Have investors found the perfect earnings recipe?

Have investors found the perfect earnings recipe?

Corporate Earnings News
Global market indices
Currencies
Cryptocurrencies
Fixed Income
Commodity sector news
Key data to move markets this week
Global macro updates

Corporate Earnings News

Corporate earning calendar 9 May - 16 May 2024

Thursday: Fiverr International, Roblox, Takeda Pharmaceutical, Viatris, Cleanspark, Jackson Financial, Marathon Digital
Friday: Enbridge
Tuesday: Home Depot, Alibaba Group
Wednesday: Cisco Systems, The Trade Desk
Thursday: Baidu, Deere & Co., Walmart, Take Two Interactive, JD.com

US Stock Indices Price Performance

Nasdaq 100 +3.69% MTD +7.48% YTD
Dow Jones Industrial Average +2.83% MTD +3.17% YTD
NYSE +2.23% MTD +6.78% YTD
S&P 500 +3.02% MTD +8.76% YTD

The S&P 500 +2.81% over the past week, and 10 of the 11 sectors have exhibited positive performance MTD. The Equally Weighted version of the S&P 500 posted a weekly +2.34%, its YTD performance is +4.13%.

After a brief decline last month, equities rallied in early May. This resurgence was fueled by robust corporate earnings reports and growing market speculation that the Fed may implement interest rate cuts later this year. The recent gains have pushed the S&P 500 within approximately 1% of its all-time high. All three major indexes remain in positive territory for the month. 

Rather unusually, analysts increased earnings per share (EPS) estimates for the S&P 500's second quarter during the month of April. According to Factset, the Q2 bottom-up EPS estimate rose by 0.7% (from $59.23 to $59.64) between March 31st and April 30th. This increase challenges the typical pattern of reducing earnings estimates during a quarter's initial month.

Historically, the average decline in bottom-up EPS estimates during the first month of a quarter has been 1.9% over the past five years and 1.8% over the past ten years. In fact, Q2 2024 represents the first instance of an increase in bottom-up EPS estimates during April since Q4 2021 (+0.3%).

Sector-level analysis reveals that seven out of eleven sectors saw an increase in their bottom-up EPS estimates for Q2 2024, with the Energy sector (+8.6%) experiencing the most substantial growth. Conversely, four sectors, led by Industrials (-2.6%), reported decreased EPS estimates for the same period.

Despite increasing EPS estimates for S&P 500 companies in April, the index's value decreased by 4.2% (from 5254.35 to 5035.69) during that time.

US stocks

Mega caps: A positive week for the ‘Magnificent Seven’ due to strong earnings reports, coupled with share buybacks programs announced by Alphabet and Apple. Apple +7.94%, Microsoft +3.95%, Alphabet +3.37%, Amazon +5.03%, Meta Platforms +7.61%, and Nvidia +8.88%, exhibited positive performance, while Tesla -2.93% was the only member who lost ground.

Energy stocks had a positive week this week as the energy sector itself was +5.09%, raising the sector’s YTD performance to +11.04%. Energy companies Shell +0.99%, Chevron +1.82%, Baker Hughes +0.03%, Halliburton +1.95%, ExxonMobil +0.10%, Apa Corp (US) +0.03%, Phillips 66 +4.80%, and Marathon Petroleum +1.10% all exhibited positive performance, while Occidental Petroleum -1.19%, and ConocoPhillips -1.03% experienced weekly losses.

Shell's adjusted earnings in 1Q 2024 were bolstered by a robust performance in its integrated gas division despite the lower European natural gas prices. Shell reported adjusted earnings of $7.73 bn for the quarter, down from $9.65 billion in the same quarter a year ago, but ahead of market expectations of $6.46 billion. Additionally, the chemicals and products segment substantially outperformed forecasts with adjusted earnings of $1.615 billion, attributed to favourable conditions including higher refining margins, strong utilisation rates, and global supply disruptions.

