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June CPI Will Focus Trader Minds: Global Week Ahead
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In the Global Week Ahead, Fed Chair Jerome Powell's testimony and the June U.S. consumer price inflation data top the stock trader agenda.
Starting on Friday, the major U.S. banks report Q2 earnings.
Policy rate decisions are due from the central banks of New Zealand and South Korea.
Meanwhile, the tectonic plates of politics continue shifting, with France's Sunday election following hot on the heels of the U.K. vote.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) On Thursday, the U.S. CPI data for June will land.
Thursday's monthly U.S. Consumer Price Index (CPI) reading will shape views on whether the Fed could cut interest rates in the coming months.
The June reading is expected to have climbed +0.1%, according to a Reuters poll, after being unexpectedly unchanged in May.
Data late last month showed another inflation measure, the Personal Consumption Expenditures (PCE) price index, rose +2.6% on an annual basis — suggesting inflation is cooling, but the measure was above the Fed's target of +2.0%.
That comes, of course, after Powell's testimony before Congress on Tuesday.
He told a conference in Portugal that the U.S. is back on a "disinflationary path," but policymakers need more data before cutting interest rates.
(2) On Friday, major U.S. banks report their Q2-24 earnings.
Higher interest rates and an uncertain economic environment are casting a cloud over U.S. bank earnings, with the second-quarter reporting season kicking off.
JPMorgan Chase (JPM - Free Report) , Citigroup (C - Free Report) and Wells Fargo (WFC - Free Report) will report second-quarter earnings on July 12th. Bank of America (BAC - Free Report) will release its results on July 16th:
The largest U.S. lender, JPMorgan, is expected to report earnings per share (EPS) of $4.69, according to LSEG estimates — below $4.75 a year earlier
Bank of America's EPS is forecast to slide to 79 cents from 88 cents a year earlier
Though EPS at Citi and Wells Fargo are projected to climb
Executives' commentary on the path of interest rates will remain a key focus, especially after industry leaders cited improving conditions for investment banking, analysts said.
(3) On Sunday, France concluded a 2nd round of National Assembly voting.
On Monday, according to the Financial Times, France’s leftwing parties have begun jockeying to lead the country’s next government, after scoring an unexpected election victory, that thwarted Marine Le Pen’s efforts to bring the far right to power.
Any government would have to command the support of a majority in the 577-member National Assembly, which could require winning backing from more than one bloc.
The left-wing NFP secured 180 seats, followed by Macron’s centrist Ensemble alliance at 159, according to the Financial Times’ parliamentary election tracker.
Le Pen’s right-wing Rassemblement National (RN) party, which had hoped for a parliamentary majority after winning the first round, trailed with 143.
The leftist NFP bloc is made up of several different parties — from center-left Socialists to communists and Greens. The biggest grouping within it is the far-left La France Insoumise, led by anti-capitalist firebrand Jean-Luc Mélenchon.
The Nouveau Front Populaire's (NFP) leaders have immediately called on Macron to choose a new head of government from their ranks, despite their internal fractures.
“Within the week, we need to be in a position to present a candidate for prime minister and force the president to take this situation into account,” Olivier Faure, the head of the Socialists, who made gains on Sunday and are now just behind LFI, told FranceInfo radio on Monday.
But Faure said Mélenchon was “certainly the most divisive” figure within the bloc and lacked the consensus profile needed to lead a government.
Sunday’s results marked a success for the centrist and leftist parties’ bid to form a common “front républicain” by pulling out of races to avoid splitting the anti-RN vote.
It was also a stinging setback for Le Pen.
(4) New U.K. government has a full plate of issues to address.
New governments face a baptism of fire. But for the U.K.'s just-crowned Labor Party, it will be more of a baptism of sewage on Thursday.
That's when water regulator, OFWAT, announces just how much water firms — most of whom have been relentlessly pumping untreated human effluent into U.K. rivers for years — can jack up customers' bills. It has the potential to turn nasty.
Britain's biggest water company, Thames Water, which serves more than 16 million customers in and around London and has 15 billion pounds ($19.14 billion) of debt, faces nationalization unless it can attract vast amounts of new capital to fix its woes.
It has requested bill hikes of 59%, which OFWAT is unlikely to grant given the public mood. But it will need to be enough to convince reluctant investors, who have already started to bail out of Thames, to turn the taps on again.
(5) The Bank of New Zealand and Bank of Korea take policy rate decisions.
Investors are hungry for clues on whether rate cuts are coming this year at the Reserve Bank of New Zealand and the Bank of Korea.
