The week of Oct. 3 is expected to be a busy one for earnings announcements, with four S&P 500 companies reporting quarterly results. So far, the earnings picture looks good, with 77.7% of companies that have reported surpassing analyst estimates. This number is above the long-term average of 66.1%. It will be interesting to see how things play out over the next few days and whether or not the positive trend continues.
In terms of economic data, there are a few key releases scheduled for the week. On Monday, the ISM Manufacturing PMI for September is due out. This figure is closely watched by economists as it provides insight into the health of the manufacturing sector. On Friday, the latest jobs report is scheduled to be released. This report will give investors a better idea of the health of the labor market and the overall economy.
All in all, it looks like it will be another busy and eventful week in the markets.
The Hot Zones this Week
Each week there are zones where trading can get wild. I call these the hot zones.
- ISM Manufacturing Index – Monday
- ISM Non-Manufacturing Index – Wednesday
- Non Farm Payrolls and unemployment Rate – Friday
Global Spotlight
The final phase of the Ukrainian crisis is likely to conclude with Russia formalizing its territorial annexations. On October 3 and 4, ratification votes on the deals between Russian President Vladimir Putin and various pro-Russian occupation authorities in Ukraine’s Kherson, Zaporizhzhia, Donetsk, and Luhansk regions are scheduled in the Russian lower house of parliament and upper chamber. If both houses ratify the treaties and changes to Russia’s Constitution, Moscow can de jure claim the territories as early as next week. If Ukraine continues its attacks, Russia is likely to escalate the war and threaten nuclear retaliation.
After the European Commission’s announcement of its intention to heighten sanctions against Russia on September 28th in response to Russian aggression, a new eighth EU sanction package is anticipated next week. The package is designed to introduce new sanctions against individuals and entities connected to the Russian invasion of four partially occupied Ukrainian regions: Donetsk, Luhansk, Kherson and Zaporizhzhia. It will also imposed new import and export bans on goods and services between Russia and the European Union. This legally binding price cap limits the amount that Russians can charge for their oil exports transportation into the EU starting December 5th, 2022. Although negotiations among EU leaders could continue at the Prague summit on October 7, an agreement is expected before then.
On October 2, Brazil will elect a new president as well as one-third of their senate and all 513 members of the Chamber of Deputies. The policies that these newly elected officials pursue in the next few years will be heavily impacted by how coalitions are formed in Congress. In Brazil’s presidential election, the main competitors are former leftist president Luiz Inácio Lula da Silva and current right-wing president Jair Bolsonaro. If neither candidate wins more than half of the vote, they will compete in a runoff on October 30. The polarizing presidential election is likely to lead to an increase in protest activity and street rejoicing over the days following the vote.
National Day in China falls on October 1st and is celebrated with a week-long holiday. Although this period is usually associated with increased travel and spending, officials have requested that citizens limit their movements to help prevent the spread of COVID-19. The offshore yuan may also depreciate further over the holiday, since the People’s Bank of China will not be guiding investor expectations via its daily reference rate on yuan levels during the week. After the holiday, if China intervenes even more aggressively to support the value of the yuan (especially against the strong dollar), we could see a sharp rebound in the yuan.
The first summit of the European Political Community will take place in the Czech Republic on October 6th and will include 27 members of the European Union, as well as non-EU countries such as Ukraine, Turkey, Switzerland, Georgia, Armenia and Azerbaijan. British Prime Minister Theresa May, on the other hand, has said that she will take part in the project. Notably, despite London’s lack of enthusiasm for the idea when it was originally proposed, Prime Minister Truss stated her intention to participate. In May, French President Emmanuel Macron launched the EPC, which he described as a platform for European countries to talk about major strategic concerns without being constrained by EU law and institutions. From Paris’ viewpoint, the EPC is an opportunity to connect with non-EU regions including the United Kingdom, Ukraine, the Balkans and Caucasus, and other nations to offer them a choice besides EU membership.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
Earnings
Aggregate Estimates and Revisions
- 22Q2 Y/Y earnings are expected to be 8.4%. Excluding the energy sector, the Y/Y earnings estimate is -2.1%.
- Of the 498 companies in the S&P 500 that have reported earnings to date for 22Q2, 77.7% have reported earnings above analyst estimates. This compares to a long-term average of 66.1% and prior four quarter average of 80.6%.
- During the week of Oct. 3, four S&P 500 companies are expected to report quarterly earnings.
Source I/B/E/S data from Refinitiv
Macro Market
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