Shell initiated a $3.5 billion share buyback program slated for completion by the release of its 2Q 2024 results, following the execution of a similar program in the wake of its 4Q 2024 results. Shell also increased dividend payouts to 34.40 cents a share from 28.75 cents in the first quarter of the previous year, bringing total shareholder returns to $5.0 billion.

ExxonMobil and Chevron experienced lower 1Q 2024 profits as natural-gas prices and refining margins have eased from the elevated levels seen during the post-pandemic period. However, both companies remain among the most profitable in the US, with combined earnings of $13.7 billion in the quarter. The two companies are also locked in a dispute over a massive oil discovery in Guyana.

ExxonMobil reported earnings of $8.2 billion, representing a 28% decrease y/o/y and falling short of Wall Street estimates by roughly 6%. While lower than the previous year's figures, they are still the company's second-highest for a first-quarter period in the last ten years. ExxonMobil continues to give priority to investor payouts as it sent more cash to shareholders than it spent on new projects in the quarter. It slashed capital spending 8.5% from the prior-year period while raising dividends and share repurchases collectively to $6.8 billion.

Chevron reported quarterly earnings of $5.5 billion, a 16% decline from the prior year but exceeded analyst estimates by approximately 2%.

Occidental Petroleum's 1Q 2024 profit decreased by 25%, primarily due to lower crude oil prices and production volumes. The company reported net income of $718 million (75 cents a share) versus $983 million ($1 a share) for the same quarter in the preceding year. Adjusted income stood at 63 cents a share, surpassing analyst expectations of 58 cents a share. While sales fell by 17.3% to $5.98 billion, the company's production remained within guidance, and its midstream and marketing business reported positive results.

Marathon Petroleum reported lower earnings and revenue in 1Q 2024. Net income of $937 million ($2.58 a share) marked a decline from $2.72 billion ($6.09 a share) a year earlier. Revenue also decreased to $33.21 billion from $35.08 billion. However, the company affirmed its readiness to meet potentially increased demand during the summer travel season and announced an additional $5 billion share repurchase authorization.

Halliburton's 1Q 2024 earnings of $606 million (68 cents a share) were lower than $651 million (72 cents a share) reported in the same period last year. Revenue showed a slight increase of 2.2% to $5.8 billion. While North American revenue declined, strong international growth, particularly in Mexico and Argentina, contributed positively to the results. Additionally, Halliburton repurchased approximately $250 million of stock during the quarter.

Materials and Mining stocks had a positive week, as the materials sector was +1.84%, elevating the sector’s YTD performance to +5.87%. Copper and Aluminium prices this week, +0.21% and -1.20%, respectively. Nucor +0.67%, Yara International +1.27%, Freeport-McMoRan +0.10%, Newmont Mining +2.37%, and Albemarle +9.63%, exhibited positive performance while Mosaic -1.20%, CF Industries -6.05%, and Sibanye Stillwater -0.59% logged weekly losses.

Freeport-McMoRan reported 1Q 2024 net income of $473 million ($0.32 per share), exceeding analyst projections of $0.27 per share and the estimated net income of $341.23 million. The company's revenue of $6.321 billion also surpassed expectations of $5.659 billion.

These results highlight the effectiveness of Freeport-McMoRan's strategic initiatives, including the imminent completion of its Indonesia smelter projects, which will enhance its operational capabilities. The company's strong financial position is evident in its robust operating cash flows of $1.9 billion and disciplined approach to capital expenditures, which totaled $1.3 billion for the quarter.

Despite higher sales in 1Q 2024, Newmont Mining's profit declined. The gold miner reported a net income of $171 million ($0.15 per share), lower than the $363 million ($0.44 per share) reported in the same period last year. Adjusted earnings were $0.55 per share, surpassing analyst expectations of $0.36 per share.

Attributable gold production declined by 4% to 1.7 million ounces, along with a decrease in copper, silver, lead, and zinc output. However, higher production and metal prices led to a year-over-year sales increase, reaching $4.02 billion in 1Q 2024 compared to $2.67 billion the previous year.

Newmont's average realised gold price in Q1 2024 was $2,090/oz, representing a 9.7% increase from the prior year. The company's attributable gold production was 1.68 million ounces, a significant 32.3% increase compared to Q1 2023.