Both central banks have taken a cautious stance amid stubbornly high inflation, and are widely expected to keep rates steady at 15-year highs at their meetings on Wednesday and Thursday, respectively.
In New Zealand in particular, policymakers even flagged the risk of another hike this year, with a cut not projected until late 2025. Markets are more optimistic, pricing for a single cut this year to come as early as October, as inflation cools, business sentiment deteriorates and domestic demand weakens.
South Korea has had even more pronounced indications of prices coming under control, but the market consensus is still for no cut until the fourth quarter.
Political pressure is mounting though, with President Yoon Suk Yeol calling cuts to keep in step with the U.S. Federal Reserve “unavoidable."
Zacks #1 Rank (STRONG BUY) Stocks
(1) The Gap (GPS - Free Report) : This is a $23 a share U.S. Retail-Apparel and Shoe industry stock, with a market cap of $8.7B. 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
The Gap, Inc. is a premier international specialty retailer offering a diverse range of clothing, accessories, and personal care products.
It offers products for men, women and children under the Old Navy, Gap, Banana Republic, Athleta, Intermix and Hill City brands.
Its products include other trendy assortments as well as fitness and lifestyle products for training, sports, travel, yoga and other activities.
Notably, the company offers its products through company-operated stores, franchise stores, websites, third-party arrangements, as well as catalogs.
The company reports its operating results under 4 segments: Gap Global, Old Navy Global, Banana Republic Global and Other.
(2) The New York Times Company (NYT - Free Report) : This is a $52 a share U.S. Publishing industry stock, with a market cap of $8.6B. I see a Zacks Value score of F, a Zacks growth score of B and a Zacks momentum score of D.
Image Source: Zacks Investment Research
The New York Times operates as a diversified media company that comprises newspapers, Internet businesses and other investments.
The company has one reportable segment that comprise newspaper, The New York Times ('The Times'); websites, including NYTimes.com; mobile applications, including The Times's core news applications, as well as interest-specific applications, including Crossword and Cooking products; and related businesses, such as licensing division; digital marketing agencies; product review and recommendation website, Wirecutter; commercial printing operations; NYT Live (live events business); and other products and services under The Times brand.
(3) Elbit Systems (ELST) : This is a $187a share Aerospace – Defense Equipment industry stock, with a market cap of $8.4B. I see a Zacks Value score of C, a Zacks growth score of D and a Zacks momentum score of D.
Image Source: Zacks Investment Research
Elbit Systems is a worldwide leader in Night Vision Goggles Head-Up Displays (``NVG-HUD’').
They are a major supplier to the U.S. Army and U.S. Marine Corps of Night Vision Head-Up Display systems for use in various types of helicopters.
Elbit Systems Ltd. is engaged in a wide range of defense-related airborne, ground and command, control and communications programs throughout the world.
Their focus is on the upgrading of existing military platforms and developing new technologies for defense applications.
Key Global Macro
Thursday’s U.S. CPI data is the key weekly global macro print.
On Monday, there is also the start of a 2-day Eurogroup meeting.
On Tuesday, Fed Chair Powell begins to testify, for 2 days.
On Wednesday, the Mainland China CPI for June should be +0.4% y/y, rising from a prior +0.3% y/y reading.
Mainland China’s FDI for June also comes out. This has been down a stunning -28.2% y/y.
The RBNZ policy rate decision and monetary policy statement land.
On Thursday, the U.S. broad CPI for June should be +3.1% y/y, falling from +3.3% y/y in a prior reading. The U.S. core CPI should be static at +3.4% y/y in June.
On Friday, the U.S. PPI for June should be +2.3% y/y, rising from +2.2% y/y in the prior month.
Conclusion
The looming Friday, July 12th quarterly EPS report from JPMorgan and the other big U.S. banks will put the spotlight on the Q2-24 earnings season.
According to Zacks Research Director Sheraz Mian’s work, the major U.S. banks may pull down the S&P500’s annual revenue growth. But they will make no difference to the overall S&P500 annual earnings growth narrative.
In Q2-24, Zacks expects total 2024 S&P500 earnings to be up +9.1% y/y, while showing a much more tepid +1.7% y/y revenue growth.
Zacks expects S&P500 revenue growth pace to improve to +3.9%, once the Finance sector gets excluded from our aggregate S&P500 data Zacks S&P500 index’s aggregate earnings growth for the year remains unchanged at +9.0% y/y growth, on an ex-Finance basis
In simpler words, slower revenue growth is getting manufactured by a ‘higher-for-longer’ Fed, and we are seeing it in our latest revenue growth data.
