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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
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Investor Video: Tech profits to slump, mining earnings to jump
Jessica Amir
Market Strategist
Summary: Six minute VIDEO on markets for investors and traders. What is supporting broad sentiment higher for now? What can you expect if Microsoft and Tesla's results and outlooks disappoint? Trading this week will be thin for Chinese New Year, so moves could be amplified. Australia’s ASX200 could likely take out a new all-time high, supported by the rally in commodities and expected higher earnings from mining companies, which make up 25% of the market. Gold and copper stocks are benefiting from gaining momentum in metal prices.
Monday 23 January 2023
Major catalysts for markets this week include big US tech earnings, Visa and commodities results kicking off.
In the S&P500(US500.I) tech companies, which make up 26% of the market, are expected to report a quarterly profit drop of 9.2% on average, according to Bloomberg. This could be the biggest tech profit drop since 2016. Forward 12 month earnings of 39% is also expected. The danger is that estimates are still too bullish and markets will likely be disappointed, which would trigger a fall.
Overall aggregate S&P500 earnings are expected to have grown 2.12% in the quarter; miners are expected to deliver the most growth, real estate with the least. So far, only 55 companies have reported in the S&P500 and earnings have fallen over 4% on average. So the bear case is still a factor for some investors, especially in tech. More job cuts are expected with margins being squeezed. EV companies are also facing pressure with higher metal prices.
On Tuesday Microsoft kicks off earning season. Defense giants Raytheon and Lockheed Martin report on Tuesday. Tesla reports Wednesday. On Thursday Intel and Mastercard report, and steel giant Nucor. On Friday Chevron. These could be industry proxies to watch with a major focus on their outlooks.
In Australia, the ASX200 could likely to take out a new all-time high, supported by the rally in commodities
...and expected higher earnings from mining companies, which make up 25% of the market. However CPI is a focus. Our technical analyst backs up this thinking, that the ASX200 is likely to hit a new all high- for more click here. But the danger this week is if Q4 CPI is hotter than expected on Wednesday, then equities could see profit taking. However overall sentiment is bullish as demand for copper and iron ore is likely to pick up after CNY. CPI is expected to slow from 1.8% QoQ to 1.6%, and CPI is expected to cool from 7.3% to 7.5% YoY. Hotter data could further fuel the AUD and a likely fuel a sell-off in tech stocks. As for major local company news to watch, iron ore company Champion Iron (CIA) reports quarterly earnings. Given the iron ore price is up 66% from its low, its outlook is expected to be optimistic.Market hours this week are limited for Chinese New Year
So you could expect light volume and moves perhaps to be amplified on thin trade; China’s market is shut all week (Monday to Friday), Hong Kong’s market is shut for Monday to Wednesday, Singapore’s market is shut for Monday and Tuesday. Australia’s market shut Thursday for Australia Day.
In commodities, gold and copper are gaining momentum
...and oil rallies. Gas and oil prices are also higher too ahead of the EU embargo on Russian products, which starts on February 5th.-
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