Connect with us

Treasury

Big tech may be able to stabilize Q1 earnings this week, but investors will be taking their cues from COVID updates

Big tech may be able to stabilize Q1 earnings this week, but investors will be taking their cues from COVID updates

Published

on

This week officially marks the beginning of peak earnings season with over 300 companies set to report. The season got off to a disappointing start last week with all the big banks showing a year-over-year (YoY) deceleration in growth on the top and bottom line, and as a result markets traded lower on Tuesday and Wednesday.

You might be thinking “but hey, the markets are forward-looking, and we knew to expect bad news from the banks, why wasn’t this priced in?” … and that’s true a lot of the bad news was priced in, a lot of the surprise came when banks announced how much they were putting aside for loan loss provisions for anticipated defaults, and more generally for staying mum on expectations for the second half of the year, only a few gave any form of expectations for Q2. Lack of guidance tends to be more of an ominous sign than poor guidance.  Banks actuals, plus downgrades to earnings estimates in other sectors, brought the blended earnings growth rate from FactSet down to -15% from the expectation of -10% last week.

Despite the banks dragging down markets in the first half of the week, things were looking up Thursday and Friday as plans to reopen America emerged, and Gilead Sciences announced its antiviral medicine remdesivir was showing promise in combating COVID-19. It’s likely those are the headlines that will push investors this earnings season, instead of the earnings themselves, which might be a good thing for this rally.

It’s an incredibly busy week, so here’s the 6 (yes six) things we’re watching: 

1. Big Tech reports earnings

All five FAANG stocks report in the next two weeks, and two in particular, Amazon and Netflix hit record high stock prices last week. In fact, all of these names appeared on our TipRanks trending stocks list as of this morning, which tracks the names with the most number of analyst ratings over a 3 day period. 

Netflix is anticipated to post YoY earnings growth of 114% and revenue growth of 27%. Of course this has been one of the favorite stay at home names since “pause” orders have been mandated in much of the US. 

Leading into its report Tuesday after the bell, most of the sell side analysts covered by TipRanks have reiterated past ratings (mostly buy),  with Morgan Stanley’s 5 star analyst Benjamin Swinburne upgrading to a buy last week. Keep in mind we are still seeing these reiterations of Buy calls despite NFLX being at an all time high. The 12-mo price target amongst our best analysts is for $414.26. And we’ve got a smart score* of 10, with the only negative factor being insider selling in the last 3 mos. 

(*The TipRanks Smart score is calculated using 8 factors we’ve found to be most highly indicative of future stock performance, ie: analyst recommendations, activity from insiders and hedge funds, sentiment from news, individual investors and financial bloggers, as well as technicals and fundamentals)

The other big name that rose to record levels on Thursday and is getting plenty of their own momentum due to coronavirus lockdowns is Amazon. Still, they are expected to post a YoY earnings decline of -10% and revenues of 22%. 

And you can see below, not only do they have a smart score of 10, but every single analyst that we capture that covers AMZN, 32 in total, has a buy rating. I haven’t looked too deeply into this, but I have to imagine there aren’t a ton of names in our universe that have that pedigree… especially as they report record high share prices. Right now we’re seeing a price target of $2460, that’s almost 4% higher than current prices. And you’ll see in the second screen, the 5 most recent ratings are even coming in higher than that target (ratings from Cowen, Wolfe, JPM, Robert Baird and Barclays).

Amazon saw all time intraday high of $2461 on Thursday, and Netflix saw an intraday high of $449.52 on the same day. Both names started to slip as plans to reopen America were announced, boosted by rising optimism that potential medical treatments could accelerate the restarting of the economy, hence getting people out of their homes.

Apple and Alphabet the other two FAANGs on tap this week that are getting some attention after announcing a rare collaboration last week around “contact tracing” -- an initiative to integrate technology into their smartphones that will alert users if they have come in contact with someone with COVID-19. Apple currently has a Smart Score of 10, while Alphabet has a Smart Score of 6. 

