Daily Markets: Big Earnings Week Ahead

Today’s Big Picture

Asia-Pacific equity markets finished the day mixed. Australia’s ASX All Ordinaries declined 0.14%, Hong Kong’s Hang Seng fell 0.58%, China’s Shanghai Composite declined 0.78%, and South Korea’s KOSPI closed 0.82% lower led by Utilities. Japan’s Nikkei added 0.10%, Taiwan’s TAIEX gained 0.15%, and India’s SENSEX advanced 0.67% on Banking and Financials. European markets are mixed in midday trading and U.S. futures point to a lower open.

First quarter earnings ramps up this week and so far, per Factset, Q1 results are faring better than the previous two quarters with roughly 75% of S&P component companies that have reported EPS doing so with upside surprises. This figure is roughly in line with the trailing 5-year average but they note that the average 5.8% upside surprise is trailing the 5-year average of 8.4%. We’d point out, however, that the sample size is roughly 12% of the S&P 500 total basket of companies. Following this week’s more than 1,000 earnings reports, including 180 S& 500 companies, we’ll have a much better idea about 2023 earnings expectations for the S&P 500 and the market’s valuation. Coming into this week’s FactSet’s findings put 2023 EPS growth at less than 1% compared to 2022, a far cry from the 8% forecast at the end of last September.

With the current Fed Blackout period ahead of their May meeting, these earnings releases will go a long way toward bringing the view of the current state of the economy into better focus with companies like Visa (V) and Mastercard (MA), Humana (HUM) and Lilly (LLY), Microsoft (MSFT), Meta Platforms (META), Amazon (AMZN), and Caterpillar (CAT) reporting this week. As it relates to all things Fed, Friday’s Personal Consumption Expenditure Price Index for March looks to be the key make or break data point this week.

Data Download

International Economy

The Ifo Business Climate indicator for Germany rose by 0.4 points MoM to 93.6 in April, the sixth consecutive increase in the data and the highest level since February last year. Even so, the latest reading came in slightly below market expectations of 94.0, suggesting businesses' worries were abating, but Europe's largest economy lacked momentum.

Domestic Economy

Wells Fargo (WFC) expects the Fed to raise rates by 25 basis points at both the May and June meetings, does not expect the Fed to cut the fed funds rate in 2023, and sees the economy eventually tipping into a recession later this year.

Late Friday, Fed Governor Lisa Cook commented shared, "The big question, however, is whether, and how quickly, inflation will continue its downward path toward our target of 2 percent. Much of the decline so far has been driven by the moderation in energy prices, and there is evidence that the path back to our low and stable inflation goal could be long and is likely to be uneven and bumpy."

House Speaker Kevin McCarthy says the House will vote on a debt ceiling bill this week and he believes it will pass the chamber. Last week, McCarthy floated a plan that would pair $4.5 trillion in spending cuts with a $1.5 trillion increase in the $31.4 trillion U.S. debt limit.

The New York Times reports President Biden’s administration is poised to announce limits on greenhouse gas emissions from power plants that could compel them to capture the pollution from their smokestacks, technology now used by fewer than 20 of the nation’s 3,400 coal and gas-fired plants.

Markets

Friday saw the markets close out on a neutral stance as all the major equity indexes ended the day up between 0.07% and 0.11%. Underlying sectors told a slightly different story, ending the day mixed. Consumer Discretionary names saw the biggest gain, up 1.10% as Amazon [3.03%] and Tesla (TSLA) [1.28%] combined to contribute to just over 70% of the sector's results. Materials saw the largest drop, down 0.88% as traders reacted to Chile’s announcement they would be nationalizing lithium production by bidding shares of Abermarle (ALB) and Freeport McMoRan (FCX) down 10% and 4.11% respectively, contributing to just under 60% of that sector’s returns.

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 2.00%
• S&P 500: 7.66%
• Nasdaq Composite: 15.34%
• Russell 2000: 1.72%
• Bitcoin (BTC-USD): 64.21%
• Ether (ETH-USD): 54.14%

Stocks to Watch

Before U.S. equity markets begin trading today, Coca-Cola (KO), Credit Suisse (CS), and Phillips (PHG) are expected to report their quarterly results.

Reuters reports Tesla has begun producing in Shanghai a version of the Model Y to be sold in Canada this year, the first time it will ship cars to North America from China.

Reports suggest regional bank PacWest Bancorp (PACW) is exploring a sale of its lender finance arm.

Technology investment firm Silver Lake is acquiring Software AG (STWRY) for ~$2.42 billion.

IPOs

Johnson & Johnson (JNJ) is reportedly slated to begin a roadshow to pitch shares of its consumer-healthcare business, Kenvue, which produces products such as Tylenol. The goal is to raise $3.5 billion or more in the offering at a valuation close to $40 billion. Near-term the calendar for such activity looks rather thin. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Alexandria RE (ARE), Ameriprise Financial (AMP), Crown Castle (CCK), Hexcel (HXL), Packaging Corp. (PKG), Tenable (TNB), and Whirlpool (WHR) will be among the companies reporting their quarterly results after equities stop trading. Those looking for more on which companies are reporting when should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Tuesday, April 25

• UK: CBI Industrial Trends Orders - April
• US: FHFA Housing Price Index – February
• US: S&P Case Shiller Home Price Index – February
• US: Consumer Confidence – April
• US: New Home Sales – March

Wednesday, April 26

• Germany: GfK Consumer Climate - May
• US: Weekly MBA Mortgage Applications
• US: Durable Orders – March
• US: Weekly EIA Crude Oil Inventories

Thursday, April 27

• China: Industrial Profits YTD – March
• Eurozone: Business and Consumer Survey - April
• US: Weekly Initial & Continuing Jobless Claims
• US: 1Q 2023 Advance GDP
• US: Pending Home Sales – March
• US: Weekly EIA Natural Gas Inventories

Friday, April 28

• Japan: Bank of Japan Interest Rate Decision
• Germany: 1Q 2023 GDP
• Eurozone: 1Q 2023 GDP
• Germany: Consumer Price Index - April
• US: Chicago PMI – April
• US: Employment Cost Index – 1Q 2023
• US: Personal Income & Spending, PCE Price Index – March
• US: The University of Michigan Consumer Sentiment – Final April

Thought for the Day

“When you come to a fork in the road, take it.” ~ Yogi Berra

Disclosures

• Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
• Visa (V),Humana (HUM), Microsoft (MSFT) are constituents of the Tematica Research Thematic Dividend All-Stars Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks Economy Earnings Central Banks