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Favorable U.S. Earnings Stories: Global Week Ahead
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Here is a Feb. 2nd Zacks Research Director Sheraz Mian Q4 earnings comment--
“The picture emerging from the Q4 earnings season is one of continued strength and momentum.
“Despite the well-known headwinds of cost pressures and logistical bottlenecks, an above-average proportion of companies have been able to beat estimates.
“In fact, the proportion of companies beating consensus revenue estimates is actually tracking above what we had seen in the preceding earnings season from this same group of companies, with the earnings beats nearly the same.
“On the guidance front, while a few notable operators stand out for providing a weak outlook, most companies have been able to offer reassuring, if not altogether positive, guidance.
“This is helping stabilize the revisions trend that had started going modestly negative in 2021 Q4.
“We are seeing this favorable development with estimates for the current period (2022 Q1) as well as full-year 2022.”
Outside the USA, Reuters writes that shaky U.S. stock markets may get another curveball in the form of U.S. inflation data. It is out on Thursday.
On the other side of the pond, markets wait to see if British Prime Minister Boris Johnson manages to shore up support after a string of scandals.
In China, the Winter Olympics are underway, with a display of close ties between Moscow and Beijing.
Next are Reuters’ five world market themes, reordered for equity traders.
(1) Wow! Look at Oil Prices
After a month of simmering geopolitical tensions and a 15% oil price surge, OPEC and its allies took a record-quick 16 minutes to decide that, after all, they would stick to previously planned output increases.
Crude prices are around seven-year highs of more than $90 a barrel due to fear of supply disruptions from a multitude of geopolitical flare-ups, above all, a possible Russia-Ukraine conflict. Europe is scrambling to find alternatives to Russian gas, while U.S. winter storms, at a time of general underproduction, are an added problem.
Energy prices also risks turning into a political hot potato for governments. Having already contributed to record-high inflation, further price gains risk slowing growth momentum.
(2) On Thursday, U.S. Consumer Price Inflation (CPI) Data Comes Out
Fears of a hawkish Federal Reserve brought a tumultuous start of 2022 for U.S. stocks; inflation data on Thursday could show is the concerns are fully justified.
January's U.S. consumer price index is expected to rise 0.4%, a Reuters poll shows. That's after 0.5% in December, culminating in the largest annual rise in nearly four decades.
Given that Fed Chair Jerome Powell has pledged a sustained battle to tame inflation, the U.S. central bank seems on course to hike interest rates in March. Analysts are upping rate calls; BofA, for instance, expects seven 25 basis points hikes this year.
How inflation is hitting corporate America's bottom line will be in focus too, as more fourth-quarter reports roll in, including from Coca-Cola and Pfizer.
(3) U.K. Consumer Price Inflation (CPI) Running Hot, Too
The Bank of England now reckons Britain's inflation rate could top 7%, well above previous forecasts. No wonder nearly half of its policymakers wanted a bigger increase than the 25 basis-point hike they agreed on.
With a cost-of-living crisis a political issue, the government has set out a series of financial support schemes to take the sting out of rising energy prices.
December industrial production data and a Q4 GDP estimate on Friday should provide a sense of how the economy is holding up.
Complicating the picture is a political crisis. Prime Minister Boris Johnson faces anger over a series of missteps, not least the alcohol-fueled parties held at Downing Street during coronavirus lockdowns.
The coming days could bring more clarity on his future.
(4) Beijing, China Olympics Underway
That's Chinese President Xi Jinping's promise for the Beijing Olympics. He could well have been referring to the yuan, this year's lone currency outperformer against a buoyant dollar.
As China returns from a week-long Lunar New Year break, markets want to know if that outperformance can continue in the face of a growing monetary divergence between the world's top two economies. January was the strongest month for the yuan since 2017, but Chinese New Year often heralds a reversal.
Yet other factors are in play: elevated commodity prices, curbs to contain Omicron and heavy foreign inflows into domestic bonds — all positive for China's trade surplus.
And Russian President Vladimir Putin is in China for the Olympics, signing more than 15 agreements with Beijing along the way. Both countries are keen on joint financial infrastructure to guard against sanctions from other countries.
That probably calls for a strong yuan.
(5) India’s Monetary Policy Committee to Address Inflation Concerns
India's inflation-targeting monetary policy committee has reiterated time and again it will remain supportive of growth until economic recovery is firmly entrenched. But the recent budget may force a rethink.
Sticky inflation and improving confidence on the growth outlook may set the stage for the key lending rate to rise in the coming fiscal year.
The Reserve Bank of India may kick off changes at its Wednesday, possibly by raising its borrowing rate in order to shrink the corridor with the lending rate.
Investors will also listen out for the RBI's views on the budget and how it might help markets absorb a record 14.95 trillion rupees ($200 billion) in borrowing.
Top Zacks #1 Rank (STRONG BUY) Stocks
With mega-cap tech reports last week, let’s look at the very largest market cap stocks on our #1 list this week.