2. Updates from GILD  - and other health care names working on therapies and vaccines. 

The real marker that the economy is ready to open will be the emergence of a COVID-19 treatment. A vaccine will no doubt get investor attention as well, but with that not expected to happen for 12-18 months we need a treatment to bridge the gap. Otherwise there will be constant fear around a second wave looming that will impact consumer behavior. 

Specifically we’ll be looking to hear more from Gilead Sciences, who reported last week that very early and small trials in Chicago were looking positive. Their antiviral drug, remdesivir, was originally developed for Ebola, but failed to combat that disease, and instead has shown potential in fighting coronaviruses. There is still a long way to go, and the data is still too early, but it gave everyone a little bit of hope they were looking for. 

Gilead currently has a Smart Score of 10, with the best analysts on the platform rating it a moderate buy. 

3. Reopening America

President Trump announced a plan on Thursday to reopen the American economy in three phases, mostly aimed at easing restrictions in areas that have reported lower rates of infection, while harder hit locations will likely be on pause longer. A handful of states, including Texas, Vermont, Minnesota and Montana have started to announce dates for their easing of restrictions that begin as early as the end of this month. Many harder hit eastern and midwestern states have extended their stay at home orders until May 15. We’ll be looking out for more updates from the Trump administration this week, as well as from the states as governors have made clear they will move at a pace that makes sense for their specific situation. 

4. Updated COVID numbers

We’ll also be looking for continued evidence that COVID hotspots such as NYC report improved numbers, and that the plateau of cases there starts to morph into a downturn. Other hotspots such as Massachusetts, Florida and Connecticut will all be in focus as they are expected to peak this week. It looks as though all of the precautions taken around social distancing and the use of personal protective equipment are helping, now we’ll wait to hear about other important initiatives such as expanding antibody testing.

5. Stimulus Progress

Next we’ll want to hear more about how stimulus is working in America. What we know so far: 

  • Stimulus checks - 80M have gotten their stimulus checks, some fintech companies (Current, Netspend) that have been distributing those payments report most of that cash has been spent on food, gas and other essentials. But we know glitches with distribution abound, including issues for tax preparers using services such as H&R Block and TurboTax, and those filing with dependents.
  • PPP - The fight over small business funding will continue this week. The $349B allocated to the paycheck protection program ran out on Thursday, with about 1.3 million loans approved. There is a push to have that replenished with $250B - $400B (no official word as of Sunday evening) before moving on with other stimulus efforts.
  • Mortgages - Nearly 3M homeowners have taken advantage of the mortgage forbearance program for government-backed loans, we’ll be tracking how that number increases this week. 
  • Unemployment - Over 22M Americans have applied for unemployment in the last 4 weeks, jobless benefits will now include up to $600 more per week, on top of what each individual state provides. We’ll want to see signs that people are able to successfully apply for and receive these benefits, as of last week only ⅔ of states were making those additional payments. 

6. Economic Data

On top of all that we have a slew of relevant economic data reporting this week: 

  • Home sales - This week we get monthly reports on Existing Home Sales and New Home sales for March. We know this is not going to be good news. We already got dismal Housing Starts numbers last week, which sharply missed consensus after recently spiking to a 12 year high. MoM results for Existing Home Sales are expected to be down 8%, while New Home Sales are expected to be down nearly 13%. With the spring season off to a bad start, we’ll likely see these numbers suppressed for some time as consumers will no doubt be unwilling to make large ticket purchases. Historically low mortgage rates have encouraged an increase in refinancing, but new mortgage applications have fallen 35% from last year. 
  • Consumer - Retail sales for March came in last week, and were down 8.7% from February, no surprise there. This week we get another important metric on the consumer in the form of the University of Michigan Consumer Sentiment index, which measures how US consumers are feeling about the economy and their willingness to spend money. The indicator is expected to show consumer sentiment plunged 24% in April from the prior month. 
  • Jobless claims - This has become a must watch item each Thursday as over 22M people have applied for unemployment here in the US over the last 4 weeks. No doubt this number will continue to be high this week, but we are looking for it to be lower than last week. Last week’s number of 5.25M was high, but showed a decrease from the prior 2 weeks and we want to see that pattern continue. 

