In-depth Analysis

Weekly Outlook Aug 29 – Sep 2

Focus on PMI and the NFP report

  • On Monday 29th: Monthly Retail Sales report released from Australia (July).
  • On Tuesday 30th: The U.S releases both the CB Consumer Confidence for August as well as the monthly JOLTs Job Openings survey findings.
  • On Wednesday 31st: A busy day for investors, the Chinese Manufacturing PMI for August is due, Germany posts its monthly unemployment numbers, the Eurozone’s CPI is released, U.S ADP Nonfarm employment change report, Canadian GDP figures and US Crude oil inventories reports all released. 
  • On Thursday 1st: The Chinese Caixin Manufacturing PMI is reported for August, Spain, Italy, France, Germany, the Eurozone, Great Britain, and the U.S are all set to release their monthly Manufacturing PMI, the U.S also releases its monthly ISM Manufacturing PMI and their Initial Jobless Claims report.
  • On Friday 2nd: U.S Nonfarm Payroll data and the Unemployment Rate is available.

Weekly outlook

China, Spain, Italy, France, Germany, the Eurozone, Great Britain, and the U.S are all set to publish their Manufacturing PMI reports during the week, generally weak results to be expected across the board for monthly purchases of key products for the manufacturing industry.

The indexes can vary slightly, but a reading above 50 is said to be a sign of growth in the sector, whereas below 50 is a sign of contraction in manufacturing and not a great sign for the growth of the country’s economy.

The U.S also has a number of key employment reports to release, chief of which is the closely watched Nonfarm Payroll data, which is expected to show a reduction in the number of people created this month compared to last, but the unemployment rate is expected to remain steady. The job report will also be closely watched for wage inflation trends.

Monday 29th of August

Australia releases its monthly report for July on Retail Sales today,  an indication of the strength of the economy as it relates to consumer spending. A slight increase from 0.2% to 0.3% is forecast.

Tuesday 30th of August

The US will release a number of reports on Tuesday, most notably the Conference Board (CB) Consumer Confidence and the JOLTs Job Vacancies. The former measures confidence levels from consumers about how they feel about the economy and how it impacts spending and therefore economic growth – it’s expected to be up from 95.7 to 97.5. The latter is collected by the US Bureau of Labor Statistics and looks at the number of legitimate jobs that are available each month. For July, it’s forecast to be 11.000M, up from last month’s 10.698M.

Wednesday 31st of August

A number of releases today include China’s Manufacturing Purchasing Managers Index (PMI) for a look at the growth of the country’s purchasing activities for the manufacturing sector in August. Minimal improvement is expected, with 49.2 forecast, up from last month’s 49. A level above 50 is considered to show growth, below 50 signifies contraction.

German Unemployment Change is forecast to show a drop in the number of unemployed citizens for August from 48K to 27K.

The Eurozone’s monthly Core Consumer Price Index (CPI) for July is expected to be unchanged at 4%. The annual CPI for August is forecast to be up to 9% from 8.9%, numbers that will be closely looked at by the ECB at its September meeting.

The U.S ADP National Employment change, which traders use as a forecast of the official government Nonfarm Payroll data due two days following, will be published today and is expected to reach 200,000. Additionally, in the U.S, the Energy Information Administration’s (EIA) Crude Oil Inventories will be expected to post a result of -0.933M up from -3.282M the previous week as fuel prices continue to drop.

Canada releases its key GDP data today, for a look at the overall economic activity of the country. Analysts expect growth up to 0.1% MoM from 0.0%.

Thursday 1st of September

The Caixin Manufacturing PMI for August shows purchasing numbers from the results of a nationwide survey of manufacturing firms in China. A small decrease is expected at 50.2 down from 50.4. Below 50 is considered a contraction of the sector and may therefore have negative effects on the country’s economic performance, above 50 signifies growth.

