Weekly | Three fundamental pillars
Your weekly summary with the most important news for your investments, in this edition:
Your weekly summary with the most important news for your investments, in this edition:
FED Decision
Fourth quarter 2023 reports.
Macroeconomic front.
For several consecutive weeks now, the main U.S. stock indexes continue to set historical records day after day, particularly the Dow and S&P 500, led by the technology sector, even though the Nasdaq is still slightly below its historical maximum level.
In this environment market players have been focused on three fundamental pillars starting with:
The communication that monetary authorities have been managing at a global level regarding the evolution of interest rates.
The quarterly results of the technology sector to determine whether the stock market is sustainable.
The evolution of inflation and employment data for the U.S. economy.
This week we will have new relevant information on all three fronts as:
The Federal Reserve (FED) will be announcing its monetary policy decision on Wednesday afternoon.
Five of the major technology companies (Alphabet, Amazon, Apple, Meta and Microsoft) will be publishing their sales and earnings for the fourth quarter of 2023.
On Friday we will know the employment data for the month of January where it is estimated that the economy would have generated 175 thousand new jobs, the unemployment rate increases marginally to 3.8% (from 3.7%) and wage inflation remains at 4.1% being this the figure with the greatest downward resistance from the inflationary front.
Let's start with what happened last week on the first fundamental axis with the communication of the main central banks, starting with the European Central Bank (ECB), which maintained its monetary policy rate at 4.5% (unchanged). The authorities were blunt in mentioning that:
"Future decisions by the Governing Council will ensure that its policy rates are set at sufficiently restrictive levels for as long as necessary" and that for now it is: "premature to discuss rate cuts". This is partly because inflation took an upward turn in the Eurozone.
For his part, BOJ President Kazuo Ueda noted after holding his rate at -0.1% that:
"If we obtain further evidence that a positive wage inflation cycle will intensify, we will examine the feasibility of continuing the various steps we are taking under our massive stimulus program."
So this Wednesday it will be the turn of the FED, whose scenario includes a more robust than expected economic growth during the fourth quarter of the year (at 3.3%) but with more auspicious inflation data. This is because last month's PCE inflation came in below market expectations with the headline figure at 2.6% (unchanged) but the core reading, that which excludes food and energy prices, came in at 2.9% (from 3.2%). For now, market expectations point to the FED keeping the interest rate at 5.5% but with a more generous speech about the evolution of future interest rates. Without neglecting the fact that oil prices have rebounded to +10% so far this year, closing close to US$78 per barrel, which could generate another inflationary resistance point if it does not quickly return to US$72 per barrel.
On the corporate earnings front for the S&P 500 companies we should mention that the focus will be on the figures of the aforementioned technology companies (adding Nvidia) as their earnings are estimated to grow in the order of +54% relative to Q4 2022. While the projected earnings of the rest of the 494 companies are estimated to register a mismatch of -10%. Already last week we saw Tesla's share price mismatch -12% after its quarterly numbers came in below market expectations. With this, the market's sensitivity this week will depend on the figures and estimates released by technology companies. This will be joined by other companies such as AMD, Boeing, Chevron, Electronic Arts, Exxon, Merck, Peloton, Pfizer and Starbucks among many others. For now, according to Factset, fourth quarter sales are expanding by +3.2%, with profits declining -1.4% compared to the same quarter of 2022.
On the macroeconomic front, employment data will be released on Friday, which, for now, if coupled with last quarter's GDP expansion data (3.3%) and the core inflation figure of 2.9%, would point to a "soft landing" for the economy. However, a spike in oil prices, such as the one recorded last week, or an increase in transportation costs as a result of the war between the United States and the Houthi terrorists in the Red Sea, and now the death of US soldiers in northern Jordan by Iranian drones, will be enough for the inflationary scenario to take an unexpected turn. This does not include the Russian-Ukrainian conflict that continues to put pressure on European energy costs as we enter the harshest winter months in the northern hemisphere.
Meanwhile, we cannot leave aside the U.S. political environment, where former President Trump is one step away from winning the primaries and becoming the presidential candidate for the Republican Party for the elections to be held on November 5. During the week, Trump has proclaimed that he will once again open the country's oil production capacity, as he did in his previous administration, so that the country can be self-sufficient in energy and can impact inflation figures faster than the current Biden administration with its green agenda.
In conclusion, this week the three fundamentals that have the stock indexes at all-time highs will be put to the test as we will know the FED's decision regarding interest rates, the main technology companies will be reporting their results and we will know the wage inflation data.
This Week
Monday (January 29)
Quarterly Reports
Ryanair Holdings plc
Sumitomo Mitsui Financial Group Inc
Nucor Corporation
Super Micro Computer, Inc
Alexandria Real Estate Equities, Inc.
Economic Reports
FED Dallas Manufacturing Index Report
Tuesday (January 30)
Quarterly Reports
Microsoft Corporation
Alphabet Inc.
Advanced Micro Devices, Inc.
Danaher Corporation
Pfizer, Inc
UPS
Starbucks
Economic Reports
Job Vacancies and Positions Report
Wednesday (January 31)
Quarterly Reports
Novo Nordisk
Mastercard
QUALCOMM Incorporated
Boeing Company (The)
Phillips 66
Economic Reports
New Monetary Policy Decision Report, FED
FED Press Conference and Job Postings
Thursday (February 01)
Quarterly Reports
Apple Inc.
Amazon.com, Inc.
Merck & Company, Inc.
Meta Platforms, Inc.
Shell PLC
Honeywell International Inc.
Sanofi
Economic Reports
Reporte del Índice de Manufactura ISM, PMI
Friday (February 02)
Quarterly Reports
Exxon Mobil Corporation
AbbVie Inc.
Chevron Corporation
Regeneron Pharmaceuticals, Inc.
The Cigna Group
Economic Reports
Nonfarm Payrolls Report
Unemployment rate report
Now you have more information about your investments. See you next week with more news.
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