Next week we have over 600 companies reporting as peak season continues and that includes a bunch of the biotech names which will be in view this season as investors (and really everyone) looks for updates from those working on COVID vaccine and therapies.

The post Big tech may be able to stabilize Q1 earnings this week, but investors will be taking their cues from COVID updates appeared first on TipRanks Financial Blog.

Read More

Continue Reading

Economics

Weekly investment update – Weaker economic outlook weighs on markets

Global equities have continued their sell-off over the last week. What is new is that markets are now reacting to risks of weaker economic data weighing…

Published

on

Global equities have continued their sell-off over the last week. What is new is that markets are now reacting to risks of weaker economic data weighing on earnings. Real bond yields, whose rise triggered the recent drop in equity markets, have fallen as investors price a higher probability of a recession.   

Yields of US Treasury bonds have slipped since reaching around 3.12% in early May (see Exhibit 1). The rally has been driven by fears of a global recession due to poor economic data, strong inflation numbers, aggressive talk from central bankers and concerns over the consequences of Covid in China.

Recent data that contributed to the bond market’s unease about the prospects for the US economy includes: 

  • The Richmond Federal Reserve Manufacturing survey, which fell to its lowest since 2020 at -9.
  • The monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York fell to -11.6, with the shipment measure falling at its fastest pace since the start of the pandemic two years ago.
  • The Federal Reserve Bank of Philadelphia’s May business index dropped 15 points to 2.6, with the six-month outlook falling to its lowest since December 2008 (though the underlying details were better than the headline number).
  • Existing and new home sales dropped for a third month, to its lowest since 2020, held back by lean inventory, rising prices and higher mortgage rates. 

Taken together, the various regional Federal Reserve surveys suggest that the ISM Report for Business may come in at around 53, above 50 so still clearly in expansion territory for the US economy, but down noticeably from the upper 50s/lows 60s readings to which markets have become accustomed.

US equities still weak

US equities have remained weak as the down move continues for its seventh week.

It has been apparent that, in contrast to the start of the year when rising real bond yields were undermining equity markets, it is now fears of falling earnings due to a weaker economy that are weighing on stocks.

The last week has seen, in accordance with the risk-off regime, more buying-the-dip and selling-the-rally. There has also been a rotation out of growth and cyclicals into value and defensives (healthcare, real estate, utilities and staples).

European markets under the cosh

Bearish sentiment is prevalent in Europe, too, with investors cutting exposures to European equities.

There was another outflow in the week to 18 May, taking the total to 14 weeks of outflows in a row. Cyclicals, in particular, saw strong outflows, led by the materials, financials and energy sectors.

Our multi-asset team are inclined to reduce exposure to equity markets given the deterioration in the outlook.

European economy resists

Economic activity indicators have fallen so far in May, but remain above 50. Activity edged up in the manufacturing sector despite the fallout from the Ukraine war and supply chain disruptions that have intensified with China’s coronavirus lockdowns.

Although factories continue to report widespread supply constraints and diminished demand for goods amid elevated price pressures, the eurozone economy is being boosted by pent-up demand for services as pandemic-related restrictions are wound down.

While purchasing manager indices are still pointing to growth, it may be that these surveys understate the shock to activity, while sentiment surveys likely overstate the shock. Markets are increasingly tilting towards anticipation of a contraction in the coming quarters.

Higher food prices

Restrictions on the export of Ukrainian cereals continue and risks increasing food insecurity as the UN World Food Programme has highlighted.

As much of Russian and Ukrainian wheat goes to poorer nations, hunger could be a critical risk, driving up political instability.

The risk of further rises in food prices will be a key driver of inflation, particularly in emerging markets, the worst-case scenario being that the situation worsens significantly.

Moreover, lower fertiliser supply will have a greater impact on the next few months’ harvests, while the pass-through of costlier logistics and input prices is likely to drive food prices even higher.

Coming up…

Minutes of the meeting of the US Federal Open Markets Committee on 3-4 May will be published later on Wednesday.

However, market conditions have soured appreciably since the Fed’s first 50bp rate rise, so some of the language in the minutes pertaining to financial risks and market conditions will be outdated.

