Chicago, IL – July 26, 2022 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Broadcom AVGO, Prosus PROSY and NetEase NTES.
In the Global Week Ahead, a Wednesday afternoon arrival of a 2nd straight 75 basis-point rate hike from the U.S. Fed, will be the stock market's main focus.
That stiff Fed policy rate hike arrives just as traders and investors digest a wave of Q2-22 earnings from S&P 500 companies and major firms listed in Europe.
Writing on July 20th, here is what Zacks Research Director Sheraz Mian offered—
"For the 60 S&P 500 companies that have reported Q2 results, total earnings are down -11% from the year-earlier period on +6.6% higher revenues, with 73.3% beating EPS estimates and 63.3% beating revenue estimates.
"The drag from the Finance sector accounts for most of the earnings decline, with the year-over-year growth pace improving to +12% for the companies that have reported when the Finance sector is excluded from the numbers.
"Tough comparisons to the year-earlier period boosted by big reserve releases is the primary reason for the Finance sector's -27% year-over-year earnings decline. Excluding the impact of reserves, Q2 earnings would be essentially flat from the year-ago period, as declines in investment banking and mortgages were offset by net interest income and trading gains.
"The overall picture emerging from the Q2 earnings season at this admittedly early stage is inconsistent with an economy heading into a significant downturn.
"At this stage in the Q2 earnings season, with about 12% of S&P 500 results already in, we are simply not seeing anything that would be consistent with the all-around market worries about an imminent economic slowdown or even a recession."
In addition to those earnings events and the FOMC rate hike? Keep these in mind...
The prospect of early elections in Italy after the collapse of the government means there's plenty of political drama too, and Australia's latest inflation numbers may add to pressure on the country's central bank to get ahead of the curve.
Here are Reuters' five world market themes, reordered for equity traders—
(1) On Wednesday, July FOMC Meeting Ends
Fed officials have poured cold water over expectations for a 100 basis-point rate hike in July, but Wednesday's meeting will still have drama aplenty.
A 75 basis-point (bps) interest rate hike is priced in, and coming on top of 150 bps worth of tightening so far in this cycle, that is sure to bite consumers and businesses.
Investors will be looking at whether the Fed thinks inflation is peaking and how it views the U.S. economy, as they try to gauge the scope of a September rate move.
Hanging in the balance are nascent rallies in U.S. stocks and bonds. The S&P 500 is up almost 10% from its mid-June low, 10-year Treasury yields are down 60 bps.
(2) Penultimate Q2 Week for Big Tech Earnings
Earnings from Google-parent Alphabet, Microsoft, Coca Cola, Apple and others will show how well corporate America is coping with soaring inflation and a strong dollar.
This year's -17% decline in the S&P 500 has lowered the index's forward price-to-earnings ratio to around 17.3 from 21.7 at the start of 2022, closer to the market's historic average of 15.5, according to Refinitiv Datastream.
While there have been several notable beats this season, it's still early and many worry that earnings estimates may not hold up in the face of the highest inflation in four decades and tightening financial conditions.
Also clouding the picture is the burgeoning dollar, which makes U.S. exports less competitive and hurts firms earning much of their money abroad. Alphabet, Microsoft and Coca Cola report on July 26, Apple and Amazon on July 28.
(3) Major European Q2 Earnings Reports Flowing In, Too
One-sixth of Europe's STOXX 600 equity index reports second-quarter results July 25-29, and Refinitiv I/B/E/S forecasts earnings to have grown +22% year-on-year.
That headline figure masks disparities; earnings growth at energy firms basking in the glow of $100-a-barrel oil is seen at 185%, while real estate businesses will show a 70% drop, Refinitiv predicts.
Statements from retailers, heavy industry and hospitality firms may show how much pain is being inflicted by energy shortages and high inflation. The likes of Airbus, Volkswagen and Mercedes will cast light on the state of European exporters.
Bank earnings, expected to have slowed around 16%, include numbers from UBS, Credit Suisse, Deutsche, Barclays and BNP Paribas.
The Q2 season will show if European shares are correctly valued around 11.5 times forward earnings, versus their 14% long-term average, or need to cheapen further.
(4) Italian Politics Plunge Off Parliamentary Cliff
A political crisis couldn't have come at a worse moment for Italy. The ECB has just jacked up rates for the first time since 2011, inflation is soaring and the country has been hit hard by its exposure to Russian gas.
The collapse of Mario Draghi's government ends months of stability, unnerving markets that had cheered when the ex-ECB chief became prime minister in 2021. They now worry about the prospect of new elections and Rome's ability to pass policies.
It also leaves the ECB, with its new tool to contain stress in bond markets, in an awkward position of determining which part of government bond spread widening is "unwarranted" — or giving up buying Italy's bonds altogether.
(5) Reserve Bank of Australia Credibility On the Line
Reserve Bank of Australia (RBA) boss Philip Lowe is pledging a steady policy-tightening campaign to at least double interest rates from current levels to "chart a credible path" back to the RBA's 2-3% inflation target. Quarterly inflation numbers due Wednesday could show a further acceleration in price growth, which at 5.1% is already at its highest in two decades.
The rate-rise pledges are ironic coming from Lowe, who just months ago pushed back against markets, saying he didn't see rates rising throughout 2022, but has since lifted them three times since May.
Criticism of the RBA's inflation policy has led to an independent inquiry of its operations.
The Nasdaq has risen +14% off its recent lows. And, lo and behold, three major tech firms made our #1 STRONG BUY list.
(1) Broadcom: This major Semi firm made it back to our #1 list this week. I see a $518 share price tag, making for a market cap of $209B. The Zacks Value score is C, the Zacks Growth score is B and the Zacks Momentum score is B.
(2) Prosus: This is an Internet Commerce firm you may not know about. It is based in the Netherlands, but it operates globally. I see a $14 share price tag, making for a market cap of $115B. The Zacks Value score is F, the Zacks Growth score is F and the Zacks Momentum score is D.
(3) NetEase: This is an Internet Software and Services firm. I see a $100 share price tag, making for a market cap of $69B. The Zacks Value score is D, the Zacks Growth score is C and the Zacks Momentum score is F.
Is it time to pick up tech stock bargains?
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