For Immediate Release
Chicago, IL – April 23, 2019 – 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:Showa Denko SHWDY, Ericsson ERIC and Snap SNAP.
Here are highlights from Monday’s Analyst Blog:
Earnings Season Rules: Global Week Ahead
In the Global Week Ahead, the Q1-19 earnings season (inside the USA) pushes deeper into key non-financial tickers, with a highlight on big tech stocks.
Overall, one hundred and forty-eight S&P500 firms release fresh earnings reports. Their Q1 data — and company management outlooks on the rest of 2019 — should rule among the possible trading catalysts.
Key names: Twitter, AT&T, Facebook, eBay, Amazon, Ford, American Airlines, Starbucks, Coca-Cola, Visa, Capital One, Lockheed Martin, Boeing, Caterpillar, UPS, 3M, Equifax, Microsoft, Xerox, Intel.
Next, I list Reuters’ five world market themes, force ranked for equities.
After the USA reporting season, these are the influences likely to dominate the thinking of both investors and traders in the Global Week Ahead.
(1) The First U.S. GDP Reading for 2019 Comes Out
The working thesis through the early months of 2019 was that U.S. economic growth would continue to tail off as tailwinds faded from last year’s $1.5 trillion tax cut and headwinds picked up from a weaker global economy, partial federal government shutdown and trade wars. Indeed, that looked to be the case as most economic data through the first quarter fell short of forecasts. As a result, Citigroup’s U.S. economic surprise index came to near the most negative in around two years.
But one closely-tracked gauge of quarterly gross domestic product, the Federal Reserve Bank of Atlanta’s GDPNow model, has rebounded sharply in recent weeks and may be signaling that the advance reading of first quarter GDP may not be quite so grim.
A month ago, GDPNow estimated an annualized 0.2 percent growth, which would have been the lowest since a one-off GDP contraction in the first 2014 quarter. Now the model forecasts quarterly growth will come in at 2.8 percent. That would not only top current estimates of 1.8 percent but would mean growth actually accelerated from the fourth quarter’s 2.2 percent.
One factor behind the turnaround was a surprise narrowing in the U.S. trade deficit as Chinese imports plunged in the face of President Donald Trump’s tariffs. By some estimates, trade could now contribute as much as one percentage point to first quarter GDP after being a washout in the fourth quarter.
(2) European Earnings? These Don’t Look Good Either
The United States is widely seen as heading into an earnings recession (defined as two straight quarters of negative year-on-year earnings growth) but Europe might, at least for now, escape one.
European firms are expected to deliver their first quarter of negative earnings growth since 2016 — the latest I/B/E/S Refinitiv analysis predicts Q1 earnings to fall 3.4 percent year-on-year. But it expects results to pick up again in Q2.
So despite this quarter’s poor outcome, hopes for a bounce-back could keep equities buoyant. After all, sentiment is already rock-bottom — investors surveyed by Bank of America Merrill Lynch named “short European equities” the most crowded trade for the second month running.
The auto sector will be in focus in coming days with a flurry of earnings from Michelin, Continental, Daimler, Peugeot and Renault. These stocks are particularly sensitive to growth in China and will be watched as the stirrings of a recovery were felt in recent Chinese GDP data.
(3) What Can Central Banks Do?
The 100 years since the Fed’s creation in 1913 is said to be the century of central banking. Well, since the 2008-2009 crisis, we’ve certainly lived through a decade of central banking. But with monetary policy taken to the limit to lift growth and inflation, can central banks do anymore?
Of late, some of the economic and business confidence data is giving rise to hopes rate-setters might just be able to hold fire on further action for now. German and Japanese PMIs ticked modestly higher from March, and from China to the United States, the hope is that spring will bring some green shoots on the economic front.
Central banks in Japan, Canada and Sweden hold meetings in the coming days so we may get some clues on what they are thinking.
ECB Vice President Luis de Guindos and Olli Rehn, widely tipped to succeed ECB Governor Mario Draghi, will also be quizzed on the subject at upcoming speeches, especially since sources tell Reuters “a significant minority” of ECB rate-setters doubt any recovery is underway. Central bankers in Australia and New Zealand have sounded similarly gloomy. A decade of central banking and planning is not over yet.
(4) The Bank of Japan Keeps Trying
As we said above, central banks don’t have much ammunition left in their arsenal. The toolbox is probably lightest at the Bank of Japan.
At the G20 meeting in Washington, BOJ Governor Haruhiko Kuroda said he was ready to expand monetary stimulus if needed. But he also said he had no plans to change the central bank’s forward guidance, or the message it sends to signal policy intentions to financial markets. To many, that sounded like a man backed into a corner.
Kuroda has a chance to prove otherwise at the upcoming BOJ meeting. Expectations are thin though, given the BOJ’s balance sheet is already bigger than the country’s economy and Japanese financial institutions are suffering immense pain from the prolonged monetary easing.
The world’s No. 3 economy may have contracted in the first quarter, and whether it recovers depends much on first, whether China recovers as well and second, on whether the trade conflict between the other two powers sharing the podium reaches a resolution.
(5) Russia Watches a New Leader in Ukraine
The past two years have seen an increasingly bitter rift open up between President Donald Trump’s Republican supporters and his Democrat critics over the alleged collusion between Russia and Trump’s campaign in the 2016 U.S. election.
That may not be defused even after Special Counsel Robert Mueller’s 400-page report on the subject is unveiled by Attorney General William Barr. He has already told lawmakers the investigation “did not establish that members of the Trump campaign conspired or coordinated with the Russian government in its election interference activities.”
But that is unlikely to stop U.S. politicians from continuing their clamor for sanctions against Russia. As for investors, their appetite for Russian assets has not so far been dented. After plummeting last year, foreign buying of rouble-denominated government bonds has recovered sharply so it remains to be seen whether that bullishness continues.
Meanwhile, Ukraine — the reason behind the original 2014 sanctions on Russia — elected comedian Volodymyr Zelenskiy as president. Could the election of a new leader bring about some rapprochement between Kiev and Moscow? Watch this space.
Zacks #1 Rank (STRONG BUY) Stocks—
(1) Showa Denko:This is a $56B market cap diversified chemical maker in Japan. It has a Zacks VGM score of B and shares price around $37.
Can major diversified outfits like this (in Japan) provide a lift to the economy there?
(2) Ericsson: This is a big $33.7B market cap wireless telco equipment provider, based in Sweden. The Zacks VGM score is B, and share price around $10.
Did this 5G-related company finally get its restructuring behind it?
(3) Snap:Wow! I didn’t expect to see this U.S. social media company on our Zacks #1 Rank list. But there it was. The market cap is $15B. The Zacks VGM score is F. Shares price at just under $12 each.
Is this Snap covering analyst earnings optimism durable?
Zacks Investment Research
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