Instead, the three major focus points for market participants will likely be: 

  • Policymakers’ views on the conditions which could lead to a shift down, back to a pace of raising rates by 25bp at each FOMC meeting;
  • Any hints as to how far and for how long policymakers intend to push policy rates into restrictive territory;
  • Guidance shaping expectations for the next Summary of Economic Projections — aka the dot plot — due to be released at the June meeting. 

Forthcoming economic data  

US personal income and spending data for April should give investors an insight into the US consumer’s behaviour: Are they tightening the purse strings? The report may also show the Fed’s preferred inflation gauge (core PCE deflator) starting to decelerate.

Perhaps equally important, the report should shed light on how consumers are responding to the current high inflation environment, indicating how wages are performing relative to inflation and how aggressively consumers are tapping into the USD 2.5 trillion of accumulated savings from the pandemic period.

Disclaimer

Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. The views expressed in this podcast do not in any way constitute investment advice.

The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.

Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).

Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

Writen by Andrew Craig. The post Weekly investment update – Weaker economic outlook weighs on markets appeared first on Investors' Corner - The official blog of BNP Paribas Asset Management, the sustainable investor for a changing world.

Read More

Continue Reading

Government

A New WHO COVID Report Once Again Proves Sweden Right

A New WHO COVID Report Once Again Proves Sweden Right

Authored by Ian Miller via ‘Unmasked’ Substack,

Throughout the pandemic, Sweden has…

Published

on

A New WHO COVID Report Once Again Proves Sweden Right

Authored by Ian Miller via 'Unmasked' Substack,

Throughout the pandemic, Sweden has faced an enormous amount of criticism and international pressure due to their willingness to stick to established public health principles and pre-pandemic planning.

Instead of following the incessant, anti-science groupthink that became part of a virus-induced political religion, Sweden chose instead to not impose the strict lockdowns that Dr. Fauci recently claimed were not tried in the US.

Sweden never mandated masks be worn in indoor public spaces, correctly identifying the lack of evidence supporting their use.

They kept schools open in defiance of teacher’s unions and politically motivated “experts” in the United States who advocated for a policy with zero benefits and tremendous harms.

Essentially, Sweden followed the actual science and not The Science™, with the requisite trademark and capital letters. That would include the guides that were prepared prior to the panic, inaccurate modeling, political motivations and crisis obsession took over.

Even last year it became readily apparent that no one in the media or public health establishment was willing to discuss the inarguable reality that Sweden’s results were no worse than many countries across the globe — and significantly better than many, many others.

In general, comparisons have been mainly focused on COVID specific outcomes, but now the World Health Organization, fresh off demanding authoritarian powers over sovereign nations whenever they deem necessary, has released a new report on their estimates of excess mortality.

Excess mortality is simply the number of deaths above the expected rate in a given country in a specific time frame.

Excess mortality captures all of the outcomes in a country — it’s not limited to COVID related metrics or any other specific cause.

For that reason it can often be a better indicator of the true cost of the pandemic, whether that be COVID mortality or the consequences of lockdowns, hospital policy or mental health breakdowns.

The WHO report contains many illuminating statistics from the first two years of the pandemic which illustrate that Sweden’s approach was undoubtedly the correct one; once again contradicting the expert derived “consensus” that advocates for endless restrictions on normal life.

Sweden’s relative success is easily visible when comparing thirty European countries in estimated excess mortality rate per 100,000:

Sweden ranks 25th out of the 30 countries.

24 countries had a higher excess mortality rate per 100,000.

In summary, Sweden, the country that eschewed strict lockdowns, had some of the lowest mask usage anywhere on earth, kept schools open and society functioning as much as possible, and had one of the lowest rates of overall mortality of any country in their region.

While a single graph or chart may not necessarily disprove pro-mandate arguments, this one comes remarkably close.

If lockdowns, masks and other restrictions were as important as experts and politicians preach that they are, these results should not be possible.

Countries like Germany, Portugal and the Czech Republic were all praised for having “science based” responses with strict lockdowns, and extremely high rates of mask compliance.

