Wall Street is heading into a busy week on Monday with results from the profits of mega-tech giants and the latest information on inflation from Washington in the queue.
The heaviest components of the S&P 500 – Microsoft (MSFT, Alphabet (GOOGL), the parent company of Facebook Meta (FB), Apple (AAPL) and Amazon (AMZN) – are among 180 companies planned to report earnings data for the first quarter to Friday.
Traders will also receive a new reading of the Personal Expenditure Index (the Federal Reserve’s most closely monitored inflation footprint) on Friday, just as market expectations for a more aggressive and faster rise in the interest rate cycle.
One-fifth of the companies in the S&P 500 reported results for the first quarter so far, with 79% reporting better profits for the period – above the five-year average of 77%, according to the latest FactSet data. However, the size of the ascending surprise is below the five-year average: 8.1% compared to 8.9%.
“The slower growth rate of Q1 2022 than in recent quarters may be due to both a difficult comparison with the unusually high profit growth in Q1 2021 and the continuing macroeconomic cross-wind,” John Butters said in a note. senior profit analyst at FactSet.
For the third week in a row, US stock markets ended lower as the war in Ukraine and renewed concerns about inflation weighed on investor sentiment. A steep sell-off late last week, which intensified on Friday, was sparked by speeches by Fed Chairman Jerome Powell at a panel hosted by the International Monetary Fund signaling a 50-point increase in interest rates. May 4, when the US Federal Reserve holds its next policy meeting.
“The combination of Jerome Powell’s comments and some disappointing earnings news was too much for investors to handle the weekend move,” said John Lynch, CEO of Comerica Wealth Management, in an email comment. “In addition, market expectations for profitability inflation are rising, providing a stronger statement of the potential for constant price pressures than the headlines suggest.
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With the fastest rate of inflation in decades, Federal Reserve officials are changing their minds about how aggressive the central bank will be in tackling rising prices.
“The challenge we are facing is that inflation expectations continue to rise,” Invesco global market strategist Brian Levitt told Yahoo Finance Live on Friday. “The Fed needs to move.”
One of the politicians who has signaled that employees are likely to take a more combative approach is San Francisco Federal Reserve President Mary Daly, who told Brian Cheung of Yahoo Finance in a sitting interview Thursday that she would support raising the interest rate on federal funds by 0.50% at the end of the next policy meeting next month. The Fed has not moved to raise interest rates in steps higher than 0.25% since 2000.
“I like to think of it as an expeditious march to neutrality,” the Daily said. “It is clear that the economy does not need the accommodation we provide.”
The rapid change in monetary policy has shaken stock markets, hitting market-leading technologies hard and stocks growing amid fears that higher interest rates will push indentations into estimates and future cash flows. Given the victory of this sector, the ranking of profits this week will be especially important for investors.
The first in the case are Microsoft and Alphabet, and the results should come out after the bell on Tuesday. Microsoft’s earnings picture looks positive among analysts, who forecast a consensus estimate of EPS of $ 2.19, according to Bloomberg.
In the previous reporting period, the technology giant exceeded the forecasts at $ 2.48 against $ 2.31 expected by analysts. Stock observers will keep a close eye on how the war has affected the company’s critical cloud computing business.
“During conversations with many partners in Microsoft and the wider software ecosystem, we have not noticed any war that has slowed spending across Europe more broadly,” Bank of America said in a recent note, although adds that it has lowered revenue expectations to take into account potential potential. geopolitical impact.
Analysts polled by Bloomberg expect Alphabet to report earnings per share of $ 25.74. In the last quarter, Google’s parent company exceeded analysts’ expectations as a whole and reported a revenue jump of 34% on an annual basis.
“Alphabet, a parent of Google, is a powerful advertising center, and despite other projects and divisions, that hasn’t changed,” said Sophie Lund-Yates, a stock analyst at Hargreaves Lansdown. “Advertising revenue is planned to increase by nearly 23% in the first quarter, and any disappointment on this front will not be well received.”
