For Immediate Release
Chicago, IL – October 1, 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: Micron MU, L3Harris Technologies LHX and Allstate Corp. ALL.
Here are highlights from Monday’s Analyst Blog:
Q3 Ends, Earnings Season Nears: Global Week Ahead
This is a Global Week Ahead where one fundamental macro data dump matters most.
What am I referring to? It’s the September print of the U.S. nonfarm payroll on Friday.
I see analyst consensus is at +130K for that preliminary Federal job additions number. Economists and traders get a foreshadowing from the private ADP payroll report on Wednesday. Consensus has +137.5K there.
In short, there are subdued job add expectations entering the week.
That is actually bad news in hiding. If the actual Federal U.S. jobs data for September miss an already subdued mark, traders in the already richly valued stock markets are going to be entering more sell orders than buy orders.
With range and swing trading in hand, the S&P 500 is stuck at no more than 3,000 around the close the last few weeks. That summary share price index, a key tale of the tape, will also reveal how much fundamental hope remains in the strength of the U.S. economy.
Q4 begins on Tuesday. Another shoe to drop — major S&P 500 company earnings reports — are on the way for Q3.
Assuredly, fresh earnings reports will deliver the needed granularity — on the effect of massive trade policy uncertainty the world over.
Next are Reuters’ five world market themes for the Global Week Ahead. I have them in order of importance to equity traders.
(1) Q4 Begins on Tuesday. Which Means Q3 Ends and Earnings Reports Start Rolling in Shortly.
The final quarter of 2019 begins on Tuesday after months of roller-coaster moves on world markets.
Trouble in China and emerging markets and some of Europe’s big bourses have halted the equity bull run. Oil has stepped back after its red-hot start to the year, and U.S. Treasuries have surged as the Fed has spun 180 degrees and cut rates for the first times since the financial crisis.
So what will Q4 bring? Well, much depends on the trade war, of course, but signs are the bond rally has stalled for the time being. Some big investors are even buying up assets that react well to inflation — yes inflation, remember inflation?
Mario Draghi is preparing to leave the ECB after eight years as its president, so European assets will be under scrutiny again. Emerging market central banks are still cutting rates with gusto, so their bonds could still run up. Finally, while the year-end always has the potential for a Santa rally in stocks, let’s not forget that last Christmas was more Bah Humbug.
(2) The U.S. Consumer and Services Activity Is Just Fine. Maybe?
Consumers and the service sector are just fine!
That’s been the argument of those who believe the U.S.-China trade war doesn’t spell doom for the broader U.S. economy. But September non-farm payroll data due out on Oct. 4 could confirm that jobs in the so-far resilient service sector are starting to take a hit.
There have been some warning signals. Non-farm service-providing payrolls grew by 84,000 in August — a slower pace of growth than the 133,000 added in July. And the services employment reading of IHS Markit’s September PMI index slipped below 50 — the mark that separates growth from contraction — for the first time in nearly a decade.
True, the broader U.S. services business activity index rose to 50.9 from 50.7 in August, but the slide in service-related employment could be a canary in the service-sector coal mine. Markit added that for the first time since January 2010 jobs were now being cut across the surveyed companies.
Additionally, consumer confidence ebbed in September, a potentially worrying signal for consumer spending, which has been driving the U.S. economy while exporters grapple with Chinese tariffs and tepid global demand.
(3) Brexit and Trump: The Haze May Be Clearing
Things may be coming to a head in British and U.S. politics.
Details emerging over President Donald Trump’s interaction with Ukraine’s leader could add more grist to impeachment proceedings against him. The last time a president was impeached — Bill Clinton in 1998 — it took 2-1/2 months between proceedings being brought and the eventual House vote to impeach him. So there’s likely plenty more noise ahead.
The other question is what UK Prime Minister Boris Johnson does next to carry out his “no ifs, no buts” pledge to deliver Brexit by Oct. 31. His Conservative Party meets for its annual conference until Wednesday — it might give a hint of how Johnson plans to obey the law and still take the UK out of the EU by Oct. 31.
These events in two of the world’s most hitherto stable democracies have pushed the World Economic Policy Uncertainty Index – a somewhat crude measure of news articles about economic and policy angst – to the highest in its 20-year history, or some 50% above levels touched during the 2008 financial crisis.
U.S. shares, bond yields and sterling have all fallen in the past week; the deepening political angst will keep investors on their toes.
(4) Will a New Trade War Front Open with Europe?
A new front in the trade war may be about to open up.
The World Trade Organization has given Washington the go-ahead to impose tariffs on European Union goods worth around $7.5 billion over illegal government support for planemaker Airbus.
An arbitration tribunal will soon announce a value and methodology for the tariffs. Sources say duties will target aircraft and aerospace parts from Airbus host nations — Britain, France, Germany and Spain, ratcheting up the tit-for-tat tariff spat in the aircraft industry.
But Washington has other European goods — wine, cheese and luxury goods — in its sights. It’s all very bad news for Europe’s economy and companies, staggering under the weight of an earnings and manufacturing recession, especially in Germany. That’s why for Europe, the WTO decision has overshadowed Trump’s impeachment probe, with a pan-European equity benchmark racking up its first weekly drop in six weeks.
(5) 70 Years of the People’s Republic
On Tuesday, it will be 70 years since Mao Zedong proclaimed the People’s Republic from atop Beijing’s Gate of Heavenly Peace.
It will be an occasion for pomp, pageantry and might.
President Xi Jinping is to make a speech, likely featuring the “Chinese Dream” of military strength, national renewal and growing respect for his country on the world stage.
Markets, however, are on edge about other Chinese realities. A gauge of factory activity, China’s Purchasing Managers’ Index came in a touch higher-than-expected at 49.5 on Monday but remained below the 50-point mark separating expansion from contraction, reinforcing expectations Beijing needs to roll out more support measures to cushion the country’s worst economic slowdown in decades.
Industrial production growth was its softest in 17 years in August, while profits went into reverse. Quarterly economic growth sits near a three-decade low. And to cap it off, citizens wishing to celebrate over a meal of China’s favorite protein — pork — will find it incredibly expensive, since a contagious and fatal (for pigs) fever has put a rocket under prices. There’s some food for thought about the People’s Bank’s next move.
Top Zacks #1 Rank Stocks
(1) Micron:Yes. After its latest earnings beat, this memory chip bellwether tech stock is back on our Zacks Rank #1 (STRONG BUY) list. The market cap is large at $47B at $43 a share after a big selloff.
There is a Zacks Value score of B and a Growth score of D now. The latter two marks summarize the situation well: it’s a cheap stock. There is no turnaround in chip land to note. Not yet.
(2) L3Harris Technologies: This is a $47B market cap stock in the over-played Aerospace and Defense industry.
Why do I say overplayed? There is a Zacks Value score of F and a Zacks Growth score of D. That’s a stock on the way to the short junkyard. It’s just a matter of timing.
(3) Allstate Corp.: This is a $38.5B market cap stock at a hefty $107 a share.
That sounds overpriced, doesn’t it? But I note there is a Zacks Value score of A here, a Zacks Growth score of C, and a Zacks Momentum score of A.
All in all, of the three stocks I have written up, this may be the most attractive one.
Key Global Macro
Zacks Investment Research
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