But not in Zacks EPS growth data.
Have an excellent trading week!
Warm Regards,
John Blank Zacks Chief Equity Strategist and Economist
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June CPI Will Focus Trader Minds: Global Week Ahead
In the Global Week Ahead, Fed Chair Jerome Powell's testimony and the June U.S. consumer price inflation data top the stock trader agenda.
Starting on Friday, the major U.S. banks report Q2 earnings.
Policy rate decisions are due from the central banks of New Zealand and South Korea.
Meanwhile, the tectonic plates of politics continue shifting, with France's Sunday election following hot on the heels of the U.K. vote.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) On Thursday, the U.S. CPI data for June will land.
Thursday's monthly U.S. Consumer Price Index (CPI) reading will shape views on whether the Fed could cut interest rates in the coming months.
The June reading is expected to have climbed +0.1%, according to a Reuters poll, after being unexpectedly unchanged in May.
Data late last month showed another inflation measure, the Personal Consumption Expenditures (PCE) price index, rose +2.6% on an annual basis — suggesting inflation is cooling, but the measure was above the Fed's target of +2.0%.
That comes, of course, after Powell's testimony before Congress on Tuesday.
He told a conference in Portugal that the U.S. is back on a "disinflationary path," but policymakers need more data before cutting interest rates.
(2) On Friday, major U.S. banks report their Q2-24 earnings.
Higher interest rates and an uncertain economic environment are casting a cloud over U.S. bank earnings, with the second-quarter reporting season kicking off.
JPMorgan Chase (JPM - Free Report) , Citigroup (C - Free Report) and Wells Fargo (WFC - Free Report) will report second-quarter earnings on July 12th. Bank of America (BAC - Free Report) will release its results on July 16th:
Executives' commentary on the path of interest rates will remain a key focus, especially after industry leaders cited improving conditions for investment banking, analysts said.
(3) On Sunday, France concluded a 2nd round of National Assembly voting.
On Monday, according to the Financial Times, France’s leftwing parties have begun jockeying to lead the country’s next government, after scoring an unexpected election victory, that thwarted Marine Le Pen’s efforts to bring the far right to power.
Any government would have to command the support of a majority in the 577-member National Assembly, which could require winning backing from more than one bloc.
The left-wing NFP secured 180 seats, followed by Macron’s centrist Ensemble alliance at 159, according to the Financial Times’ parliamentary election tracker.
Le Pen’s right-wing Rassemblement National (RN) party, which had hoped for a parliamentary majority after winning the first round, trailed with 143.
The leftist NFP bloc is made up of several different parties — from center-left Socialists to communists and Greens. The biggest grouping within it is the far-left La France Insoumise, led by anti-capitalist firebrand Jean-Luc Mélenchon.
The Nouveau Front Populaire's (NFP) leaders have immediately called on Macron to choose a new head of government from their ranks, despite their internal fractures.
“Within the week, we need to be in a position to present a candidate for prime minister and force the president to take this situation into account,” Olivier Faure, the head of the Socialists, who made gains on Sunday and are now just behind LFI, told FranceInfo radio on Monday.
But Faure said Mélenchon was “certainly the most divisive” figure within the bloc and lacked the consensus profile needed to lead a government.
Sunday’s results marked a success for the centrist and leftist parties’ bid to form a common “front républicain” by pulling out of races to avoid splitting the anti-RN vote.
It was also a stinging setback for Le Pen.
(4) New U.K. government has a full plate of issues to address.
New governments face a baptism of fire. But for the U.K.'s just-crowned Labor Party, it will be more of a baptism of sewage on Thursday.
That's when water regulator, OFWAT, announces just how much water firms — most of whom have been relentlessly pumping untreated human effluent into U.K. rivers for years — can jack up customers' bills. It has the potential to turn nasty.
Britain's biggest water company, Thames Water, which serves more than 16 million customers in and around London and has 15 billion pounds ($19.14 billion) of debt, faces nationalization unless it can attract vast amounts of new capital to fix its woes.
It has requested bill hikes of 59%, which OFWAT is unlikely to grant given the public mood. But it will need to be enough to convince reluctant investors, who have already started to bail out of Thames, to turn the taps on again.
(5) The Bank of New Zealand and Bank of Korea take policy rate decisions.
Investors are hungry for clues on whether rate cuts are coming this year at the Reserve Bank of New Zealand and the Bank of Korea.
Both central banks have taken a cautious stance amid stubbornly high inflation, and are widely expected to keep rates steady at 15-year highs at their meetings on Wednesday and Thursday, respectively.
