What we hope to see from 9 Club stocks out with earnings in the week ahead

Published Sat, Jul 22 202310:00 AM EDT

The Nasdaq pulled back a bit this week while the S & P 500 continued to grind higher. But for a change, the Dow was the star show, with a weekly advance of more than 2%. Friday's tiny gain pushed the 30-stock average's winning streak to 10 straight sessions, the first time that's happened since way back in August 2017. Looking to next week, earnings season will ramp up — and though we'll get some important economic data, expect the corporate releases and management commentary on the post-game calls to be firmly in the driver's seat. And, the wild card, of course, is the Federal Reserve's July meeting on Tuesday and Wednesday. A resumption of interest rate hikes appears to be a foregone conclusion after the June pause following 10 straight meetings of increases. Here are two important things to know for the week ahead. 1. Economic and Fed meeting : The advance estimate of first-quarter gross domestic product (GDP), which serves to provide one of the highest-level views of the U.S. economy, is out Thursday, the day after the conclusion of the Fed's meeting. While that high-level view is important to shaping our thinking on the timeline of any potential recession on the horizon, we don't think it's the most important update of the week. That designation is reserved for Friday's release of the June personal spending and income report, which contains the personal consumption expenditures (PCE) price index, the central bank's preferred measure of inflation. With consumer and wholesale inflation readings for June both coming in below expectations and both on a downward trend, we'll be looking to the PCE price index for further confirmation of whether inflation is indeed slowing. So far this year, we've seen the headline PCE trend lower but core PCE, which excludes food and energy, has proven far stickier. As we see here , the problem is really on the services side of the economy. Shelter, which is about a third of the consumer price index (CPI), was the largest driver of last month's increase. We need to see more supply in the housing market if we're going to get that number to come down more quickly. Fortunately, we'll get updated new home sales and pending home sales figures on Wednesday and Thursday, respectively. New home sales will provide us with more quantitative data on pricing and inventory while the pending home sales report always has some good insights from National Association of Realtors Chief Economist Lawrence Yun on the state of the real estate market. New details on pricing will help us understand where we stand, while information on inventory will help us better see where we might be headed. Remember, the primary issue right now is tight supply. That's putting upward pressure on list prices, which is being compounded by high mortgage rates. In the middle of all these releases, the Fed will wrap up its two-day July meeting Wednesday. At 2 p.m. ET, we'll get the latest monetary policy statement revealing the central bankers' decision rates. A quarter-point hike is expected. Expect any real move in the stock market to come as Fed Chairman Jerome Powell's conference gets underway at 2:30 p.m. ET. That said, keep in mind that the PCE release comes two days after the Fed meeting so we have to take whatever is said about the inflation path ahead with a small grain of salt. After all, if the Fed is truly going to be data dependent and the most important piece of data comes out after the meeting, they don't have all the information either at the time of the press conference. 2. Quarterly earnings : As important as economic releases are, it's earnings that will garner the bulk of investors' attention. Not only do earnings provide a more detailed view of individual industries, but they also give us a chance to hear from management teams about what they are seeing in real-time and the conversations they are having with customers. Economic releases, on the other hand, tend to be higher level in nature and delayed. Nine Club names are out with quarterly results this coming week. Danaher (DHR) and GE Healthcare (GEHC) are out before the opening bell Tuesday. From Danaher, we want to hear about the inventory glut in bioprocessing. Notably, German competitor Sartorius reported earnings Friday and said they view "adverse factors to be only temporary and anticipate that demand will gradually pick up during the second half of 2023." This comes after Sartorius preannounced last month and slashed its bioprocessing outlook. It's likely the cause of the outsized 4.7% move higher we saw in Danaher shares Friday. Even if Danaher were cut to their outlook, we think the stock can hold steady on the view that it would be the last such cut, a clearing event for people to become more positive on the path forward. At GE Healthcare, which we added to just this past week, we'll be looking for any commentary around hospitals looking to step up their diagnostic infrastructure investments, including PET scanners and MRI systems, in order to support the launches of new Alzheimer's treatments. Microsoft (MSFT) and Alphabet (GOOGL) will report after the closing bell Tuesday. At Microsoft, it's all about Azure growth in the reported quarter and management's commentary on customer cloud optimization trends. As a reminder, management does not provide guidance on the earnings release, they only provide it at the end of management's prepared remarks on the earnings call. So, any move before the guidance is discussed is not to be trusted. As for Alphabet, we want to hear how cost optimization efforts are going and the latest on their generative AI initiatives. Additionally, with the company raising the cost of YouTube Premium this past week, it will be interesting to hear about how the platform may be benefitting from the strike in Hollywood as consumers start to feel starved for new content. Moving right along, we have Meta Platforms (META) reporting after the bell Wednesday. In addition to all the things we usually look for, such as active user numbers and average revenue per