Portugal’s vaccine success

Germany’s “Master class in science communication”

The Czech Republic’s “Lifesaving lesson to wear masks”

Sweden vastly outperformed each of them.

But let’s dive in a bit deeper.

One of the more common refrains from mask advocates is that US states such as New York, New Jersey and others have poor cumulative results because they weren’t aware early on that masks “work,” so their policies were adjusted and spread was successfully reversed by mask mandates and other restrictions after the first wave.

However, Sweden shows the exact opposite.

Restrictions in Sweden for the entirety of 2020 and 2021 were consistently among the least authoritarian and invasive when compared to other western countries.

Once again, if mask mandates, lockdowns and strict vaccine based policies were so important and effective, we'd expect the outcomes in 2021 to be worse in Sweden, as most of the world experienced increased spread with more transmissible variants.

Instead we see the exact opposite:

Black bars indicate the 2020 rate in each country, while the orange bars are the 2021 rates.

In many European countries, excess mortality became significantly worse in 2021 despite the arrival of vaccines, the ingrained evidence-free belief in masks and widespread discriminatory vaccine passport policies. Sweden had the exact opposite results, with significantly lower rates in 2021 despite their “lax” rules.

Comparing the 2021 numbers exclusively also highlights Sweden’s success:

Although the determination of pro-mandate fanatics to exclusively compare Sweden to other Scandinavian countries is nonsensical, the 2021 excess mortality rates show Sweden with lower numbers than both Finland and Denmark.

Their numbers were also lower than a number of other countries that imposed mask mandates and strict vaccine passports like Ireland, Portugal and Greece.

Revisiting the overall chart from 2020-2021, it’s important to highlight several other countries that had much stricter rules than Sweden:

France, Austria, Belgium, Netherlands, United Kingdom, Spain and Italy all had lockdowns, varying levels of vaccine discrimination, mask mandates and strict entry requirements.

All fared worse than Sweden.

The lockdown and mask apologists simply offered no explanation for this.

Oh sure, there are excuses and misdirections, but no actual explanations.

Yes, Sweden had higher cumulative rates than the other Scandinavian countries, but viewing them in context shows how similar they actually were, outside of Norway, which was essentially a global exception.

Norway, however, had significant rates of spread in late 2021 that would not be counted until the 2022 data is in.

In general, the Scandinavian countries were more lax than most of continental Europe regardless.

More importantly, the broader context of Europe shows how successful Sweden’s policies actually were.

Here are several notable countries and how much higher than excess mortality rates were from 2020-2021:

  • Czech Republic 229%

  • United States 163%

  • Italy 147%

  • Spain 106%

  • United Kingdom 100%

  • Germany 96%

  • Portugal 71%

  • Greece 63%

  • Netherlands 57%

  • Belgium 35%

All of these countries had much harsher restrictions than Sweden with significantly worse results.

No matter how hard they try, every available piece of data and evidence continues to contradict the assertions made by incompetent experts desperate to protect their disgraced reputations and future grants.

Masks, lockdowns and strict discrimination at nearly every indoor business were all proven to be completely ineffective, both at reducing infections and overall mortality.

Sweden’s willingness to follow science and not The Science™ meant that they limited the negative impacts of COVID while avoiding higher numbers of deaths from other lockdown-derived consequences.

The vast majority of mainstream media outlets have no interest in covering these results because it contradicts the policies they’ve strongly advocated for and consistently promoted.

CNN, MSNBC, The New York Times and many other mainstream left wing publications did their best to ensure that corporations, politicians, teacher’s unions and other decision makers had the cover to enforce seemingly endless mandates.

Disturbingly, toddlers are still masked in New York City, which appears to be heading back towards mask mandates and vaccine passports (now with boosters!).

School districts across the United States have already decided to mandate masks due to a slight increase in cases.

These policies will now be an endless, reoccurring threat in anti-science areas like Chicago, San Francisco and Los Angeles.

All based on the lie that masks work. A lie that Sweden helps expose.