CF Industries achieved 1Q 2024 net earnings of $194 million ($1.03 per diluted share) and adjusted EBITDA of $459 million. Additionally, the company generated $2.26 billion in net cash from operating activities and $1.38 billion in free cash flow over the trailing twelve months.

Production outages in Q1 2024, resulting from severe weather and maintenance events, led to approximately $75 million higher maintenance expenses than in the same quarter of 2023. Lower ammonia production also reduced the availability of ammonia for higher-margin upgraded fertiliser products.

European Stock Indices Price Performance

Stoxx 600 +2.15% MTD +7.68% YTD
DAX +3.16% MTD +10.43% YTD
CAC 40 +1.83% MTD +7.80% YTD
IBEX 35 +2.75% MTD +10.40% YTD
FTSE MIB +1.20% MTD +12.52% YTD
FTSE 100 +2.58% MTD +8.03% YTD

According to LSEG I/B/E/S data, as of 7 May 1Q 2024 earnings are expected to decrease 6.5% from Q1 2023. Excluding the Energy sector, earnings are expected to decrease 2.7%. First quarter revenue is expected to decrease 5.0% from Q1 2023. Excluding the Energy sector, revenues are expected to decrease 3.6%. As of 7 May, 185 companies in the STOXX 600 have reported earnings to date for Q1 2024. Of these, 61.1% reported results exceeding analyst estimates. In a typical quarter 54% beat analyst EPS estimates. As of 7 May, 222 companies in the STOXX 600 have reported revenue to date for Q1 2024. Of these, 51.4% reported revenue exceeding analyst estimates. In a typical quarter 58% beat analyst revenue estimates.

During the week of 13 May, 45 companies are expected to report quarterly earnings.

Other Global Stock Indices Price Performance

MSCI World Index +2.92% MTD +7.34% YTD
Hang Seng +3.10% MTD +7.43% YTD

This week, the Hang Seng Index increased by +3.10%, while the MSCI World Index rose by +0.99%.

Currencies

EUR +0.78% MTD -2.61% YTD to $1.0745
GBP +0.06% MTD -1.82% YTD to $1.2497

The Dollar Index this week is -0.16% and maintains a YTD gain of approximately +3.22%. The index still sits about 7% below the record high it struck in September 2022.

The euro was +0.23% against the USD over the past week, while the British Pound was -0.25% ahead of today's BoE meeting. As expected the BoE voted to keep rates on hold at 5.25% despite falling inflation. Seven members of the committee voted to hold rates steady. Deputy governor Dave Ramsden joined external member Swati Dhingra, who backed a cut in March, in voting for an immediate reduction to borrowing costs. "The Committee will consider forthcoming data releases and how these inform the assessment that the risks for inflation persistence are receding," the BoE said. "On that basis, the Committee will keep under review for how long the Bank rate should be maintained at its current level." The BoE cut its inflation forecasts for two and three years' time to 1.9% and 1.6% - below its 2% target - from its February projections of 2.3% and 1.9%. Markets are now considering that a rate cut may take place in June. They had, prior to today’s meeting, fully priced in a first quarter-point BoE rate cut in August and another in November or December.

The dollar strengthened on Wednesday, marking the third consecutive day of gains against the Japanese yen, maintaining pressure on Tokyo and heightening the risk of potential intervention. The dollar strengthened to its highest level against the yen on 26th April, reaching ¥158.34, and has appreciated +2.54% against the Japanese currency this week.

The yen's vulnerability remains a central concern for currency traders, particularly after Japanese officials escalated their warnings about the negative economic consequences of the currency's weakness. Analysts believe that any intervention by Tokyo would provide only temporary support for the yen, considering the substantial interest rate disparity between the US and Japan. It’s been suggested that Japanese authorities spent approximately $60 billion last week bolstering the yen after it reached a 34-year low against the dollar.

In Europe, the Swedish crown faced downward pressure following Sweden's Riksbank's decision to cut interest rates to 3.75% from 4.00% on Wednesday. It said it was likely to cut the rate twice more in the second half of the year if inflationary pressures remain mild. 