“The inflationary environment means that companies are likely to seek to save costs, and digital advertising is cheaper than television advertising or billboards, so this can act as a headwind,” she added. “In addition, monitoring progress in cloud profitability is key. It is an exciting engine of growth and progress must be seen. “
US Federal Reserve Chairman Jerome Powell testified during the Senate Banking Committee hearing entitled “Semi-Annual Report on Monetary Policy to Congress” in Washington, DC, USA, March 3, 2022. Tom Williams / Poole told REUTERS
Facebook parent Meta is expected to show another challenging quarter when it reports on Wednesday. This comes after the company suffered the biggest one-day destruction in the market’s history, erasing a record market value of $ 230 after reporting its first drop in daily consumer numbers in February. According to Bloomberg, analysts expect EPS to reach $ 2.59.
When Apple’s titanium iPhone announced its results on Thursday, investors will be focused on how the company has handled amid supply chain disruptions – especially with the latest wave of COVID blockades in China. Bloomberg analysts expect earnings per share of $ 1.42.
“At the beginning of the quarter, we see some short-term risk of COVID-related downtime in China and lower sales in the App Store,” BofA analysts said in a recent research note. “However, we continue to view Apple as a long-term winner and believe that stocks have more room to appreciate, as we see significant catalysts, including the ability to better monetize their installed base, revenue growth.” advertising, augmented reality and long-term service growth. “
The week with heavy technological gains will end with Amazon, which published results for the first quarter with Apple on Thursday after the market closed, with the consensus estimate of Bloomberg EPS is $ 8.37.
Analysts from Bank of America in a recent note said that Amazon remains the leading stock of the financial institution FANG for 2022 due to the strength of its cloud business AWS and the ability to improve margins from the back 12-month bottom, also confirming its rating Buy of shares.
In terms of economic data, the Bureau of Economic Analysis is scheduled to release a new reading of its monthly personal consumption expenditure index (PCE) on Friday. The measure is another measure of how fast prices are rising across the country. Consensus economists expect the PCE to see a new monthly increase of 0.9% in March, according to Bloomberg,
This will mark the 16th consecutive monthly increase and will lead to an increase in the index by 6.7% on an annual basis.
“Supply chain pressures and labor rigidity will keep inflation up in the short term, while policy normalization and some reversal of spikes will cool things down over time,” Bank of America economists said.
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Economic calendar
Monday: Fed National Activity Index in Chicago, March (0.45 expected, 0.51 in the previous month), Fed’s manufacturing activity in Dallas, April (expected 4.8, 8.7 in the previous month)
Tuesday: Orders for durable goods, March preliminary (1.0% expected, -2.1% in the previous month), orders for durable goods excluding transport, March preliminary (0.6% expected, -0.6% in previous month), orders for capital goods without defense, excluding aircraft, March preliminary (0.4% expected, -0.2% in the previous month), deliveries of capital goods without defense, excluding aircraft, March preliminary 0.5% expected, 0.3% in the previous month), FHFA housing price index, month on month, February (1.5% expected, 1.6% in the previous month), S&P CoreLogic Case-Shiller 20 -City Composite, month on month, February (1.50% expected, 1.79% in the previous month), S&P CoreLogic Case-Shiller 20-City Composite, year-on-year, February (19.20% expected, 19, 10% in the previous month), S&P CoreLogic Case-Shiller US National Home Price Index, year on year, February (19.17% in the previous month), Conference Board Consumer Confid ence, April (Expected 108.5, 107.2 in the previous month), Current situation of the conference, April (153.0 in the previous month), Expectations of the Conference Council, April (76.6 during the preliminary reading), index of production of Richmond Fed, April (8 expected, 13 in the previous month), new home sales, March (770,000 expected, 772,000 in the previous month), New home sales, month on month, March (-0.3% expected, -2.0% in the previous month)
Wednesday: MBA mortgage applications, week ended April 22 (-5.0% in the previous week), preliminary trade balance of goods, March, – $ 105.0 billion expected, – $ 106.6 billion in the previous month, revised to $ 106 , 3 billion), wholesale stocks, over the month – month, March preliminary (1.5% expected, 2.5% in the previous month), retail stocks, month on month, March (1.6% expected, 1, 1% in the previous month), upcoming home sales, month over March (-1.0% expected, -4.1% in the previous month), upcoming NSA home sales, on an annual basis, March % in the previous month)
Thursday: GDP on an annual basis, quarter over quarter, progress for the 1st quarter (1.0% expected, 6.9% before), personal consumption, quarter over the quarter, advance for 1 (3.4% expected, 2, 5% before), GDP price index, quarter-over-quarter, progress for the first quarter (7.2% expected, 7.1% before), Core PCE, quarter-over-quarter, …
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