In the Global Week Ahead, geopolitics remains at the forefront of stock trader minds.

This result comes after war broke out between Israel and the Palestinian militant group Hamas.

The mood inside stock and bond markets is jittery at best.

This trading week might offer some reassurance — that both households and businesses are holding up — in an uncertain macro environment.

Why?

a. Some of the world's biggest multinational companies report earnings. They provide stock traders their detailed Q3 updates, and forward outlooks.
b. A variety of macro data prints offer a look at growth, wages and consumer spending, in the United States, China and the United Kingdom.

Next are Reuters five world market themes, reordered for equity traders—

(1) The S&P500 Q3 earnings season heats up, as a few “Big Tech” stocks report.

A number of major U.S. companies report results, revving up a third-quarter earnings season expected to show a pickup in profit growth after a tepid first half.

Tesla (TSLA Quick QuoteTSLA - Free Report) kicks off earnings for the mega-caps on Oct. 18th. These companies' shares have been key drivers of the equity rally in 2023.

Bank of America (BAC Quick QuoteBAC - Free Report) and Goldman Sachs (GS Quick QuoteGS - Free Report) both report Oct. 17th.

Other heavy hitters include healthcare giant Johnson & Johnson (JNJ Quick QuoteJNJ - Free Report) on Oct. 17, Netflix (NFLX Quick QuoteNFLX - Free Report) on Oct. 18th and Philip Morris International (PM Quick QuotePM - Free Report) on Oct. 19th.

In economic data, U.S. retail sales for September, due on Tuesday, will provide a key look into the health of the consumer.

Investors are keen to determine if the economy can avoid a hard landing. U.S. retail sales increased more than expected in August as a surge in gasoline prices boosted receipts at service stations.

(2) A number of Europe’s major banks report earnings this week.

Storm clouds are brewing over European banking stocks as the boost from higher interest rates fades and recession risks rise, but some big investors are hanging on to shares.

Banks have long underperformed the region's main stock market. And just ahead of quarterly earnings next week, European bank shares (.SX7P) are sporting a dividend yield of almost 8%, making them cheaper on this basis than during the 2008 global financial crisis.

Banks have had a major boost from hiking their loan costs in line with central bank rates.

Analyst forecasts collated by European asset manager Amundi show European banks are expected to grow adjusted earnings by +25% this year, followed by a +6% gain in 2024.

(3) Poland has elected a center-left coalition gov’t, ousting the ruling nationalists.

Voters on Sunday have decided, in numbers not seen even in 1989. Poland's ruling nationalists appeared on Monday Oct. 16th to have lost their parliamentary majority in the nation's most pivotal election in decades, potentially opening the way for opposition parties to seize power in what would be a huge political shift.

Poland has repeatedly clashed with the European Union over the rule of law, media freedom, migration and LGBT rights since Law and Justice (PiS) swept to power in 2015, but opposition parties have vowed to mend ties with Brussels and scrap reforms that critics say undermine democratic standards.

An Ipsos exit poll published early on Monday, Oct. 16th gave PiS 36.6% of the vote, which would translate into 198 lawmakers in the 460-seat lower house of parliament.

Opposition parties, led by the former European Council president Donald Tusk's liberal grouping Civic Coalition (KO), were projected to win a combined 248 seats, with the KO seen winning 31.0% of ballots cast.

Victory for the opposition in a vote seen by analysts as the most significant election for Europe in years could potentially redefine the relationship between Brussels and the largest EU member state in central and eastern Europe.

The election cycle is also heating up elsewhere in emerging markets:

a. Ecuadorians also voted on Sunday Oct. 15th for a new president.

Business scion Daniel Noboa will fulfill a long-held family ambition when he takes office as Ecuador's president, after winning election on Sunday on promises to create jobs and bring crime gangs under control.

Noboa, 35, who quit a job at his family's sprawling conglomerate when he was elected to the national legislature in 2021, won more than 52% of the vote, beating leftist challenger Luisa Gonzalez, who had about 48%, with the initial tally nearly complete.

b. Argentinians head to the polls on Oct. 22nd.

(4) Is the worst over for the mainland China economy? Or is there a real estate crisis brewing?

The clock is ticking loudly for China's biggest private property developer.

