Thursday Apr 18 2024 07:38
8 min
Volatility is sure to be on the table this week with key US inflation data and earnings reports from most of the Magnificent Seven stocks on Wall Street. Keep your eyes on the Middle East conflict, which is “on the brink” of something bigger, according to UN chief Antonio Guterres.
In the background, a slew of releases sees this quarter’s earnings season hit its stride for US equity markets. Standouts are Alphabet, Microsoft, Tesla, Meta, Amazon, and Boeing.
How will the market react to earnings as geopolitical risk ramps up, inflation remains sticky, and leading central banksmag seemingly diverge in their expectations for cuts this year?
Here are the week’s key events:
The calm before the storm of earnings and data this week, but Chinese interest rates will be one to watch early on. Traders will want to consider any developments in the Middle Eastern conflict over the weekend as they ease gently into a big week of earnings.
The prospect of escalating conflict could provoke significant risk-off manoeuvres that may make investors hesitant to trade stocks even as big players from the Dow Jones index and the “Magnificent Seven” put out their latest performance metrics.
Each of the so-called Magnificent Seven stocks — Nvidia, Meta, Amazon, Microsoft, Alphabet, Apple and Tesla — gained at least 49% in 2023 and powered the broader market higher.
Last week JPMorgan analysts stuck to a positive outlook:
“We reiterate our Overweight ratings across AMZN, META, & GOOGL, w/our preference in that order. Amazon is our Best Idea, even as it is most owned across our coverage.”
Earnings: Verizon Communications
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A huge day for US stocks; General Electric, General Motors, PepsiCo, Spotify, Alphabet, Microsoft, Tesla, and Visa are all releasing their Q1 reports. Tesla may not be in the Magnificent Seven for much longer: TSLA shares have fallen by around a third this year, with the company beset by problems with rolling out new models and a general slowdown in the global EV market that prompted it to slash 10% of its workforce last week.
JPMorgan said this should “firmly dispel the notion that the firms earlier reported big 1Q delivery miss was somehow supply-driven rather than reflective of a demand problem”.
Additionally, look out for flash PMI survey data from the Eurozone, UK and the US.
Earnings: General Electric, General Motors, PepsiCo, Philip Morris, Spotify, Alphabet, Microsoft, Tesla, Visa
Australia kicks off Wednesday morning with CPI figures before another broad basket of earnings comes in from the States. Australian inflation held steady for the second consecutive month last month; if CPI stays under control, it may prompt the RBA to be among the first leading central banks to cut rates on the 7th of May.
US durable goods data and the German Ifo business climate survey will be among the economic releases to watch.
In the Q1 reports lineup, Boeing earnings will be of note after a series of well-publicised problems with its aircraft. The focus on Meta earnings will be whether it can continue to deliver growth in daily active users, whilst revenue growth of 25% in the last quarter may be tough to beat. Piper Sandler reiterated its Meta stock rating as “overweight” recently, noting:
“We continue to see upside to numbers and remain buyers despite the strong run in the stock.”
Earnings: AT&T, Boeing, Thermo Fisher Scientific, Ford, IBM, Meta, Teladoc Health
Thursday brings a first look at quarter-on-quarter US GDP as well as unemployment claims figures — Q4 growth was revised higher, and the American economy has beaten expectations for the last 3 consecutive quarters. Will growth remain strong as inflation stays stubbornly above target?
Earnings season isn’t slowing down as Magnificent Seven member Amazon, as well as big hitters Intel and Mastercard, are just some on today’s roster. Despite bringing in 14% of its revenue, Amazon continues to swing the axe in its cloud computing division.
Revenue for the e-commerce giant jumped 14% in Q4 last year after firing over 168,000 employees in 2023 — is this the job-swiping AI revolution in action?
Mastercard has continued to benefit from a strong consumer, beating two-thirds of earnings estimates since 2020; will the recent $30bn credit card fee settlement slow it down? Lots to look at today, with Gilead Sciences, Pinterest, Snap and Caterpillar Inc. all following suit.
Earnings: Caterpillar, Mastercard, Merck & Co, Amazon, Gilead Sciences, Intel, Mondelez, Pinterest, Snap
Forex traders will be wondering if multi-decade lows could lead to monetary policy intervention as the Japanese yen continues to take a beating in mid-April. In an interview with Asahi, Bank of Japan Governor Ueda stated the central bank could "respond with monetary policy" if currency shifts impact inflation, potentially affecting interest rate decisions.
Ueda noted any rate hike this year would be "dependent on data" related to Japan's progress toward its 2% inflation target.
Elsewhere, earnings are winding down for the week, with oil giants Chevron and Exxon Mobil reporting. More importantly, the US core PCE Price Index will be key in determining just how persistent of a hurdle inflation is for the Federal Reserve (Fed) as it considers how many rate cuts it will enact in 2024.
The Personal Consumption Expenditures (PCE) Price Index is notably the US Federal Reserve’s (Fed) preferred inflation measure. The core PCE index excludes volatile categories, such as food and energy prices.
Last week, Federal Reserve Chair Jay Powell said that 12-month core PCE was likely to be little changed at 2.8%
Earnings: Chevron, Exxon Mobil
When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.
Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
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