Spain, Italy, France, Germany, the Eurozone, Great Britain, and the U.S are all set to release their monthly Manufacturing PMI as well. A further drop in the trend downwards is expected for Spain at 48.5 from 48.7. Also down is Italy’s PMI, with 48 from 48.5 last month. The French, German, British, Eurozone and U.S manufacturing are all expected to hold their numbers steady from the month previous, at 49, 49.8, 46, 49.7 and 51.3 respectively.

The U.S also releases its monthly ISM Manufacturing PMI, which will show results of a survey of 400 Industrial companies across the U.S. The diffusion index is expected to show a result of 52, down from 52.8.

The U.S Initial Jobless Claims shows the weekly number of people who have filed for unemployment insurance for the first time. 249K people are expected to be impacted by a lack of work and requiring insurance payments, up from 243K last week.

Friday 2nd of September

The highly anticipated U.S Nonfarm payrolls report is due today for a look at the number of employed people in the country, excluding farm workers and not-for-profits. After a much higher than anticipated number last month, expectations are lower for August, Analysts are forecasting 285K jobs created, which is down from last month’s 528K. The U.S Unemployment Rate is also set to remain the same as last month at 3.5%, according to expectations. The annual average hourly earnings for August are expected to rise to 5.3% from 5.2%.

Small comments on last week’s earnings reports

Macy’s

Macy’s had a strong quarter, with their net sales and earnings per share surpassing expectations given the currently challenging economic conditions for retailers.

YoY comparable sales were down by 1.5% on an owned basis and down 1.6% on an owned-plus-licensed basis. When compared to pre-pandemic conditions in 2019 and over the same period, sales were up 4.3% and 4.4%, respectively. Diluted earnings per share were down to $0.99 from $1.08 YoY, and adjusted EPS was down $1.00 from $1.29 YoY.

Forecasts for full-year sales have been lowered to account for growing macroeconomic pressures in the retail industry, as many consumers struggle with the effects of inflation.

Macy’s stock price performance last week: -2,58%

Zoom

Zoom’s second quarter results weakened after the sharp rise in the company’s popularity during the pandemic seems to be slowing down. The company grew 8% this quarter compared to last quarter’s 12% increase.

Zoom’s GAAP net income over the quarter was $45.7 million, which is down from $316.9 million YoY as a result of major investments in the company and other expenses. Earnings per share were $0.15, which is down from $1.04 YoY. Non-GAAP earnings for the second quarter however totalled $323.5 million, down from $415.1 million YoY earnings, and showed a drop from $1.36 EPS to $1.05 EPS YoY.

Forecasts for full-year sales have been lowered to account for growing macroeconomic pressures and adjusted buying patterns of consumers.

Zoom stock price performance last week: -17,10%

Nvidia

Nvidia has suffered a difficult second quarter, predominantly as a result of a drop in revenue from its gaming sector. Supply chain issues, high inflation and an oversupply of inventory have heavily impacted the company, with Q3 forecasts being paired down to reflect these factors.

Nvidia’s revenue of $6.7 billion was up 3% YOY but down 19% QOQ. Non-GAAP income was down 62% QoQ with $1.292 billion and down 51% YOY. Non-GAAP earnings per share were down 63% to $0.51 from $1.36 EPS QoQ.

The company’s Data Center revenue was the leading growth area, showing an increased revenue of 1% QoQ and 61% growth YoY with $3.81 billion.

Nvidia stock price performance last week: -6,91%

Dollar Tree

Dollar Tree and its Family Dollar stores reported better-than-expected earnings results for their 2nd quarter, alongside other major discount retailers that sell everyday essential products. The company attributed their strong numbers to consumers shifting to spending more on their inexpensive brands, as inflation puts pressure on households.

The company’s consolidated net sales for the quarter were up 6.7% to $6.77 billion YoY, and earnings per share were up 30.1% to a record $1.60 from the previous year’s quarter $1.23.

Dollar Tree re-worked their expected earnings for the 2022 Fiscal Year from $28.10 billion down to $27.85 billion as a result of investments in pricing at Family Dollar to promote further growth and long-term profitability. 

Dollar Tree stock price performance last week: -17,51%

 

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