Country Garden (2007.HK) has until Tuesday to meet coupon payments or have all its nearly $11 billion in offshore debt deemed in default.

It's not alone. Companies accounting for 40% of Chinese home sales have defaulted since 2021, when a liquidity crisis hit the sector, which accounts for about a quarter of the economy.

Beijing has rolled out a raft of measures recently, but with little impact on home sales.

There have been reports the government is looking to increase its budget deficit to meet this year's 5% growth target.

Recent data already suggests the worst may be over for parts of the economy. Wednesday could bring confirmation, with the release of GDP, industrial output and retail sales figures.

(5) The Bank of England (BoE) struggles to set a course against high inflation.

Poor Old Lady of Threadneedle Street. The Bank of England (BoE) has been constantly wrongfooted by inflation data for months.

For most of the year, it's come in above expectations and well above the central bank's own forecasts. Suddenly in August, it slowed more than expected. Many believe the data pushed the BoE to leave rates unchanged at its last meeting.

That said, inflation is still over three times the BoE's 2% target and growth isn't exactly stellar. Meanwhile, at the last count, the labor market was starting to cool, but basic pay grew at its fastest rate on record — making the BoE's juggling act even tougher.

More surprises on Oct. 17th and 18th, when employment and inflation data land, respectively, could set an awkward scene for the BoE's November meeting a little over two weeks later.

Zacks #1 Rank (STRONG BUY) Stocks

(1) Neurocrine Biosciences (NBIX Quick QuoteNBIX - Free Report) : This is a $111 stock with a $11.1B market cap in the Medical-Drugs industry. I see a Zacks Value score of A, a Zacks Growth score of B and a Zacks Momentum score of C.
 

Image Source: Zacks Investment Research

Neurocrine Biosciences is a neuroscience-based company focused on the discovery and development of novel therapeutics for neuropsychiatric, neuroinflammatory and neurodegenerative diseases and disorders.

The company's neuroscience, endocrine and immunology disciplines provide a unique biological understanding of the molecular interaction between central nervous, immune and endocrine systems for the development of therapeutic interventions for anxiety, depression, insomnia, stroke, malignant brain tumors, multiple sclerosis, obesity and diabetes.

(2) Williams Sonoma (WSM Quick QuoteWSM - Free Report) : This is a $162 stock with a $10.4B market cap in the Retail – Home Furnishing industry. I see a Zacks Value score of A, a Zacks Growth score of B, and a Zacks Momentum score of B.
 

Image Source: Zacks Investment Research

Headquartered in San Francisco, CA, Williams-Sonoma, Inc. is a multi-channel specialty retailer of premium quality home products. Incorporated in 1973, the company has five brands and each of the brands are operating segments.
 

• Pottery Barn (accounting for 41% of fiscal 2022 total revenues) is the largest brand of the company and offers premium quality furniture, lighting, tabletop, outdoor and decorative accessories.
• West Elm (26.3%) produces personalized products designed by the company’s team of artists and designers.
• Williams-Sonoma (14.8%) offers cookware, tools, cutlery, electrics, tabletop and bar, outdoor, furniture and cookbooks.
• Pottery Barn Kids and Teen (13.1%) deals with products used for putting up nurseries, bedrooms and play spaces. It also caters to the teenage population with furniture, bedding, lighting and decorative accents for teen bedrooms, dorm rooms, study spaces and lounges.
• Other segment (4.8%) primarily consists of international franchise operations, Rejuvenation and Mark and Graham. Rejuvenation offers premium quality products which are inspired from history and are manufactured in facilities in Portland, OR. Mark and Graham is known for personalized gift items. The brand manufactures women’s and men’s accessories, home décor as well as seasonal items.

Cash and cash equivalents were $514.4 million as of Jul 30, 2023 compared with $124.9 million reported a year ago and $367.3 million at the end of fiscal 2022. Net cash from operating activities totaled $715 million in the first six months of fiscal 2023 compared with $383.6 million a year ago. At the fiscal second quarter-end, the company stated that it had no debt, thereby maintaining its strong financial position.

Williams-Sonoma rewarded shareholders in dividends (worth $116.6 million) and share repurchases (worth $310 million) in first-half 2023.

