Earnings Season Begins Amid Market Tension and Geopolitical Moves
Banking Giants Set to Report: This Friday marks the start of a new quarterly earnings season, with major financial institutions such as JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), and Wells Fargo (NYSE:WFC) scheduled to announce their results. These reports are highly anticipated by investors keen to gauge the health of the banking sector.
Airline and Investment Firms on Deck: Alongside the banking behemoths, Delta Air Lines (NYSE:DAL) and BlackRock (NYSE:BLK) are also poised to reveal their quarterly performances. The outcomes of these reports could significantly impact market sentiments, given their influence in their respective industries.
Economic Indicators in Focus: The attractiveness of stocks might wane if earnings growth remains modest, especially with bond yields offering compelling returns. Investors are also set to scrutinize companies’ outlooks on the economy and inflation, seeking clues on whether the recent phase of sturdy growth coupled with easing consumer prices will persist.
Inflation Data Awaited: The release of consumer price inflation figures for March is eagerly awaited on Wednesday. This follows a surprising surge in job additions last month, as revealed by Friday’s payroll data, stirring doubts about the Federal Reserve’s timing for its anticipated interest rate cut, previously expected as early as June.
Oil Markets Respond to Geopolitical Developments: Monday saw a significant drop in oil prices, driven by optimism over potential ceasefire talks between Israel and Hamas, which could alleviate fears of supply disruptions from the Middle East. Negotiations are underway in Egypt, with both parties engaging ahead of the Eid holidays, and Israel has initiated troop withdrawals from southern Gaza.
Diplomatic Efforts Influence Oil Prices: This development follows heightened tensions after Iran’s threats of military action against Israel, propelled by allegations of an attack on its embassy in Syria. Last week, oil prices had hit a five-month peak amidst these escalations.
Supply Concerns Persist: Despite the geopolitical tensions easing, oil supply concerns continue to support prices. The Organization of Petroleum Exporting Countries (OPEC) and its allies have affirmed production cuts until the end of June, with Russia indicating further reductions, hinting at tighter global oil supplies ahead.
SPY/SPX- The specific focus last week was how the price will trade per prior week’s ‘inside week,’ which means particular attention will be paid to last week’s high and low… If buyers fail to defend the prior breakout point at 5255, it would result in a failed breakout and price could test 5200 and 5165” That first target at 5200 was hit, with a weekly low marked at 5191.5. Following the test of that 5200 downside support level, price rebounded to trade back above 5250.
Despite last week’s volatility, this week will have the same 5250 level as the main watch. 5250 has served as a strong reference point over the past 5 weeks, with most of the volume transacting there as well. Continued strength above 5250 can trigger a test of the upper end of the 5 week range at 5300, 5320, and potentially 5375 if new highs are established. Holding below 5250 would target 5230, 5200, and 5150.
Quick levels:
Upside levels of interest: 5300, 5320, 5375
Downside levels of interest: 5230, 5200, 5150
Notable Economic Data
- Tuesday – 3Y Auction
- Wednesday – CPI, 10Y Auction, FOMC Minutes
- Thursday – PPI, Jobless Claims, 30Y Auction
Notable Earnings
- Friday – Banks: C, JPM, WFC
$META- Oppenheimer raised the firm’s price target on Meta Platforms to $585 from $525 and keeps an Outperform rating on the shares as AI driving revenue upside. The firm is also increasing Q1 to high-end of guidance, raising rest of 2024 and increasing 2025 revenue to +13% vs. prior +12%. While historical seasonality still suggests upside to the second half of 2024, the firm’s model now implies 337bps of share gains vs. 6-year average of 305bps, indicating significant gains built-in. To re-rate to an “AI multiple,” or 25-30-times, investors would need to believe EPS could grow over 25% in 2025, representing $3B of incremental net income through stemming losses in Reality Labs or driving 2025 revenue growth to 16%, representing 700bps share gains, which seems unlikely, Oppenheimer says.
$GOOG- Oppenheimer raised the firm’s price target on Alphabet (GOOG) to $185 from $172 and keeps an Outperform rating on the shares. Following its 1K person survey on Search/AI user behavior, the firm thinks Alphabet’s shares remain attractive ahead of Q1 results and potential Gemini update at May Google I/O event given derisked model, discount to NASDAQ, and mixed/bearish investor sentiment. Oppenheimer’s survey indicates search remains the best at satisfying consumer use cases, with genAI a complement vs. substitute to search, and survey also indicates Google’s search dominance would continue if government ended Apple (AAPL) exclusivity agreement. Furthermore, results suggest potential Alphabet/Apple Gemini integration would meaningfully increase the number of searches, with 53% of respondents indicating they would use voice search more than text search today, the firm adds.
$NFLX- TD Cowen raised the firm’s price target on Netflix to $725 from $600 and keeps a Buy rating on the shares. The firm previewed its Q1 results and raised subscription estimates and now expects paid 1Q24 net adds of +5.11M, above consensus of +4.11M and reflecting continued paid sharing momentum. Cowen said Netflix is benefiting from a dual tailwind of paid sharing initiatives as well as strong underlying business demand from a robust, increasingly global content slateand noted Ad tier adoption is also ramping.
$DIS- Evercore ISI raised the firm’s price target on Disney to $130 from $115 and keeps an Outperform rating on the shares. The firm is updating its Q2 estimates to reflect CEO Bob Iger’s intra-quarter commentary that domestic and international parks operating income is expected to grow low to mid-teens in Q2 and that management now expects to exceed $8B of free cash flow in FY24. The firm now expects 11% Experiences segment operating growth in Q2 as it is raising its expectation for Parks operating income growth to 14% year-over-year and moderating its expectation for Consumer Products operating income growth to be down (1%) year-over-year, the analyst tells investors.
$NVDA- AI momentum remains strong for Nvidia and should drive another solid beat and raise, Cantor Fitzgerald tells investors in a research note. Nvidia remains a clear top pick and Cantor expects earnings to act as a catalyst and push shares higher. - KeyBanc raised the firm’s price target on Nvidia (NVDA) to $1,200 from $1,100 and keeps an Overweight rating on the shares following quarterly supply chain findings. The firm sees positive implications for Nvidia with supply chain feedback indicating GB200 with ASPs of $1.5M-$2M are expected to become a mainstream configuration in 2025 and could generate as much as $90B-$140B in revenues in of itself; from a capacity perspective, hearing Nvidia is looking to double its CoWoS capacity at TSMC (TSM) next year in 2025 to 300K interposers; and demand for H20 in China being much higher than anticipated and could contribute $9B-$12B in incremental revenues this year.
OpenAI, Google (GOOGL) and Meta (META) ignored corporate policies, altered their own rules and discussed skirting copyright law as they sought online information to train their newest artificial intelligence systems, The New York Times’ Cade Metz, Cecilia Kang, Sheera Frenkel, Stuart A. Thompson and Nico Grant report. OpenAI transcribed 1M+ hours of YouTube videos through Whisper and used the text to train GPT-4, according to the report, while Google also transcribed YouTube videos to harvest text.
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