(1) Apple (AAPL - Free Report) : This is a $173 share price stock now, with a market cap of $2.8T. I see a Zacks Value score of F, a Zacks Growth score of A and a Zacks Momentum score of C.
(2) Tesla (TSLA - Free Report) : This is a $891 share price stock now, with a market cap of $894B. I see a Zacks Value score of F, a Zacks Growth score of C and a Zacks Momentum score of F.
(3) Exxon Mobil (XOM - Free Report) : This is a $173 share price stock now, with a market cap of $2.8T. I see a Zacks Value score of C, a Zacks Growth score of A and a Zacks Momentum score of B.
Note that both AAPL and TSLA carry Zacks Value scores of F.
Note also. Both AAPL and TSLA carry Zacks Momentum scores of C and F, respectively.
Is the boom coming off some mega-caps?
Key Global Macro
Thursday is the big macro print day. The U.S. CPI data for January comes out.
On Monday, Mainland China’s foreign exchange reserves declined to $3.22 trillion for January, lower than the $3.25 trillion estimated and reported for December.
On Tuesday, U.S. NFIB small business optimism was 98.9 in DEC. We get JAN data.
On Wednesday, the U.S. WASDE agricultural report comes out. Keep an eye on crop prices, just like many other prices, they are rising fast.
On Thursday, the U.S. Consumer Price Index (CPI) for JAN comes out. I see a +7.2% consensus call. +7.0% y/y was here in DEC.
On Friday, University of Michigan consumer sentiment has been hit hard by the rise in the CPI. Last month, it was 67.2. This month?
Conclusion
Here is another excerpt from Zacks Research Director Sheraz Mian wrote about Q4 earnings--
“The stock market setup appears to have been particularly favorable for the 2021 Q4 earnings season.
“We feel that market participants will be pleasantly surprised to see impressive results after watching those stocks experience significant weakness in recent days on Fed-related worries.
“We have seen this favorable setup in play with the strong Microsoft (MSFT - Free Report) , Apple and Alphabet (GOOGL - Free Report) results helping those mega-cap stocks show impressive rebounds.
“Looking at Q4 as a whole, total earnings for the quarter are expected to be up +25.6% from the same period last year on +14.1% higher revenues.
“The growth pace decelerates significantly in the following periods.”
Sheraz’s comments were written on Feb. 2nd, 2022.
Happy trading and investing to all!
Warm regards,
John Blank
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Favorable U.S. Earnings Stories: Global Week Ahead
Here is a Feb. 2nd Zacks Research Director Sheraz Mian Q4 earnings comment--
“The picture emerging from the Q4 earnings season is one of continued strength and momentum.
“Despite the well-known headwinds of cost pressures and logistical bottlenecks, an above-average proportion of companies have been able to beat estimates.
“In fact, the proportion of companies beating consensus revenue estimates is actually tracking above what we had seen in the preceding earnings season from this same group of companies, with the earnings beats nearly the same.
“On the guidance front, while a few notable operators stand out for providing a weak outlook, most companies have been able to offer reassuring, if not altogether positive, guidance.
“This is helping stabilize the revisions trend that had started going modestly negative in 2021 Q4.
“We are seeing this favorable development with estimates for the current period (2022 Q1) as well as full-year 2022.”
Outside the USA, Reuters writes that shaky U.S. stock markets may get another curveball in the form of U.S. inflation data. It is out on Thursday.
On the other side of the pond, markets wait to see if British Prime Minister Boris Johnson manages to shore up support after a string of scandals.
In China, the Winter Olympics are underway, with a display of close ties between Moscow and Beijing.
Next are Reuters’ five world market themes, reordered for equity traders.
(1) Wow! Look at Oil Prices
After a month of simmering geopolitical tensions and a 15% oil price surge, OPEC and its allies took a record-quick 16 minutes to decide that, after all, they would stick to previously planned output increases.
Crude prices are around seven-year highs of more than $90 a barrel due to fear of supply disruptions from a multitude of geopolitical flare-ups, above all, a possible Russia-Ukraine conflict. Europe is scrambling to find alternatives to Russian gas, while U.S. winter storms, at a time of general underproduction, are an added problem.
Energy prices also risks turning into a political hot potato for governments. Having already contributed to record-high inflation, further price gains risk slowing growth momentum.
(2) On Thursday, U.S. Consumer Price Inflation (CPI) Data Comes Out
Fears of a hawkish Federal Reserve brought a tumultuous start of 2022 for U.S. stocks; inflation data on Thursday could show is the concerns are fully justified.
January's U.S. consumer price index is expected to rise 0.4%, a Reuters poll shows. That's after 0.5% in December, culminating in the largest annual rise in nearly four decades.
Given that Fed Chair Jerome Powell has pledged a sustained battle to tame inflation, the U.S. central bank seems on course to hike interest rates in March. Analysts are upping rate calls; BofA, for instance, expects seven 25 basis points hikes this year.