user, we want to hear about the progress in monetizing Reels. Will it no longer be a headwind come 2024? And, are those AI initiatives helping to improve ad targeting and attribution rates? Thursday morning, we hear from Linde (LIN) and Honeywell (HON). We booked some profits in Linde last month but still think it has significant growth prospects, due to the earnings-compounding nature of its business and incremental wins related to decarbonization. In addition to decarbonization efforts, we'll be listening to management's commentary on customer demand. Sitting so high up in the supply chain, the industrial gas giant can tell us a lot about demand across industries. Remember, these industrial gasses are used in everything from electronics to food and beverages, health care, manufacturing, metals and mining, the chemical and energy industries, and so much more. Linde's results can help us round out our thinking on inflation as any price action taken by the company is sure to have a ripple effect throughout the economy as customers will seek to pass through costs and protect profit margins. As for Honeywell, though we expect the strength we saw in Aerospace as well as Performance Materials and Technologies in the first quarter to have continued into the second, we're hoping for positive updates on supply, which management called out last time as an ongoing headwind containing top-line performance. We'll also be listening in for management's thoughts on the mergers and acquisitions (M & A) landscape. Thursday after the bell brings earnings from Ford (F). In addition to any commentary, management may care to share about its electric vehicle charging partnership with "frenemy" Tesla , we want to hear about management's thinking behind Ford's latest round of price cuts . Is demand an issue? Or has the team managed to cut battery costs and increase production to the point where the cost per vehicle is down enough that increased volumes at a lower price point can yield better returns overall? The last report of the week will be from Procter & Gamble (PG) before the bell Friday. Sales mix is always something to listen to because it informs margin dynamics. Additionally, with inflation an ongoing issue, we will be listening for any commentary on whether consumers are "trading down" to cheaper alternatives or if the value of P & G innovation is keeping them loyal. Recall, management has been playing with packaging in order to have something for those that want to buy bulk and save on a per-unit basis and buy less with a smaller cash outlay (at higher unit price points). Supply chain dynamics are another big watch item for us as we think margins can improve in the back half of the year as input costs (such as freight costs or raw materials costs) come down and selling prices hold firm. For those looking to review first-quarter performance ahead of these releases, keep our first-quarter earnings report card handy. Here's the full rundown of all the important domestic data in the week ahead. Monday, July 24 The Nasdaq 100′s special rebalance will take place before the market opens on July 24. Though some volatility wouldn't be a surprise, we reiterate that it's not a moment to panic. Any volatility has nothing to do with the underlying fundamentals of these companies. It's only happening because the fundamentals have been so strong after all. Any swings will be temporary. Earnings are what matters, not short-term market mechanics-induced moves. Before the bell earnings: Domino's Pizza (DPZ), Dynex Capital (DX), HBT Financial (HBT), Hope Bancorp (HOPE) After the bell: Cleveland-Cliffs (CLF), NXP Semiconductors (NXPI), Cadence Design Systems (CDNS), Whirlpool (WHR), Logitech International (LOGI), Liberty Global (LBTYA) Tuesday, July 25 FOMC meeting begins 10 a.m. ET: Consumer confidence Before the bell: Danaher, GE Healthcare , Verizon Communications (VZ), General Motors (GM), 3M (MMM), General Electric (GE), Spotify (SPOT), Nucor (NUE), Raytheon Technologies (RTX), PulteGroup (PHM), Sherwin-Williams (SHW), Archer-Daniels-Midland (ADM), Biogen (BIIB), Albertsons Companies (ACI), Polaris Industries, Inc (PII), Dow Chemical (DOW), Corning (GLW), Kimberly-Clark (KMB), Xerox (XRX) After the bell: Microsoft, Alphabet , Snap (SNAP), Visa (V), Texas Instruments (TXN), WM (WM), Canadian National Railway Company (CNI), Chubb Corporation (CB), Universal Health Services (UHS) Wednesday, July 26 10 a.m. ET: New home sales FOMC meeting ends; 2 p.m. ET policy statement and 2:30 p.m. ET Powell news conference Before the bell: AT & T (T), Boeing (BA), Coca-Cola (KO), Hilton (HLT), Union Pacific (UNP), General Dynamics (GD), Quest Diagnostics (DGX), Otis Worldwide (OTIS) After the bell: Meta Platforms , Chipotle Mexican Grill (CMG), ServiceNow (NOW), Lam Research (LRCX), eBay (EBAY), Mattel (MAT), Edwards Lifesciences (EW), Hewlett Packard (HP), L3Harris Technologies (LHX), Imax (IMAX) Thursday, July 27 8:30 a.m. ET: Gross domestic product 8:30 a.m. ET: Initial jobless claims 10:00 a.m. ET: Pending home sales Before the bell: Linde, Honeywell , Royal Caribbean Cruises (RCL), McDonald's (MCD), Southwest Airlines (LUV), Mastercard (MA), Crocs (CROX), AbbVie (ABBV), Bristol-Myers Squibb (BMY), Northrop Grumman (NOC), Overstock (OSTK), Hertz Global (HTZ), Tractor Supply Company (TSCO), Keurig Dr Pepper (KDP), HCA Healthcare (HCA), PG & E (PCG), Boston Scientific (BSX), Hershey (HSY), Comcast (CMCSA), Harley-Davidson (HOG), Mobileye Global MBLY), Norfolk Southern (NSC) After the bell: Ford, Intel (INTC), Roku (ROKU), First Solar (FSLR), T-Mobile US (TMUS), United States Steel Corp (X), KLA Corporation (KLAC), Skechers (SKX), Mondelez (MDLZ), Boston Beer Company (SAM), SkyWest (SKYW), Live Nation Entertainment (LYV), Texas Roadhouse (TXRH), Deckers Brands (DECK) Friday, July 28 8:30 a.m. ET: Personal income and spending 8:30 a.m. ET: PCE price index Before the bell: Procter & Gamble , Exxon Mobil(XOM), Chevron (CVX), Charter Communications (CHTR), AstraZeneca (AZN), Colgate-Palmolive (CL), Newell Brands (NWL), Sanofi (SNY), Church & Dwight (CHD). 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