Sweden's policy move serves as a reminder of the dollar's likely continued strength as long as other central banks initiate rate cuts before the Fed. The Swiss National Bank's March cut and the recent move by Sweden's Riksbank, are among major central banks' first steps towards monetary easing.

The ECB has indicated its intention to reduce rates in June, subject to favourable data trends.

Investor attention remains centred on the pace and timing of potential Fed rate cuts. Slowing economic growth and weaker-than-expected US job figures have invigorated expectations for lower interest rates by year-end. The CME's FedWatch Tool indicates that traders currently estimate a 66% probability of a Fed rate cut in September.

Cryptocurrencies

Bitcoin +2.52% MTD +46.3% YTD to $61,356.80.
Ethereum +0.29% MTD +30.13% YTD to $2,975.13.

Bitcoin and Ethereum have been in positive territory over the past couple of days, leaving them up about +6% and 1.5% respectively for the past seven days, after falling for most of the past 5 days. Confidence appears to have improved following last week’s weaker than expected US jobs report, which gave hope of rate cuts starting at the end of Q3. However, the higher for longer situation around interest rates and the slowdown in flows into Bitcoin ETFs has caused the overall crypto market to fall 17% to $2.4 trillion in the wake of Bitcoin’s mid-March record high of $73,798, according to data compiled by CoinGecko and Bloomberg news.

Note: As of 6:30 pm EDT 8 May 2024

Fixed Income

US 10-year yield +7 basis points MTD +63 basis points YTD to 4.49%
German 10-year yield +3 basis points MTD +44 basis points YTD to 2.46%.
UK 10-year yield +5 basis points MTD +60 basis points YTD to 4.14%.

US Treasury yields firmed on Wednesday as investors assessed the likelihood of one or more interest rate reductions by the Fed during a week with significant new Treasury debt issuance and in anticipation of crucial inflation data scheduled for release next week.

This week has been dominated by new debt supply. On Wednesday, the Treasury auctioned $42 billion in 10-year notes, yielding 4.483%, marginally below pre-auction trading levels. The bid-to-cover ratio of 2.49x reflects solid investor demand. This auction followed the sale of $58 billion in 3-year notes at a high yield of 4.605% and a strong bid-to-cover ratio of 2.63x on Tuesday.

The 30-year bond yield rose by 2.7 basis points to 4.6318% this week. The Treasury will auction $25 billion of 30-year bonds later today. Notably, the 30-year yield has increased by 63 basis points year-to-date.

Investors will be focused on the release of both the April Producer Price Index report on Tuesday and the Consumer Price Index (CPI) on Wednesday. These reports will shed light on the direction and speed of Fed policy.

Eurozone government bond yields also experienced a rise on Wednesday after reaching multi-week lows earlier in the week. However, softer US economic data and a corresponding decline in US yields contributed to a weekly decrease in Eurozone bond yields. The benchmark German 10-year yield experienced a weekly decline of -13 basis points.

Italian bond yields, indicative of the eurozone periphery, also fell by -18 bps to 3.80%. The spread between Italian and German 10-year yields contracted by -7 bps to 133 bps, down from 140.4 bps last week.

In response to recent weaker US jobs data, money markets anticipate two Fed rate cuts this year, totaling approximately 45 basis points of monetary easing. Additionally, markets are pricing in around 70 bps of ECB rate cuts in 2024.

UK 10-year yields experienced a significant decline of -19 bps this week, settling at 4.14%. This downward trend was in anticipation that the BoE would signal its first interest rate cut in four years at today’s meeting. The BoE, in a 7-2 vote, did maintain rates at 5.25%, but cut its inflation forecast and raised the outlook for growth. It also changed its language, adding that "The Committee will consider forthcoming data releases and how these inform the assessment that the risks for inflation persistence are receding. On that basis, the Committee will keep under review for how long the Bank rate should be maintained at its current level."

