Chicago, IL – February 9, 2021 – 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: Exxon Mobil Corporation XOM, Royal Dutch Shell plc RDS.A and China Petroleum & Chemical Corporation SNP.
Here are highlights from Monday’s Analyst Blog:
There's No Goldilocks Zone: Global Week Ahead
In the Global Week Ahead, stock traders will look into more Q4 earnings reports.
From big S&P 500 companies.
Analysts had anticipated positive earnings growth would resume in Q1-2021, after four straight quarters of pandemic-driven declines across the entirety of 2020.
But positive y/y earnings growth has arrived a little earlier!
Earnings in the ongoing Q4 earnings season are now modestly above the year-earlier period.
Total Q4 earnings (aggregate net income) for 292 S&P 500 companies that already reported results?
· - Their earnings are up +4.9% from the same period last year
· - On +2.4% higher revenues
· - 80.5% beat EPS estimates
· - 79.5% beat their revenue estimates
We have another busy reporting line-up.
More than 450 companies, large and small, are on deck to report Q4 results.
Including 82 S&P 500 member firms.
Next are Reuters' five world market themes, reordered for equity traders—
(1) S&P 500 Earnings Turned Positive. More Reports to Come
S&P 500 companies have been beating analyst estimates for fourth-quarter earnings at a blistering pace and coming days will put that trend to the test.
So far, 83.3% of results have posted profits above expectations, according to Refinitiv I/B/E/S data — far above the historic 65% rate. S&P500 companies are now expected to post an overall +4.9% increase in fourth-quarter earnings, compared with a double-digit fall predicted on Jan 1st.
Results look even more rosy given the dismal picture in Europe, where fourth-quarter earnings are seen dropping -23.9%.
Upcoming U.S. reports include Cisco Systems, Coca-Cola and Walt Disney.
In Europe, banks UniCredit, Commerzbank and Societe Generale, oil major Total and travel firm Tui will publish numbers.
The results could cement the transatlantic divergence.
(2) Why Is the U.S. Dollar Bouncing?
The dollar bounce is confounding some who bet on a multi-year downtrend.
Fed officials' bullish prognoses for 2021 growth and Democrats' determination to push through big-time stimulus may herald more gains.
U.S. data hints at an economic rebound gathering steam — jobless benefit claims have declined three weeks straight, factory orders beat expectations, and fourth-quarter corporate earnings bucked earlier gloomy forecasts. Inflation numbers on Wednesday will show if core CPI can continue to top expectations.
But dollar gains are euro woes. Comprising over half the dollar's index, the euro has been pressured by central bankers' jawboning and a sluggish vaccination rollout.
The moves have not yet wrecked markets' risk party. That may change if those holding $34 billion of short dollar bets decide to throw in the towel.
(3) The People's Bank of China. In the Spotlight February 10th
A lunar year like no other draws to a close, and it is not just the largest annual human migration that's facing disruption.
Chinese money markets are missing the annual dose of liquidity, which the People's Bank of China normally injects to satisfy cash demand for gifts and travel.
Short-term rates have eased after leaping to almost six-year highs, but stocks are jittery and investors are wondering if the squeeze represents de-facto policy tightening, especially given authorities' recent warnings on debt and bubble risks.
To gauge where the economy and policymakers stand, watch PBOC action on money markets, along with loan and money supply data due from Feb. 10.
(4) Biden Sends Tough Message to Russia
President Joe Biden has set out his foreign policy stall and the tone of conversation vis-à-vis Russia has cooled distinctly. There will be, he warned, no more "rolling over in the face of Russia's aggressive actions."
That could mean tough new sanctions on Russia after the poisoning and jailing of opposition politician Alexei Navalny and the Kremlin's crackdown on protesters.
The rouble has already missed out on much of the recent emerging-market uplift. A sharp increase in food inflation is adding to social discontent.
These are all the risks central bankers will need to balance when they meet on Feb. 12th. They probably have no option but to keep interest rates steady at 4.25%.
(5) Italian Prime Minister Mario Draghi? Yes!
Guess who's back: Mario Draghi. The former European Central Bank chief credited with saving the euro from collapse in 2012 is charged with forming Italy's new government.
The markets' joy was palpable. Italy's 10-year bond yield premium over Germany dipped below 100 bps and Italian default insurance costs fell to 2018 lows on hopes Draghi will act fast to boost a recession-hit economy.
He has his work cut out. A fractious parliament means snap elections are a risk. And there's a history: Mario Monti, an economist entrusted with leading Italy out of crisis in 2011, found lawmakers turn against him when they decided his economic medicine was too bitter.
But in the meantime, the fall in Italian risk helped push German borrowing costs to five-month peaks and the Germany-Italy bond flow may well accelerate.
Top Zacks #1 Rank (STRONG BUY) Stocks
Three major oil firms made our #1 list this week.
Let's discuss.
(1) Exxon Mobil: Yes. A super-major U.S. multi-national oil company is on our #1 list. I see a $48 share price, making for a $204B market cap company. Zacks give the stock a C for Value, a D for Growth and a B for Momentum.
(2) Royal Dutch Shell: Yes. A super-major European multinational oil company is on our #1 list too, for the same reason. Oil prices are heading up. This is a $36 stock, making for a $142.8B market cap. Zacks gives the stock an A for Value, a C for Growth and a B for Momentum.
(3) China Petroleum & Chemical: Three's a charm. A super-major mainland China oil and petrochemical giant is on our #1 list too. This is a $49 a share stock, making for a market cap of $59B. Zacks gives the stock an A for Value, a B for Growth and a C for Momentum.
Conclusion
Any common threads?
Two of the three super-major oil stocks get an A for Value. Does anybody care about Value anymore? Apparently not. Cheapness here, across the board, speaks to a lack of trader and investor interest.
The major Chinese oil firm is the sole firm that gets a solid grade for growth, with a B. The American and European firms get a D and a C, respectively.
It's time to construct a poem, of sorts, for you...
S&P 500 company earnings in Q4 are turning out much better than expected?
No matter...
The new Biden administration is busy passing another $1.9T in fiscal stimulus anyways.
Does this make sense?
A stagnant U.S. labor market shouts yes.
Spend that money!
The CPI less food & energy is +1.5% y/y.
No open worries from the Fed look present.
Yet.
The S&P 500 companies?
Go figure.
U.S. real GDP growth porridge for 2021 and 2022 becomes — either too hot or too cold.
Depending on who you ask.
The Goldilocks Zone refers to the habitable zone around a star, where the temperature is just right — not too hot and not too cold — for liquid water to exist.
That special circumstance, applied to a COVID-afflicted U.S. economy, may not exist.
Happy trading and investing!
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