Investors have been inundated with profits, economic data, and the Federal Reserve’s most recent policy statement during the past two weeks.
The earnings flow is expected to be stable but slow down in the coming week, and this should be one of the quietest economic calendars of the year.
Investors celebrated the April employment report on Friday, which revealed that the US labor market expanded more slowly in April. This renewed interest in the possibility of a rate decrease by the Federal Reserve this year.
When you combine this information with Apple’s (AAPL) impressive earnings late on Thursday—the latest Big Tech company to increase its intentions for shareholder return—all three major indexes ended the week in positive territory.
For the first time in three weeks, none of the “Magnificent Seven” will be included in the predicted earnings for the upcoming week. Consumer and entertainment brands will take precedence in their stead.
The week’s most anticipated report should be Disney’s (DIS) results, which are anticipated to be released Tuesday morning before the bell. The media giant is scheduled to release its first quarterly earnings after defeating Nelson Peltz in a proxy battle last month. Key themes for investors will include Disney’s prediction of the summer box office, park attendance, and subscriber growth for its streaming services.
Any remarks about the state of sports media, especially the ongoing discussions for the NBA’s upcoming media rights agreement, will be significant coming from the business that owns ESPN. Similar interest from investors should be aroused by the results that Warner Bros. Discovery (WBD), the parent company of the cable networks HBO, TBS, and TNT, will release later this week.
On the earnings front, Reddit (RDDT) will release its first quarterly results since going public, Uber (UBER) and Lyft (LYFT) will provide updates on their ridesharing businesses, and results from Cheesecake Factory (CAKE), Papa John’s (PZZA), Celsius (CELH), and Krispy Kreme (DNUT) will examine consumer eating and drinking habits.
There isn’t much of interest for investors on the economic calendar; the only noteworthy news is the preliminary University of Michigan survey on consumer sentiment that was released on Friday. Over the course of the next week, a few Federal Reserve officials will make public remarks; however, Fed Chair Jerome Powell will not be one of them.
The jobs data on Friday had the greatest influence on markets of any news this past week.
April had fewer nonfarm payroll job additions in the US economy than anticipated, at 175,000. In addition, the unemployment rate increased by a tenth of a percent, and the annual growth rate in wages fell to 3.9%, the lowest since June 2021.
Investors priced in an interest rate cut from the Federal Reserve as early as September because to the slowdown in job growth following a record-breaking start to 2024 and the apparent relaxation of wage pressures.
Fed Chair Jay Powell stated, “The labor market remains relatively tight, but supply and demand conditions have come into better balance,” during his news conference last week. The chair will be confirmed in this opinion by Friday’s report.
However, a more muted employment report that relieves the Fed of some of its pressure shouldn’t be interpreted as a sign that the US labor market is about to collapse.
If investors came to terms with the possibility that rate reduction might not happen at all during the first quarter of 2024, then the first month of the second quarter has been better for those investors demanding lower rates.
The first quarter earnings season is almost over, and that was that.
About 80% of the S&P 500 had released results as of Friday, and overall annual profits increase was 5%. Based on FactSet data, investors predicted earnings to have increased 3.4% from the previous year at the conclusion of Q1.
Investor expectations have not only exceeded this earnings season, but the usual trend of analysts becoming more cautious ahead of the earnings season the following quarter has also broken.
FactSet reports that analysts increased their predictions for earnings in April by 0.7%. Forecasts have historically been trimmed by analysts on average by 1.9% in the first month of any given quarter.
Naturally, companies love it when analysts reduce their projections during the quarter, since it makes the eventual earnings “beat” easier to handle.
Furthermore, the fact that analysts aren’t cutting their estimates indicates that the strong fundamental narrative supporting this year’s market advance is still in place, since both corporations and analysts are aware of the dynamics of this dance.
The stock of the iPhone maker increased by 6% on Friday. Better than expected were its fiscal second quarter earnings, which were released on Thursday. Apple anticipates low single digit revenue growth in the current quarter, despite the company reporting another annual revenue decline.
Furthermore, CFO Luca Maestri informed Yahoo Finance’s Josh Lipton that sales in mainland China increased in the most recent quarter, which is even more positive news for investors.
Amidst heightened investor concerns on Apple’s standing in China and conflicting statistics painting an unfavorable image of the firm in the region, analysts questioned Apple about how it reconciles these divergent interpretations.
Tim Cook, the CEO, told investors, “I can’t address the data points.” “I can only talk about our findings… I am unable to connect to figures that we did not arrive at.”
A critical evaluation of Apple’s stance on outside attempts to monitor its operations.
And the kind of message you will only come across in a setting where businesses feel free to exploit differences between their own figures and estimates from outside sources.
Therefore, this creates a climate where analysts won’t be as eager to lower their predictions as they usually would.
Weekly Calendar
Monday
Earnings: Palantir (PLTR), Spirit Airlines (SAVE), Tyson (TSN), BioNTech (BNTX), Williams (WMB), Goodyear Tire (GT), Simon Property Group (SPG), Vertex (VRTX), Fidelity National (FIS), Air Lease (AL), Aaron’s (AAN), Lucid (LCID), Coty (COTY), Hims & Hers (HIMS)
Economic news: No notable economic news.
Tuesday
Earnings: Disney (DIS), Lyft (LYFT), Reddit (RDDT), Match Group (MTCH), Twilio (TWLO), Coupang (CPNG), Kenvue (KVUE), TransDigm (TDG), TripAdvisor (TRIP), Rockwell Automation (ROK), Ferrari (RACE), Crocs (CROX), BP (BP), Datadog (DDOG), Celsius (CELH), Rivian (RIVN), Electronic Arts (EA), IAC (IAC)
Economic news: No notable economic news.
Wednesday
Earnings: Uber (UBER), Toyota (TM), AB InBev (BUD), Airbnb (ABNB), Arm Holdings (ARM), Fox (FOXA), New York Times (NYT), Icahn Enterprises (IEP), Hain Celestial (HAIN), Wolverine World Wide (WWW), Robinhood (HOOD), Instacart (CART), Bumble (BMBL), Cheesecake Factory (CAKE), AMC (AMC), Beyond Meat (BYND)
Economic news: MBA mortgage applications, May 3 (-2.3% previously)
Thursday
Earnings: Roblox (RBLX), Unity (U), Warner Bros. Discovery (WBD), Tapestry (TPR), Akami (AKAM), Dropbox (DBX), Planet Fitness (PLNT), Papa John’s (PZZA), YETI (YETI), Warby Parker (WRBY), Endeavor (EDR), Constellation Energy (CEG), Yelp (YELP)
Economic news: Wholesale trade inventories, March final (-0.4% expected, -0.4% previously), Initial jobless claims, May 4 (208,000 previously)
Friday
Earnings: Enbridge (ENB), Honda (HMC), AMC Networks (AMCX), Soho House (SHCO), DigitalOcean (DOCN), Hawaiian Electric (HE)
Economic news: University of Michigan consumer sentiment, May preliminary (77 expected, 77.2 previously); University of Michigan 1-year inflation expectations (3.2% previously)
Shayne Heffernan