Commodities

Gold spot +0.97% MTD +12.18% YTD to $2,309.04 per ounce.
Silver spot +3.68% MTD +14.71% YTD to $27.36 per ounce.
West Texas Intermediate crude -3.59% MTD +10.24% YTD to $79.21 a barrel.
Brent crude +0.16% MTD +8.48% YTD to $83.58 a barrel.

Gold prices were relatively firm +0.60% this week. A slight strengthening of the US dollar, however, limited any significant gains for gold. Gold prices stabilised on Wednesday as investors await the University of Michigan's consumer sentiment reading on Friday and remarks from several Fed officials this week. US CPI data, scheduled for release on 15th May, is also highly anticipated as it will indicate the Fed's prospective monetary policy pathway. Spot gold remained largely unchanged at $2,309.04 per ounce. US gold futures for June delivery experienced a minor decline of 0.1%, settling at $2,322.3 per ounce.

Oil prices were -0.01% from a week ago. Data from the Energy Information Administration (EIA) released Wednesday indicates that US gasoline and diesel demand have reached their weakest seasonal levels since the onset of the 2020 coronavirus pandemic. This decline has consequently depressed refining margins for these products to multi-month lows.

The 4-week average demand for gasoline in the week ending 3rd May stood at 8.63 million barrels per day (bpd). This represents the lowest May demand since 2020, when the pandemic severely curtailed demand for transportation fuels. Similarly, the 4-week average demand for distillate fuels, including diesel and heating oil, reached 3.60 million bpd, also marking the weakest seasonal level since the pandemic.

This demand decline is exerting downward pressure on refining margins, potentially disrupting two years of strong profitability for the sector. The US 3-2-1 spread, a key indicator of overall refining margins, traded below $26.50 a barrel on Wednesday, its lowest point since February and a level not seen at the start of May since 2021. The spread between US gasoline futures and US crude oil also narrowed to its weakest level since February on Friday.

The recent softening of demand coincides with increases in US gasoline and distillate stocks. Last week, gasoline stocks rose by 915,000 barrels to 228 million barrels, registering the highest seasonal level since 2021. Distillate fuel oil stocks marked a three-year seasonal high for the week ending 3rd May. Conversely, EIA data shows a 1.4 million barrel decline in crude inventories to 459.5 million barrels for the week ending 3rd May, slightly exceeding expectations of a 1.1 million barrel draw. This decrease is partially attributable to rise in refinery crude runs and a 1% increase in refinery utilisation rates to 88.5% of total capacity. However, utilisation remains below the 91% level recorded a year ago.

Note: As of 6 pm EDT 8 May 2024

Key data to move markets this week

EUROPE

Thursday: Speeches by ECB Executive board member Piero Cipollone and ECB Vice President Luis de Guindos.
Friday: Speeches by Executive board members Piero Cipollone and Frank Elderson and ECB Monetary Policy Meeting Accounts.
Tuesday: German Harmonised Index of Consumer Prices, EU EcoFin meeting, Spanish Harmonised Index of Consumer Prices, German ZEW Current Situation and Economic Sentiment surveys, and Eurozone ZEW Economic Sentiment.
Wednesday: Eurozone Employment Change, Eurozone GDP, and Eurozone Industrial Production.

UK

Thursday: BoE Monetary Policy Decision, BoE Minutes and Monetary Policy Report, and speeches by Governor Andrew Bailey and Chief Economist Huw Pill.
Friday: GDP, Industrial Production, Manufacturing Production, speeches by Chief Economist Huw Pill and MPC member Swati Dhingra.
Tuesday: Average Earnings, Claimant Count Change, Claimant Count Rate, Employment Change, and ILO Unemployment Rate, and a speech by BoE Chief Economist Huw Pill. 
Thursday: A speech by BoE MPC member Megan Greene.