In New Zealand in particular, policymakers even flagged the risk of another hike this year, with a cut not projected until late 2025. Markets are more optimistic, pricing for a single cut this year to come as early as October, as inflation cools, business sentiment deteriorates and domestic demand weakens.
South Korea has had even more pronounced indications of prices coming under control, but the market consensus is still for no cut until the fourth quarter.
Political pressure is mounting though, with President Yoon Suk Yeol calling cuts to keep in step with the U.S. Federal Reserve “unavoidable."
Zacks #1 Rank (STRONG BUY) Stocks
(1) The Gap (GPS - Free Report) : This is a $23 a share U.S. Retail-Apparel and Shoe industry stock, with a market cap of $8.7B. 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
The Gap, Inc. is a premier international specialty retailer offering a diverse range of clothing, accessories, and personal care products.
It offers products for men, women and children under the Old Navy, Gap, Banana Republic, Athleta, Intermix and Hill City brands.
Its products include other trendy assortments as well as fitness and lifestyle products for training, sports, travel, yoga and other activities.
Notably, the company offers its products through company-operated stores, franchise stores, websites, third-party arrangements, as well as catalogs.
The company reports its operating results under 4 segments: Gap Global, Old Navy Global, Banana Republic Global and Other.
(2) The New York Times Company (NYT - Free Report) : This is a $52 a share U.S. Publishing industry stock, with a market cap of $8.6B. I see a Zacks Value score of F, a Zacks growth score of B and a Zacks momentum score of D.
Image Source: Zacks Investment Research
The New York Times operates as a diversified media company that comprises newspapers, Internet businesses and other investments.
The company has one reportable segment that comprise newspaper, The New York Times ('The Times'); websites, including NYTimes.com; mobile applications, including The Times's core news applications, as well as interest-specific applications, including Crossword and Cooking products; and related businesses, such as licensing division; digital marketing agencies; product review and recommendation website, Wirecutter; commercial printing operations; NYT Live (live events business); and other products and services under The Times brand.
(3) Elbit Systems (ELST) : This is a $187a share Aerospace – Defense Equipment industry stock, with a market cap of $8.4B. I see a Zacks Value score of C, a Zacks growth score of D and a Zacks momentum score of D.
Image Source: Zacks Investment Research
Elbit Systems is a worldwide leader in Night Vision Goggles Head-Up Displays (``NVG-HUD’').
They are a major supplier to the U.S. Army and U.S. Marine Corps of Night Vision Head-Up Display systems for use in various types of helicopters.
Elbit Systems Ltd. is engaged in a wide range of defense-related airborne, ground and command, control and communications programs throughout the world.
Their focus is on the upgrading of existing military platforms and developing new technologies for defense applications.
Key Global Macro
Thursday’s U.S. CPI data is the key weekly global macro print.
On Monday, there is also the start of a 2-day Eurogroup meeting.
On Tuesday, Fed Chair Powell begins to testify, for 2 days.
On Wednesday, the Mainland China CPI for June should be +0.4% y/y, rising from a prior +0.3% y/y reading.
Mainland China’s FDI for June also comes out. This has been down a stunning -28.2% y/y.
The RBNZ policy rate decision and monetary policy statement land.
On Thursday, the U.S. broad CPI for June should be +3.1% y/y, falling from +3.3% y/y in a prior reading. The U.S. core CPI should be static at +3.4% y/y in June.
On Friday, the U.S. PPI for June should be +2.3% y/y, rising from +2.2% y/y in the prior month.
Conclusion
The looming Friday, July 12th quarterly EPS report from JPMorgan and the other big U.S. banks will put the spotlight on the Q2-24 earnings season.
According to Zacks Research Director Sheraz Mian’s work, the major U.S. banks may pull down the S&P500’s annual revenue growth. But they will make no difference to the overall S&P500 annual earnings growth narrative.
In Q2-24, Zacks expects total 2024 S&P500 earnings to be up +9.1% y/y, while showing a much more tepid +1.7% y/y revenue growth.
Zacks expects S&P500 revenue growth pace to improve to +3.9%, once the Finance sector gets excluded from our aggregate S&P500 data
Zacks S&P500 index’s aggregate earnings growth for the year remains unchanged at +9.0% y/y growth, on an ex-Finance basis
In simpler words, slower revenue growth is getting manufactured by a ‘higher-for-longer’ Fed, and we are seeing it in our latest revenue growth data.
But not in Zacks EPS growth data.
Have an excellent trading week!
Warm Regards,
John Blank
Zacks Chief Equity Strategist and Economist