Week Ahead: Earnings & FOMC

Key Events

  • Big Earnings: Apple, Tesla, Amazon, Facebook, Google & loads more...

  • Federal Reserve Meeting

  • Infrastructure Talks

  • US-China Meeting

  • Australia's Boofheads

Over one-third of the S&P 500 will report earnings this week.  👇👇👇

It's going well so far 👇👇👇

Second-quarter reporting season is firing all pistons, with 120 of the companies in the S&P 500 having reported.

Of those, 88% have beaten consensus, according to Refinitiv.

"We’re seeing companies, on average, beat on the top and on the bottom line," Zaccarelli said. "We’re seeing the resilience of the consumer and that’s been the story of the earnings season so far."

Analysts now expect aggregate year-on-year S&P 500 earnings growth of 78.1% for the April to June period, a sizeable increase from the 54% annual growth seen at the beginning of the quarter.

Social media firms Twitter Inc (TWTR) and Snap Inc (SNAP) advanced on the back of their upbeat results.

Those reports gave a boost to shares of Facebook Inc (FB), which is due to post second-quarter results next week.

👆  Bear this in mind for the FB release. A strong earnings report is expected (and perhaps already priced in after the 8% rally this week...)

Other high-profile earnings expected next week include Tesla Inc (TSLA), Apple Inc (AAPL), Alphabet Inc (GOOGL), Microsoft Corp (MSFT) and Amazon.com (AMZN).

Industrials Lockheed Martin Corp (LMT), Boeing Co (BA), Ford Motor Co (F), General Dynamics Corp (GD), 3M Co (MMM) Caterpillar Inc (CAT), Chevron Corp (CVX) and Exxon Mobil Corp (XOM), along with a host of healthcare, consumer goods and others, are also on deck.

So far this month:

Apple +8.47%Microsoft +6.93%Amazon +6.29%Google (GOOG +9.97%, GOOGL +8.95%)Facebook +6.35% (most of this move happened on Friday)Tesla -5.34%

Lots of big expectations, and chunky moves already. Setting a high bar for the earnings releases to push prices higher?

After the last Federal reserve meeting we saw a clear preference for the Nasdaq and tech stocks versus the Russell 2K.

They were moving roughly in lockstep until the meeting and have diverged significantly since 👇👇👇

Bottom window is correlation coefficient

There could be good reasons for this. Many of the companies in the Russell are debt-laden zombie shit-cos after all.

However, the the possibility that the cyclical/value names will catch up is one that should not be dismissed.

If we look back to the previous FOMC, markets were shocked by the dot plot and the perception that the Fed would respond aggressively to the threat of inflation.

It's unlikely they will be more hawkish this time around. The comments were actually quite dovish at the last meeting but markets focused on the dots and projections instead.

To me the most likely scenario would be a return to the dovish playbook of prior meetings (& double down on FAIT).

i.e. Play down the threat of inflation, acknowledge the recovery and progress made so far, still a long way from achieving our goals. End result is returning the focus to jobs and the employment side of the mandate.

It would be an absolute BOSS move to get ahead of the increase in rental prices too, and we may see this come up in the Q&A.

JP, I know you're reading. Got the reply all ready for you bruh. 👇👇👇

Macrodesiac: Has inflation already peaked?

ING's preview is here 👇

Their summary:

The combination of a less dovish Fed and the Delta Variant has certainly hit portfolio flows to emerging markets, which have been negative in five out of the last six weeks. This has certainly provided support to the dollar. It is hard to see this trend turning in the immediate future.

And given that the US rates markets do not look heavily positioned for a hawkish Fed – 1m USD OIS rates priced three years forward have corrected 30bp lower from their highs in June – a Fed sounding like it is ready to start normalising should prove dollar supportive.

Taking the other side of this, nothing much has changed.

This timeline has been the most likely scenario for months. 👇👇👇

The key risk was supposedly that inflation would panic the Fed and send them into a steep rate hiking cycle.

OIS markets aren't pricing that now.

20th July 2021

And the Delta variant doesn't seem to be concerning markets either...

Scotiabank have the latest positioning data, and USD has flipped...  

USD longs don't make a lot of sense to me right now.

We've seen dollar appreciation recently on both ends of the smile. 👇👇👇

The US economy has already outperformed, and the anticipation of Fed hikes since the last FOMC has seen the USD rally in anticipation of earlier hikes...

Delta fears/safe-haven flows may have played a part too, but the market doesn't seem too concerned by variants (if indeed it ever was), and more vaccines are starting to find their way to the less-vaccinated countries.

A dovish Fed could be the catalyst to tip the USD scales and reverse the recent move.

More positioning details (Full note in the discord) 👇👇👇

Infrastructure Talks/Votes: I have no idea on the probabilities of this passing, but there might be a vote this week and a lot of focus/chat on getting a deal done before the August recess.

Summary via Reuters 👇👇👇

Lawmakers are hoping to hold a procedural vote as soon as Monday that will allow the bipartisan bill to move forward.

Other key issues remain unresolved heading into the weekend, including a disagreement over how much funding would be allocated to public transit.

The bipartisan framework with $1.2 trillion in funding over five years includes about $579 billion in new spending on roads, bridges, ports and other public works projects.

Democrat Biden has said it is essential, but he also wants it to be followed by a much larger $3.5 trillion budget framework that would allow for spending on some of his other priorities, including climate measures and social spending.

Wendy meets Wang (Sunday/Monday)

US-China tensions continue to dominate news flow. This meeting isn't especially key or high-profile, but is seen as paving the way for a series of higher level talks between the two nations, potentially ending up (best-case scenario) with a Biden-Xi meeting at the G20 in October.

U.S. Deputy Secretary of State Wendy Sherman will tell China in upcoming talks that while Washington welcomes competition with Beijing, there needs to be a level playing field and guardrails to ensure that does not veer off into conflict, senior U.S. officials said on Saturday.

The officials, briefing reporters ahead of Sherman's talks in Tianjin with Chinese State Councilor and Foreign Minister Wang Yi on Monday, said the world's two largest economies needed responsible ways to manage competition.

"The U.S. wants to ensure that there are guardrails and parameters in place to responsibly manage the relationship," he said. "Everyone needs to play by the same rules and on a level playing field."

Last but not least... Australia.

It's all been kicking off. Anti-lockdown protests in Sydney...

 People are saying Enough is Enough in #Sydney.

Let your voices be heard. We’ re all fed up with governments protecting us to death. pic.twitter.com/qr5WcoQ1dq— Abir Ballan (@abirballan) July 24, 2021 

David Elliott, police and emergency services minister for New South Wales, told reporters. “What we saw today were 3,500 very selfish boofheads,” he said, using local slang for fools. “These are the sort of people who are going to prolong this lockdown.”

Seriously, PM Morrison is under pressure. Decisions made in the coming weeks will affect the projected path of the economy.

Morrison says they're going to set vaccination targets and take different measures to get ahead of the virus.

For now, lockdowns are the only 'solution'...

“We’ll be setting those targets in the weeks ahead based on the best possible medical, scientific and economic evidence,” Morrison said. Data on serious illness, hospitalization and fatalities will guide future decision-making rather than case numbers, and unvaccinated residents may be subject to different measures than those who’ve received inoculations, he said.

Finally, some earnings previews via @WallStJesus  👇👇👇

Oz case numbers