US

Thursday: Initial and Continuing Jobless Claims and a speech by San Francisco Fed President Mary Daly. 
Friday: Speeches by Fed Governor Michelle Bowman, Chicago Fed President Austan Goolsbee, Dallas Fed President Lorie Logan, and Fed Chair for supervision Michael Barr, Michigan Consumer Sentiment Index, and UoM 5-year consumer inflation expectations.
Monday: Speeches by Federal Reserve Vice Chair Phillip Jefferson and Cleveland Fed President Loretta Mester.
Tuesday: PPI.
Wednesday: CPI, NY State Manufacturing Index, Retail Sales and a speech by Minneapolis Fed President Neel Kashkari.
Thursday: Initial and Continuing Jobless Claims, Building Permits, Housing Starts, Philadelphia Fed Manufacturing Survey, Industrial Production and speeches by Cleveland Fed President Loretta Mester and Atlanta Fed President Raphael Bostic. 

CHINA

Thursday: Imports, Exports, and Trade Balance.
Saturday: CPI and PPI.

JAPAN

Wednesday: GDP

Global Macro Updates

And the wait goes on. On Wednesday, another Fed policymaker made the case for holding for longer. Federal Reserve Bank of Boston President Susan Collins said interest rates will likely need to be held at a two-decade high for longer than previously thought to damp demand and reduce price pressures. “The recent upward surprises to activity and inflation suggest the likely need to keep policy at its current level until we have greater confidence that inflation is moving sustainably toward 2%,” Collins said at a speech at the Massachusetts Institute of Technology. Her comments echoed those of Fed Chair Jerome Powell’s, who last week affirmed the Fed's ongoing efforts to bolster confidence that inflation would revert to the 2% benchmark requisite for contemplating rate cuts.

During her speech, Collins pointed out that the progress achieved in inflation last year was predominantly due to a deceleration in goods prices, a trend unlikely to persist with the same momentum. "Progress on inflation will very likely require lower growth in demand, particularly to facilitate further slowing of core non-housing services inflation," she elucidated.

In a moderated conversation following her remarks, Collins added, “I do think that holding in this restrictive range for longer will — in an orderly way in my baseline — would slow the economy.”

While Collins, who is not a voting member of the FOMC this year, stressed the objective for labour markets to sustain their robustness, she also noted the necessity for a "moderating in an orderly way" to balance labour supply with demand.

BoJ signals rate hikes as inflation outlook strengthens. A summary of opinions from the BoJ April policy meeting revealed a significant shift towards a hawkish stance among board members. Many members advocated for steady interest rate increases to mitigate the risk of inflation exceeding the BoJ's 2% target.

The summary, released Thursday, indicates that some members anticipate a potential acceleration of interest rate hikes due to the increasing likelihood of inflation remaining at or above the target level. "If underlying inflation continues to deviate upward from the baseline scenario against the backdrop of a weaker yen, it is quite possible that the pace of monetary policy normalisation will accelerate," one member was quoted as saying.

This discussion aligns with BoJ Governor Kazuo Ueda's recent comments hinting at the possibility of multiple future rate hikes, raising the probability of an increase in short-term borrowing costs. However, the BoJ's hawkish signals have not strengthened the yen, as markets remain focused on the diminishing likelihood of near-term US interest rate cuts, thus maintaining a wide US-Japan interest rate differential.

The summary also includes an opinion stating, "If the outlook shown in our April quarterly report is realised, our 2% inflation target will be sustainably and stably achieved in about two years and the output gap will be positive. Therefore, there's a chance our policy interest rate will be higher than the path currently priced in by the market."

The summary calls for the BoJ to signal its intention to scale back its substantial bond purchases and begin reducing its balance sheet. One member advocated for the eventual elimination of BoJ’s ETF holdings, acknowledging that this process may be lengthy. Although the BoJ no longer acquires ETFs, it maintains a monthly purchase of approximately ¥6 trillion in Japanese Government Bonds and has refrained from selling bonds or ETFs.

While every effort has been made to verify the accuracy of this information, EXT Ltd. (hereafter known as “EXANTE”) cannot accept any responsibility or liability for reliance by any person on this publication or any of the information, opinions, or conclusions contained in this publication. The findings and views expressed in this publication do not necessarily reflect the views of EXANTE. Any action taken upon the information contained in this publication is strictly at your own risk. EXANTE will not be liable for any loss or damage in connection with this publication.

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