How inflation is hitting corporate America's bottom line will be in focus too, as more fourth-quarter reports roll in, including from Coca-Cola and Pfizer.
(3) U.K. Consumer Price Inflation (CPI) Running Hot, Too
The Bank of England now reckons Britain's inflation rate could top 7%, well above previous forecasts. No wonder nearly half of its policymakers wanted a bigger increase than the 25 basis-point hike they agreed on.
With a cost-of-living crisis a political issue, the government has set out a series of financial support schemes to take the sting out of rising energy prices.
December industrial production data and a Q4 GDP estimate on Friday should provide a sense of how the economy is holding up.
Complicating the picture is a political crisis. Prime Minister Boris Johnson faces anger over a series of missteps, not least the alcohol-fueled parties held at Downing Street during coronavirus lockdowns.
The coming days could bring more clarity on his future.
(4) Beijing, China Olympics Underway
That's Chinese President Xi Jinping's promise for the Beijing Olympics. He could well have been referring to the yuan, this year's lone currency outperformer against a buoyant dollar.
As China returns from a week-long Lunar New Year break, markets want to know if that outperformance can continue in the face of a growing monetary divergence between the world's top two economies. January was the strongest month for the yuan since 2017, but Chinese New Year often heralds a reversal.
Yet other factors are in play: elevated commodity prices, curbs to contain Omicron and heavy foreign inflows into domestic bonds — all positive for China's trade surplus.
And Russian President Vladimir Putin is in China for the Olympics, signing more than 15 agreements with Beijing along the way. Both countries are keen on joint financial infrastructure to guard against sanctions from other countries.
That probably calls for a strong yuan.
(5) India’s Monetary Policy Committee to Address Inflation Concerns
India's inflation-targeting monetary policy committee has reiterated time and again it will remain supportive of growth until economic recovery is firmly entrenched. But the recent budget may force a rethink.
Sticky inflation and improving confidence on the growth outlook may set the stage for the key lending rate to rise in the coming fiscal year.
The Reserve Bank of India may kick off changes at its Wednesday, possibly by raising its borrowing rate in order to shrink the corridor with the lending rate.
Investors will also listen out for the RBI's views on the budget and how it might help markets absorb a record 14.95 trillion rupees ($200 billion) in borrowing.
Top Zacks #1 Rank (STRONG BUY) Stocks
With mega-cap tech reports last week, let’s look at the very largest market cap stocks on our #1 list this week.
(1) Apple (AAPL - Free Report) : This is a $173 share price stock now, with a market cap of $2.8T. I see a Zacks Value score of F, a Zacks Growth score of A and a Zacks Momentum score of C.
(2) Tesla (TSLA - Free Report) : This is a $891 share price stock now, with a market cap of $894B. I see a Zacks Value score of F, a Zacks Growth score of C and a Zacks Momentum score of F.
(3) Exxon Mobil (XOM - Free Report) : This is a $173 share price stock now, with a market cap of $2.8T. I see a Zacks Value score of C, a Zacks Growth score of A and a Zacks Momentum score of B.
Note that both AAPL and TSLA carry Zacks Value scores of F.
Note also. Both AAPL and TSLA carry Zacks Momentum scores of C and F, respectively.
Is the boom coming off some mega-caps?
Key Global Macro
Thursday is the big macro print day. The U.S. CPI data for January comes out.
On Monday, Mainland China’s foreign exchange reserves declined to $3.22 trillion for January, lower than the $3.25 trillion estimated and reported for December.
On Tuesday, U.S. NFIB small business optimism was 98.9 in DEC. We get JAN data.
On Wednesday, the U.S. WASDE agricultural report comes out. Keep an eye on crop prices, just like many other prices, they are rising fast.
On Thursday, the U.S. Consumer Price Index (CPI) for JAN comes out. I see a +7.2% consensus call. +7.0% y/y was here in DEC.
On Friday, University of Michigan consumer sentiment has been hit hard by the rise in the CPI. Last month, it was 67.2. This month?
Conclusion
Here is another excerpt from Zacks Research Director Sheraz Mian wrote about Q4 earnings--
“The stock market setup appears to have been particularly favorable for the 2021 Q4 earnings season.
“We feel that market participants will be pleasantly surprised to see impressive results after watching those stocks experience significant weakness in recent days on Fed-related worries.
“We have seen this favorable setup in play with the strong Microsoft (MSFT - Free Report) , Apple and Alphabet (GOOGL - Free Report) results helping those mega-cap stocks show impressive rebounds.
“Looking at Q4 as a whole, total earnings for the quarter are expected to be up +25.6% from the same period last year on +14.1% higher revenues.
“The growth pace decelerates significantly in the following periods.”
Sheraz’s comments were written on Feb. 2nd, 2022.
Happy trading and investing to all!
Warm regards,
John Blank