Business & Investment

Earnings season is the next big test of last week’s market and value stocks

The trader is working on the floor of the New York Stock Exchange (NYSE) in New York City, USA on December 2, 2021.

Brendan MacDermid | Reuters

Next week’s market focus will be on fourth-quarter earnings, which is expected to reveal stronger profit growth for stocks that are more economically sensitive than technology names.

Revenue periods may test the theory that value and circulation are set to outpace technology stocks. It’s also time for investors to get a first-hand look at how companies are dealing with inflation. Increased 7% on an annual basis during the last month of 2021, Measured by the consumer price index.

Credit Suisse U.S. Equity Strategist Jonathan Gorab said, “Revenues are expected to grow at 20% year-over-year. Companies will probably outperform it, with profit margins of 25% to 30%. Probably. “

“It’s completely distorted in about 20% of the energy, materials, industry and discretionary cyclical sectors of the market, with a combined growth of 95% to 100% expected,” he added. “Everyone is expected to be better than technology.”

Golub estimates that the S & P technology sector is expected to grow revenues by only 11%.

“Energy, materials, industry, these old economies are expected to deliver far better revenue growth not only now, but also in subsequent quarters,” he said.

Revenue is expected to increase 62% in the materials sector and 52% in the industrial sector. Energy profits turned negative last year and will increase significantly. At the discretion of consumers after deducting internet retail, revenue growth of 33.9% is expected. Treasury is considered a circulating stock, but profits are expected to increase by only 2%.

“With these levels of inflation, some companies will win naturally and some will not. These are the companies that are the biggest beneficiaries of inflation. This is the story of inflation,” Golab said. “When you look at where the market excitement is, you shouldn’t look at tech companies. This year’s growth of 10% isn’t bad. That’s fine, but other companies are doing much better.”

Revenue forecast revisions also support the cyclical sector, Gorab said. Cyclic’s growth forecast has increased by 9.5% since September, while the technology sector’s revenue forecast has declined by 1.6%.

Several major banks reported on Friday, and the earnings season will be busy last week in various sectors.Finance like Goldman Sachs, Traveler When Bank of America As with Netflix and consumer brand giants, the report Procter & Gamble. There are also results from shipping companies including JB Hunt Transport Service, United Airlines When Union Pacific..

in the meantime Citigroup, Wells Fargo When JP MorganTheir stock performance was mixed, exceeding the estimates they reported on Friday. JP Morgan fell more than 6% Disappointing outlook on Friday, including warnings about headwinds from wage inflation.

“I think it will be clear from many industries and sound-cycle companies whether they can survive price pressures and supply chain issues. I think well-managed companies are fine,” said Steve Sosnick. increase. , Chief Strategist of Interactive Brokers.

Stocks tied to bonds

Sosnick said he expects technology to remain tied to future upheavals. 10 years Ministry of Finance On Friday, it was about 1.77%, below the recent high of 1.8%.

The 10-year yield, which rises when bonds sell out, made a big move early in the year as the Federal Reserve repeated its hawkish stance.Central bank revealed that it was discussed Reduced balance sheet at December meeting.. It could add further policy tightening from the federal government, which has already predicted three rate hikes this year.

Technology performed better than industrial and materials, each with a 1% reduction in one week. Tech was off about 0.6% in a week and its treasury fell 1.3%.

The Nasdaq The S & P 500 fell 0.8%, while the week of Friday afternoon fell about 1%.

The Treasury market could be a bit quieter last week as the market closes on Monday due to Martin Luther King Junior Day.

Wells Fargo’s Michael Schumacher said Fed officials had entered a quiet period prior to the January 25-26 meeting.

“10 and 30 years [Treasury] The auction does not get in the way. It seems to us that a big catalyst happened in the short term. “I think it will be quiet next week,” Schumacher said. At least the stock is resting. “

The calendar has several economic reports, including the Fed’s Manufacturing Survey on Tuesday and the Philadelphia Fed’s Manufacturing Survey on Thursday. Existing home sales will also be reported on Thursday.

Sosnick expects volatility to continue and technology to continue to be attacked. “I think what we see is that growth is returning to growth at a reasonable price at any price,” he said.

Calendar one week ahead


Market closed due to Martin Luther King Junior Day


Revenue: Goldman Sachs, Charles Schwab, Bank of New York Mellon, Truist Financial, JB Hunt Transport, Interactive broker

8:30 am Empire State Manufacturing

NAHB survey at 10 am

TIC data at 4 pm


Revenue: Bank of America, Procter & Gamble, UnitedHealth, US Bancorp, Morgan Stanley, Alcoa, United Airlines, Financial, FNB, Fastenal, Citizens Financial, Prologis, State street, Comerica

8:30 am Housing starts

8:30 am Business Leader Survey


Revenue: Netflix, Traveler, Union Pacific Railroad, American Airlines, Baker Hughes, Fifth Third, Intuitive surgery, Northern Trust, CSX, Regions Financial, PPG Industries

8:30 am First unemployed bill

8:30 am Philadelphia Federal Manufacturing

10:00 am Existing home sale


Revenue: Schlumberger, Ally Financial, Huntington Bancshares

Earnings season is the next big test of last week’s market and value stocks Earnings season is the next big test of last week’s market and value stocks

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