*  *  *

Get a 7-day free-trial to 'Unmasked' Substack

'Unmasked: The Global Failure of COVID Mask Mandates' is now on sale at Amazon and available in hardcover format for the first time

Tyler Durden Wed, 05/25/2022 - 05:00

Read More

Continue Reading

Government

Data contradict fears of COVID-19 vaccine effects on pregnancy and fertility

New experiments conducted in mice add to mounting evidence in opposition to a popular claim that COVID-19 vaccination during early pregnancy may cause…

Published

on

New experiments conducted in mice add to mounting evidence in opposition to a popular claim that COVID-19 vaccination during early pregnancy may cause birth defects or fetal growth problems. The study also counters claims that COVID-19 vaccines reduce fertility through their effects on the protein syncytin-1. Alice Lu-Culligan of the Yale School of Medicine, US, and colleagues present these findings in the open-access journal PLOS Biology.

Credit: Hannah J. Lee (CC-BY 4.0, https://creativecommons.org/licenses/by/4.0/)

New experiments conducted in mice add to mounting evidence in opposition to a popular claim that COVID-19 vaccination during early pregnancy may cause birth defects or fetal growth problems. The study also counters claims that COVID-19 vaccines reduce fertility through their effects on the protein syncytin-1. Alice Lu-Culligan of the Yale School of Medicine, US, and colleagues present these findings in the open-access journal PLOS Biology.

Despite growing evidence that COVID-19 vaccination during pregnancy can benefit both mother and child, safety concerns are a significant cause of vaccine hesitancy. Popular claims in particular hold that vaccination during pregnancy could harm the fetus, and that vaccination prior to pregnancy could reduce female fertility.

To investigate those claims, Lu-Culligan and colleagues first conducted experiments in pregnant mice. They found that administering a COVID-19 vaccine early in pregnancy did not affect the size of the fetus, nor was it associated with any birth defects. In addition, they found that fetuses had high levels of antibodies against COVID-19 infection, suggesting that the protective effects of vaccination passed from pregnant mice to their fetuses. These findings are consistent with a growing body of data on pregnant humans reported by the US Centers for Disease Control and other research groups.

The scientists also injected other pregnant mice with a substance known as poly(I:C), which simulates viral infection; fetuses from these mice had reduced growth. Overall, the mouse experiments suggest that vaccination during pregnancy is safer for both mother and fetus than infection during pregnancy.

Next, the researchers collected blood samples from both vaccinated and unvaccinated human volunteers. They found that those who had been vaccinated did not have elevated levels of antibodies against the protein syncytin-1, suggesting that fears of reduced fertility due to COVID-19 vaccination’s effects on this protein are unfounded.

The authors note that, as more people are vaccinated and clinical trials progress, the resulting data will continue to help address widespread concerns about vaccination. In particular, they note, it will be useful to confirm that COVID-19 vaccination is safe at all stages of pregnancy.

“This work provides evidence in a mouse model that vaccination in early pregnancy does not harm fetal growth or development and instead protects the fetus throughout later stages of pregnancy,” Lu-Culligan adds. “It also directly challenges misinformation deterring many nonpregnant people from vaccination—we show that the antibodies generated by vaccination do not target a rumored placental protein and that these misconceptions around infertility are not supported by the data.”

#####

In your coverage, please use this URL to provide access to the freely available paper in PLOS Biology:   http://journals.plos.org/plosbiology/article?id=10.1371/journal.pbio.3001506

Citation: Lu-Culligan A, Tabachnikova A, Pérez-Then E, Tokuyama M, Lee HJ, Lucas C, et al. (2022) No evidence of fetal defects or anti-syncytin-1 antibody induction following COVID-19 mRNA vaccination. PLoS Biol 20(5): e3001506. https://doi.org/10.1371/journal.pbio.3001506

Author Countries: United States, Dominican Republic, Canada

Funding: This work was supported by the National Institutes of Health (https://www.nih.gov/) grants F30HD093350 (ALC), T32GM007205 (ALC), and T32AI007019 (AT), and by the Howard Hughes Medical Institute (https://www.hhmi.org/) (AI). VSM is supported by the CAPES-Yale program (https://medicine.yale.edu/bbs/training/initiatives/capes/). The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.


Read More

Continue Reading

Trending