap.
Microsoft’s disappointing second-quarter earnings shifted the focus to Amazon and Apple, which both report on Thursday and have seen shares soar this year, thanks to strong demand for products and services from people staying at home during the pandemic.
Apple’s +32% surge in 2020 increased its market capitalization to $1.65 trillion, Microsoft is snapping at its heels at $1.56 trillion, while Amazon is at $1.51 trillion.
Two others in the FAANG quintet, Facebook and Google parent Alphabet (GOOGL - Free Report) , also have results coming up. But they are out of the race: the latter just barely squeezes into the trillion-dollar club.
(2) A Two-Day Fed Meeting Ends on Wednesday July 29th
After slashing interest rates to near zero and engaging in huge asset buying, the U.S. Federal Reserve will probably sit on its hands at the July 28-29 meeting.
Markets are seeking clues on its next move. The Fed doesn’t seem keen on yield curve control or negative interest rates. But if it wants to rely on asset purchases and forward guidance only, it might eventually need to expand QE, Fedwatchers reckon.
Also, this QE program has spread purchases of Treasuries pretty evenly across the curve, while the last two rounds focused on the long end. Many predict the Fed will opt to up purchases in the 20- to 30-year bracket; that will keep in check the term premium — the extra return earned from holding long-term bonds.
Yet Fed Governor Lael Brainard recently mentioned the “thick fog of uncertainty” surrounding the U.S. economy. So for now, the Fed might just wait for that fog to dissipate.
(3) What to Make of U.S.-China Tensions… in an Election Year
U.S. diplomats are clearing out of the Chengdu consulate after their Chinese counterparts were ordered to quit Houston, TX in the latest round of tensions. Markets sold the moves, but not too much — because nobody’s mentioned tariffs.
Yet caution is warranted. This represents a big push towards de-coupling with Secretary of State Mike Pompeo saying the “old paradigm of blind engagement” is done.
Currency markets are advising care; the yuan had its steepest three-day selloff since late March and the U.S. dollar is tanking for the fourth straight week.
(1) Euro Gains and U.S. Dollar Woes
The euro suddenly looks unstoppable, hitting 21-month highs above $1.16 after the European Union set aside differences and agreed a COVID-19 recovery fund. This signal of solidarity, combined with monetary and budget stimulus, could propel the currency to $1.20, some predict.
The optimism should take the sting out of upcoming German and Eurozone second-quarter gross domestic product data, expected to show steep contractions amid the coronavirus hit.
Euro gains stem partly from dollar woes; coronavirus outbreaks across the U.S. and tensions with China have set the greenback on track for its worst month since Jan. 2018.
One hitch: In nominal trade-weighted terms, the euro is now above 2018 peaks. If exports take a hit, euro strength won’t sit well with policymakers.
(5) Look at the Loan Loss Provisions on European Banks
In the first quarter, Europe’s top 40 banks set aside 22 billion euros in provisions against loans going sour in the wake of COVID-19. As the second-quarter earnings season kicks off, focus is again on provisioning.
British banks set aside more in the first quarter than any other European country. Four of them — Barclays, Standard Chartered, Lloyds and newly rebranded NatWest Group — will disclose more in the coming days.
Following the U.S. pattern, European investment banks should be cushioned by bumper earnings for their trading arms; Deutsche Bank has already signaled better-than-expected profits.
There are fewer bright spots for retail and corporate-focused names. Spain's Santander and BBVA, with large Latin American arms, also face the double whammy of loan loss provisions and exchange rate impact.
Top Zacks #1 Rank Stocks
A. Texas Instruments (TXN - Free Report) : This is a $118B market cap stock at $120 a share. I see a Zacks Value score of D, a Zacks Growth score of B and a Zacks Momentum score of A.
Their Q2 EPS report was a solid one. Can this stock rise still higher? Or is that good news already priced in?
B. Dollar General (DG - Free Report) : This is a $48.2B market cap stock at $191 a share. I see a Zacks Value score of B a Zacks Growth score of A and a Zacks Momentum score of C.
Those are solid long-term metrics. This discount retailer is in the right niche during a job-loss pandemic.
C. The Kroger Co. (KR - Free Report) : This is a $27B market cap stock at around $35 a share. I see a Zacks Value score of A, a Zacks Growth score of A, and a Zacks Momentum score of D.
People are eating more at home now. So, grocers like this have become growth stocks. How long does that trend last, once vaccines get distributed?
Key Global Macro
GDP reports late in the week are key catalysts. The USA is out with Q2 data on Thursday. Eurozone Q3 data is out on Friday.
Canada and Mexico — and sovereigns in Europe like Germany and France and Spain — are set to report GDP growth too.
On Monday, U.S. durable goods orders should be up +6.8% m/m for June.
Germany’s retail sales should be down -3.0% m/m in June.
However, Germany IFO indexes are improving. Business climate should get to 89.3 for 86.2, Current Assessment should get to 85.0 from 81.3, and Expectations should get to 93.4 from 91.4.
Japan’s All Industry Activity Index should be down -3.5% in May. A backward looking number.
On Tuesday, Spain’s unemployment rate should be 16.1%, up from 14.4%. This is not too different than the USA right now.
On Wednesday, the FOMC ends its 2-day meeting. It concludes with just a 2pm ET statement and Chair Powell’s press conference a half-hour later.
There will be no forecasts or ‘dot plots,’ after having delivered best guesses at the June meeting. Barring unseen circumstances, the Fed hits snooze until September 16th.
On Thursday, the first swing at Q2 USA GDP gets released. It won’t be the last, as two rounds of revisions always follow.
Q2 GDP gets updated by Germany. Then by France, Italy and Spain (alongside the overall Eurozone) on Friday.
Eurozone contraction is expected at around -12% q/q in seasonally adjusted terms. 60% of Europe’s economies went into virus lockdown mode ahead of the U.S.
China updates the state version of its purchasing managers’ indices (PMIs) for July. Little further traction is expected compared to the ‘V’ shaped recovery already past. Consensus has 50.8 for manufacturing and 54.5 for non-manufacturing.
On Friday, Columbia’s BanRep monetary decision likely cuts the policy rate by 25 basis points. Columbia’s core inflation rate has sunk to +1.4% y/y. Growth concerns abound. And the country's COVID-19 case count shows no signs of flattening.
Normally, Canada’s GDP release on Friday would cover just the month of May. This time, we may get much of June and Q2 overall too. StatsCan guided on June 30th. Its prelim estimates for May GDP showed a +3.0% m/m rise.
Mexico’s Q2 GDP arrives in a 1st estimate. Expect revisions at the end of August. Consensus sees about a -19% rate of contraction in y/y terms.
Inflation reports will include the Fed’s preferred PCE gauges along with Eurozone CPI. Little change is expected. The prior month’s U.S. and Eurozone core readings are +1.0% y/y and +0.8% y/y, respectively.
Conclusion
In the Global Week Ahead, what is likely all that matters for most stock traders?
Answer: When the tape reflects…
Early this week, make sure to update yourself with the latest Zacks consensus earnings estimates on these key companies, online.
Happy trading to all!
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 >>