In the global week ahead, the Q4 earnings windfall rumbles.
There are four industry groups whose major fourth-quarter corporate reports were released this week.
- In the United States, we hear large media and consumer products groups.
- In Europe, we mean major oil producers and renewable energy companies.
Following the close of the US FOMC meeting last week, global financial markets are digesting what the Reserve Bank of Australia and Reserve Bank of India are offering.
Stock market bulls had an exceptional month of January.
Where do we go from here?
This is followed by Reuters’ five global market themes, rearranged for stock traders –
(1) A stellar stock market run in January
It was a great start to 2023 for the markets – stocks and government bonds had one of the best Januarys on record, fueled by optimism that the worst is over.
But will the bulls stay in control?
Growth looks okay – check; slowing inflation — tick; the end of monetary tightening may be in sight — tick.
So far, so good.
January’s metrics are critical as they reflect how investors have framed their portfolios for the year ahead, though some believe the month could only mark a wave of irrational complacency.
So far, markets seem unafraid to take on central banks, betting on the prospect of an unison break in monetary tightening that could come later in the year – even if policymakers aren’t. haven’t made that promise yet.
German inflation and preliminary data on unemployment and consumer confidence in the United States could further guide the markets.
(2) In the US, S&P500 Q4 earnings continue to come out
Media and consumer stocks are taking their turn at the forefront as another batch of US results are about to land.
Walt Disney, which faces a proxy battle for board representation, and News Corp, which dropped a plan to reunite with Fox Corp, report Wednesday and Thursday, respectively, with The New York Times also online Wednesday. .
Earnings from PepsiCo and Kellogg on Thursday will provide insight into how consumers are coping with inflation.
In total, more than 90 S&P500 companies are expected to release their results in the coming days.
With 190 companies reporting, S&P500 earnings are expected to have fallen -2.4% in the fourth quarter from a year ago – a steeper fall than the -1.6% drop forecast on January 1 – according to Refinitiv IBES.
(3) In Europe, the major oil and renewable companies publish their results
Big Oil lived up to its moniker in 2022 as supply disruption from Russia’s war in Ukraine and high prices resulted in big profits – a record $200 billion, to be exact. .
Shell (SHEL – Free report) posted a record profit of $40 billion last year. BP (BP – Free report) , Total Energies (TTE – Free report) and Norwegian state producer Equine (EQNR – Free report) are all expected in the coming days, as are the “Big Renewables”, including Danish wind turbine manufacturer Vestas and German Siemens Energy.
Unlike their fossil fuel counterparts, turbine and solar panel makers have struggled to pass on rising input costs, although investors have yet to penalize them for it.
Over the past three years, the iShares Clean Energy (ICLN – Free Report) rose +120%, while the SPDR S&P Oil & Gas ETF only gained +12%.
Oil and gas may have won the sprint, but not the marathon.
(4) The Reserve Banks of Australia (RBA) and India set policy rates
Markets bet on another quarter-point rate hike by the Reserve Bank of Australia on Tuesday, but the economic backdrop is less clear than a week ago.
Then inflation data stunned investors by hitting a 33-year high, defying the RBA’s most aggressive tightening campaign in modern history. The macro readings shocked the other way, as retail sales fell the most since the darkest days of the pandemic and house prices suffered their biggest drop since at least 1980.
The outlook for the Australian dollar is not tarnished: as long as China’s reopening is on track, the currency should push higher.
Meanwhile, the Reserve Bank of India’s inflation fight may be over, with economists forecasting another quarter-point hike on Wednesday and then a pause.
(5) European and Canadian Central Bank (ECB) Speakers Listening
And even if markets choose to ignore central bankers for now, that doesn’t mean they won’t listen to what officials say.
ECB policymakers Peter Kazimir and Klaas Knot and Tiff Macklem of the Bank of Canada will speak in the coming days.
Cheering markets — US Treasury yields are down 50 basis points so far this year — mean easing financial conditions that may undo some of the rate hikes.
This is not good for a central bank, nor the idea that their communication is ineffective.
After all, what happens in the markets, especially government bonds, affects the entire economy.
With markets pricing in rate cuts in the US and Europe by the end of the year, central bankers are all too aware of the communication challenge they face.
Zacks #1 Ranking (STRONG BUY) Stocks
I found big Chinese tech and major European financial stocks on our #1 list this week.
(1) JD.com (J.D. – free report): It is a $17 per share Chinese online direct selling company with a market capitalization of $82.6 billion. I see a Zacks Value score of A, a Zacks Growth score of A, and a Zacks Momentum score of B.
(2)UBS (UBS – free report): It is a Zurich, Switzerland-based banking company at $17 per share, with a market capitalization of $75.5 billion. I see a Zacks Value score of C, a Zacks Growth score of C, and a Zacks Momentum score of B.
(3) Axa (AXAHY – free report): It is an international group of insurance and related financial services companies at $32 per share, with a market capitalization of $74 billion. I see a Zacks Value score of A, a Zacks Growth score of D, and a Zacks Momentum score of C.
Key global macro
Not much will emerge, in terms of macro data or political events.
Monday, Mainland China exports for JAN come out. The previous one was -9.9% y/y. Imports from Mainland China for JAN are also coming out. I see a -7.5% before there.
Tuesday, the Australian ANZ Commodity Price Index for JAN comes out. I see a decline of -2.0% YoY for JAN, weaker than the previous reading at -0.1%.
The Reserve Bank of Australia (RBA) waives its decision on the key rate.
WednesdayWilliams of the New York Fed delivers a speech.
The Reserve Bank of India sets its monetary policy.
THURSDAY, a 2-day EU leaders’ summit begins. Obviously, Ukraine will be discussed.
The European Commission publishes its economic growth forecasts.
Friday, the University of Michigan’s preliminary consumer sentiment index for FEB comes out. A prior of 64.9 is in place.
Conclusion
To wrap things up, here are key takeaways from Zacks Director of Research, Sheraz Mian:
(1) For the 191 S&P500 companies reporting Q4-22 results, total earnings are up +1.5% from the same period last year, with revenue up +7 .2%.
72.3% of companies exceeded EPS estimates and 67.5% exceeded revenue estimates.
(2) The proportion of the 191 members of the S&P500 index that beat both EPS and earnings estimates is 53.4%.
This mark of 53.4% is well below the average of the previous 20 quarters of 60.1%. The range over these 20 quarters is a maximum of 81.7% and a minimum of 46.6%.
(3) Looking at the whole of Q4-22, aggregate S&P500 earnings are currently expected to decline -6.4% on revenue up +4.7%.
Excluding the strong contribution from the energy sector, Q4 earnings for the rest of the index are expected to be down -10.4% on revenue up +3.7%.
(4) For Q1-23, we expect S&P500 earnings down -7.2% on revenue up +2.5%.
This is down from -4% on January 6 and -2.9% in mid-December 2022.
(5) Looking at calendar year pictures, total S&P500 earnings are expected to increase by +4.2% in 2022. Annual earnings will then decline by -0.2% in 2023.
On an ex-Energy basis, total 2022 S&P500 earnings would be down -2.6% (instead of +4.2%, with Energy).
The 2023 annual result would be up by +1.7% (instead of -0.2%).
Happy trading and investing,
white jeans
Zacks Chief Equity Strategist and Economist
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