(Note:  Zacks identifies fiscal years by the month in which the fiscal year ends, while WSM identifies their fiscal year by the calendar year in which it begins; so comparable figures for any given fiscal year, as published by WSM, will refer to this same fiscal year as being the year before the same year, as identified by Zacks).

(3) EMCOR Group (EME Quick QuoteEME - Free Report) : This is a $207 stock with a $10B market cap in the Building Products industry. I see a Zacks Value score of C, a Zacks Growth score of B, and a Zacks Momentum score of F.

Image Source: Zacks Investment Research

EMCOR Group is one of the leading providers of mechanical and electrical construction, industrial and energy infrastructure, as well as building services for a diverse range of businesses. The company serves commercial, industrial, utility and institutional clients.

The company currently operates under the following reportable segments:

United States Electrical Construction and Facilities Services (contributing 22% to total revenues for 2022) – This comprises systems for premises electrical and lighting systems; electrical power transmission and distribution; roadway and transit lighting; fiber optic lines; voice and data communication; as well as low-voltage systems, such as fire alarm, security and process control.

United States Mechanical Construction and Facilities Services (39.1%) – This involves systems for fire protection; heating, ventilation, air conditioning, refrigeration and clean-room process ventilation; water and wastewater treatment and central plant heating and cooling; plumbing, process and high-purity piping; millwrighting; steel fabrication, erection and welding; as well as controls and filtration.

United States Building Services (24.6%) – This segment provides various types of support services related to operation and maintenance of clients’ facilities in the U.S. These include commercial and government site-based operations and maintenance; military base operations support services; infrastructure and building projects for federal, state and local governmental agencies.

United States Industrial Services (10%) – This segment comprises industrial maintenance and services that are needed for refineries and petrochemical plants such as designing, manufacturing, repairing and hydro blast cleaning of shell and tube heat exchangers and related equipment; overhaul and maintenance of critical process units in refineries and petrochemical plants.

United Kingdom Building Services (4.3%) – This segment provides support services related to operation and maintenance of commercial and government client facilities in the U.K.

Key Global Macro

Mid-week on Wednesday is a major day for global-macro prints.

On Monday, there is a Eurogroup meeting.

On Tuesday, U.S. Retail Sales come out for SEP. Ex-Auto should be up +0.2% m/m. The broader retail sales measure should be up +0.3% m/m in SEP, after rising +0.6% m/m in AUG. Still solid, just not as strong as seasonal AUG summer data.

U.S. Capacity Utilization for SEP is out. The prior reading is a solid 79.7%.

On Wednesday, Mainland China’s Q3 real GDP growth rate comes out. Look for +4.4% y/y print, following a prior +6.3% y/y effort.

Mainland China’s fixed asset investment for SEP should be up +3.2%, in line with the prior reading.

Mainland China’s retail sales for SEP should be up +4.5% y/y, also in line.

The important Eurozone HICP consumer inflation measure comes out. A stable +4.3% y/y rate thru SEP is expected.

U.S. building permits for SEP come out. The prior read is 1.54M.

U.S. housing starts for SEP also come out. The prior read is 1.28M.

On Thursday, U.S. existing home sales for SEP come out. The prior is 4.0M.

On Friday, there is People’s Bank of China (PBoC) interest rate decision.

Conclusion

Let’s close matters up with a house backdrop on Q3 earnings, done on Oct. 11th.

Here are the Zacks Research Director Sheraz Mian’s key earnings points:

(1) Estimates for 2023 Q3 held up much better than had been the case in the comparable periods of other recent quarters.

In fact, Q3 earnings estimates in the aggregate were barely down since the start of the period, with estimates modestly up when negative revisions to the Energy or Finance sector estimates are excluded.

(2) For 2023 Q3, total S&P500 earnings are currently expected to be down -2.1% from the same period last year on +0.7% higher revenues.

That will be the 4th back-to-back quarter of declining earnings for the index.

(3) Exclude a drag from the Energy sector. Those earnings are expected to decline -36.8% in Q3.

Earnings for the other 15 Zacks sectors in the S&P500 index could be up +2.7% on +3.2% higher revenues.

Have a successful trading and investing week.

Warm Regards,

John Blank
Zacks Chief Equity Strategist and Economist