The Running Of The Bulls: Global Week Ahead

In the Global Week Ahead, the second quarter (Q2) earnings season kicks into a higher gear.

So far, a strong reporting season is shaping up. The bulls are running. The bears are left feeling a little hungry these days.

As of Friday, July 7th, 5% of S&P 500 companies had reported results for Q2. 78% of the 25 reporting beat their mean EPS estimate. For comparison, the 5-year average is 68%. Add to that. 87% beat their mean sales estimate.

For Q2 2017, the overall S&P 500 blended earnings growth rate rests at +6.5%. Going into Q1, estimated EPS growth was +9.0%. That quarter ended at +14.0%.

While the second quarter estimate is lower, it still should be a strong quarter, and the 4th quarter in a row that shows positive earnings momentum. Remember the ‘Earnings Recession’? That saga ended in the second half of 2016.

The bears can focus on retailers! Utilities and Consumer Discretionary hold the negatives. The remaining nine of eleven S&P 500 sectors expect earnings growth, led by the Energy sector.

What of current S&P 500 valuations? The forward 12-month P/E ratio for the S&P 500 is 17.3. This P/E ratio is above the 5-year average (15.3) and the 10-year average (14.0). That shows a source of sincere concern. Momentum has carried this stock market far, but can it reverse easily? Yes. It can. Tech just showed us how.

To finish this earnings season review off, covering stock strategists are staying bullish. The bottom-up S&P 500 price target in 12 months’ time sits at 2,650.

On Friday July 14th, the major U.S. financial groups begin reporting before the market opens (BMO). This includes JP Morgan Chase (NYSE:JPM) (Zacks #3 Rank), Citigroup (NYSE:C) (Zacks #3 Rank), Wells Fargo (NYSE:WFC) (Zacks #3 Rank) and PNC Financial (NYSE:PNC) (Zacks #3 Rank).

Rate hikes can be a bearish catalyst. Away from Q2 earnings season, there are two Fed governor speeches to note.

On Tuesday, Governor Brainard speaks on normalizing central banks’ balance sheets. On Wednesday, and Thursday, Chair Yellen’s testimony to both chambers of Congress could carry surprises.

Next Thursday, a pair of central bank policy decisions will focus on Latin America. From a 4.0% policy rate, Peru may ease 25 basis points. In Chile, the policy rate sits at a lower 2.5%. No change is expected there.

In Asia, the week also offers a monetary policy decision out of South Korea and Malaysia.

Top Zacks #1 Rank (STRONG BUY) Stocks—

HSBC Holdings (NYSE:HSBC) : This $188B market cap U.K. global bank holding company is looking good. But the long-term Zacks VGM score is F.

ING Group N.V. (NYSE:ING) : This $69B in market cap Dutch banking conglomerate is looking good, too. Again, the Long-term Zacks VGM score is F. That means the good news is all priced in on big banks in Europe.

Reckitt Benckiser (OTC:RBGLY) : This $70B market cap Soaps and Cleaning Materials stock is worth a look. The Zacks VGM score is C.

Key Global Macro Events—

On Monday, the Producer’s Price Index (PPI) came in at the forecast level, with +5.5% y/y. That strikes me as high. The CPI is only +1.4% y/y there.

On Tuesday, Argentina’s 7-day repo reference rate (their monetary policy rate) is set to remain fixed at 26.25%. That’s not a typo.

Mexico’s Antad -- this is the National Association of Self-service and Department Stores -- same-store sales look to bounce up to +7.5% y/y from +5.7% y/y in a prior reading. Mexican consumers feel more buoyant.

Italy’s industrial production growth looks meager at +1.0% y/y.

The U.S. NFIB Small Business Optimism index should be OK, registering at 103.5 after recording a prior 104.5. It is cooling a little.

The PPI in Japan is +2.1% y/y. This is much lower than Mainland China.

The Fed’s Brainerd speaks in NYC.

On Wednesday, the U.K.’s ILO unemployment rate comes out. The forecast rise to 5.0% from 4.6% looks ominous.

India’s industrial production look to fall to +0.2% y/y, from +3.1% y/y. Modi’s India has shown its governance issues.

The Bank of Canada issues a Monetary Policy Report. The overnight rate is not expected to move from 0.5%.

On Thursday, Mainland China reports export (+8.2% y/y) and import data (+17.2% y/y). The latter looks very high.

The CPI in Germany comes out. The prior was +1.6% y/y. The more important HICP is +1.5% y/y.

U.S initial claims should remain low at 248K.

The U.S. PPI (ex-food & energy) should add +0.2% m/m. That makes for a +2.4% annualized rate.

Chile and Peru review monetary policy. No changes are expected for Chile. Peru may cut rates 25 basis points.

On Friday, the U.S. retail sales (ex auto) should be up +0.4% m/m. That makes for a +4.8% annualized rate, which is at trend.

University of Michigan sentiment should be out. 95.1 was the prior reading.

HSBC Holdings PLC (HSBC): Free Stock Analysis Report

ING Group, N.V. (ING): Free Stock Analysis Report

Reckitt Benckiser Group PLC (RBGLY): Free Stock Analysis Report

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