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Stocks Trade on Fresh Earnings: Global Week Ahead


I think globally to start each week. Do you? Follow me on twitter @johnblank100.

This Global Week Ahead tees up a hybrid, three-part schedule of events. In the simplest of statements, I don’t see a big picture target driving trader sentiment.

If I were placing a short-term bet anyway, I would go with a big surprise coming from the Q3 earnings season. It beats the other two possibilities — a final U.S. presidential debate and Mario Draghi’s latest rate announcement — in terms of moving stocks. The latter 2 headline events shouldn’t offer ‘new’ news.

Earnings season. That’s where a big stock market surprise can lay in the weeds. Those of us who work at Zacks definitely subscribe to that core thesis.

However, a steady recent rise in oil and commodity prices, and the modest rise in producer prices in China, are big tells. A negative EPS surprise coming from the key Energy and Materials sectors is not in the Q3 cards.

Nevertheless, company earnings reports should be your focus — as a trader this week, and in the next few weeks.

First up — and most important to markets — Q3 earnings season picks up.

With just 7% of companies reporting last week, 76% have reported earnings above their mean estimate, while 62% reported sales above mean estimates. That sounds pretty good.

The estimated S&P 500 EPS decline for Q3-2016 stands at -1.8%. If that number sticks, it will be the 6th consecutive quarter offering traders an EPS decline. Remember, though, stock markets look ahead 6 to 12 months.

How about stock market valuations? The forward 12-month P/E ratio for the S&P 500 is 16.4. This is based on the S&P 500 index trading at 2132 and a forward 12-month EPS estimate of $130.08. That valuation is relatively high, but not that high. This mostly says big event risks have fallen off.

Second, we have a 3rd U.S. Presidential debate on Wednesday. ‘Nuff said there.

Also on Wednesday, we get the latest Mainland China GDP growth data. There should be no China fundamental surprises, given central planning instruments.

USA housing starts and permits data come out too. They look strong this fall. Though housing prices in a number of key urban markets are starting to fall back a bit. Home sellers are piling up out there. Be aware of that dynamic.

Finally, Mario Draghi gives up a press conference and announces his latest policy rates on Thursday.

The ECB’s negative rate of -0.4% is not expected to move up or down. The refi rate at 0.00% is also expected to stick around. Comments made during the press conference are the most important.

Three Top Zacks Rank Stocks —

(1) Nationstar Mortgage NSM: This $1.4 billion market cap company is in the home mortgage business. It acquired a Zacks #1 Rank (STRONG BUY) and has a long-term Zacks VGM score of A. Fresh USA housing starts and permits data come out on Wednesday.

(2) Best Buy BBY: This $12.4 billion market cap company is a big box consumer electronics retailer. The Zacks #1 Rank (STRONG BUY) and a Zacks VGM score of A look attractive.

(3) Performance Food Group PFGC: This $2.4 billion market cap company markets and distributes food and food-related products. Its operating segments consist of Foodservice, Vistar, and PFG Customized. The Zacks #1 rank (STRONG BUY) and Zacks VGM score of B look attractive.

Key Global Macro Data and Events—

Democrat Hilary Clinton and Republican Donald Trump meet to debate on Wednesday. This is their 3rd and final debate (thank goodness!). This one is held at the University of Navada at Las Vegas.

On Wednesday, Chinese macro data comes out too. Look for the usual +6.7% y/y real GDP growth rate to headline.

On Thursday, the ECB will announce its latest interest rate decisions. Mario Draghi will speak to the press.

On Monday, the BoJ releases a quarterly report and Kuroda speaks.

EU trade ministers meet to discuss EU-Canada trade deal.

The U.K.’s CPI looks low at 0.60% y/y.

On Tuesday, Brazil’s broad retail sales come out. Forecasts are targeting -5.4% y/y, with the prior rate at a dismal -10.2% y/y.

There is a COPOM monetary policy meeting in Brazil. They set rates there. The SELIC rate should get to 14.0% from 14.25% prior.

The CPI in the USA (ex-Food & Energy) looks OK with a 0.20% m/m reading this time around.

On Wednesday, China’s real GDP growth comes out. The number is expected to be +6.7% y/y. Retail sales should be +10.4% y/y.

U.S. building permits look good at 1.18 million, up from 1.152 million prior. Housing starts should be good too, at 1.2 million, up from a 1,142 million prior.

Russia’s unemployment rate should be 5.2%.

The Fed’s Harker and Kaplan speak at separate gatherings.

The Fed releases its Beige Book.

On Thursday, the ECB announces its latest rate and President Draghi gives a press conference. The deposit rate is now at -0.40% and the refi rate is 0.00%.

A 2-day EU leaders summit in Brussels begins.

The Fed’s Dudley speaks in NYC.

Australia’s unemployment rate is 5.7%.

The U.K.’s retail sales (ex-auto & fuel) should be good at +6.2% y/y.

U.S. initial unemployment claims are absurdly low at 246K.

On Friday, the Brazilian inflation rate looks to be +8.32% y/y. That needs to get to 4.5% over the next year.

The Fed’s Tarullo and Williams speak separately.

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