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The Hot Zones this Week
Each week there are zones where trading can get wild. I call these the hot zones.
Tuesday, June 27, 2023
High-impact economic data for Tuesday include the Consumer Confidence Index for June, which exceeded expectations, coming in at 104.0 compared to the forecasted 103.8, indicating improved consumer optimism. Meanwhile, New Home Sales for May reported a slight decrease, with the figure landing at 680K against a prior count of 683K, albeit surpassing the forecasted figure of 665K, suggesting the housing market remains robust despite a marginal dip.
Thursday, June 29, 2023
On Thursday, the Initial Claims for the week ending June 24 showed an uptick at 268K, surpassing the forecast and the previous figure of 264K, indicating an increased number of people seeking jobless benefits. Meanwhile, the Continuing Claims data for the week ending June 17 were not available at the time of the report.
Friday, June 30, 2023
Closing the week on Friday, the high impact data showed Personal Income for May meeting expectations with a 0.4% increase, signaling steady income growth. Personal Spending for the same month also matched the forecast, but at a slower pace of 0.3% compared to the prior 0.8%, suggesting a possible slowdown in consumer expenditure. May’s PCE Prices remained flat with a 0.0% change, undershooting the predicted 0.1% increase. In contrast, the PCE Prices – Core for May matched the forecasted figure at 0.3%, offering a more stable picture as it excludes food and energy prices.
Macro Market
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Week’s Numbers
The past week saw notable activity across the major market indices. The Dow Jones Industrial Average (DJIA) experienced a slight decline, closing at 33,727.43 compared to 34,299.12 the previous week, marking a year-to-date return of 1.75%. The S&P 500 Index also witnessed a downturn, closing at 4,348.33 versus 4,409.59 from the week before, even as it managed to maintain a robust year-to-date return of 13.25%. The tech-heavy NASDAQ, too, faced a minor pullback, ending the week at 13,492.52 from its previous close of 13,689.57, although it still boasted an impressive year-to-date return of 28.91%. The Russell 2000 index, representative of small-cap stocks, rounded off at 1,821.63 compared to its previous close of 1,875.47, registering a year-to-date return of 3.43%. This past week’s activity underscores the volatility and dynamism inherent in the financial markets.
Review Last week’s numbers here.
Earnings
The projected year-over-year earnings for the first quarter of 2023 stands at a modest 0.1%. This figure drops to -1.6% when the energy sector is excluded from the calculation. Thus far, of the 499 companies within the S&P 500 that have disclosed their earnings for Q1 2023, an impressive 77.0% have surpassed analysts’ predictions. This outperformance exceeds both the long-term average of 66.3% and the average of the previous four quarters, which stood at 73.5%. The week of June 26 will see an additional eight S&P 500 companies reporting their quarterly earnings, offering further insights into the financial landscape of this period.
Aggregate Estimates and Revisions
- 23Q1 Y/Y earnings are expected to be 0.1%. Excluding the energy sector, the Y/Y earnings estimate is -1.6%.
- Of the 499 companies in the S&P 500 that have reported earnings to date for 23Q1, 77.0% have reported earnings above analyst estimates. This compares to a long-term average of 66.3% and prior four quarter average of 73.5%.
- During the week of June. 26, eight S&P 500 companies are expected to report quarterly earnings.
Source I/B/E/S data from Refinitiv
Global Spotlight
Guatemalan Electoral Showdown
Guatemala is poised for general elections, with the populace set to cast their votes on June 25 for various political offices – ranging from the presidency and vice presidency to all 160 congressional seats, along with the mayoral and councilor posts across the country’s 340 municipalities. Given the crowded presidential race featuring over 20 candidates, a likely runoff vote has been slated for August 20. Current polling trends suggest that a single-round victory is improbable for any candidate. This election unfolds against the backdrop of a growing corruption scandal, implicating the administration of outgoing President Alejandro Giammattei. Although top contenders like Sandra Torres, Zury Rios, and Edmond Mulet promise a diverse political perspective, their deep-rooted political stature might hinder substantial anti-corruption measures in the future.
Pakistan’s Financial Precipice
Pakistan’s economic situation hangs in the balance as its $6 billion International Monetary Fund (IMF) bailout program, established in 2019, nears its end on June 30. The looming deadline amplifies Pakistan’s potential default risk, should it fail to access the final installment of the bailout amidst dwindling foreign exchange reserves. Efforts to secure the last $1.1 billion tranche have been escalated by Pakistani authorities. Despite the IMF’s expressed readiness to cooperate with Pakistan, it has also voiced concerns over the country’s budget, raising doubts about its financial future. Without the IMF’s support to unlock funds from other lenders, Pakistan’s financing situation post-June has been deemed “highly uncertain” by Moody’s, which in turn exacerbates the default risk and the consequent prospect of shortages in essential goods, potentially triggering civil unrest.
Hajj: Saudi Arabia’s Recovery Effort
As the Hajj commences on June 23, Saudi Arabia strives to regain its pre-pandemic influx of 2.4 million pilgrims, following years of restrictive pandemic measures. Despite estimates suggesting a likely turnout of 2 million pilgrims this year – a welcome increase from 2022’s figure of 1 million – factors such as inflation, worldwide economic instability, and mounting temperatures due to climate change could potentially deter a rapid return of the pilgrims. This might impede Saudi Arabia’s ambitious Vision 2030 strategy, which targets 30 million annual visitors for both Hajj and Umrah. A lesser-than-expected turnout could also hamper foreign investments in the Saudi tourism sector, leaving the country to rely on state-backed funds like the Public Investment Fund for development and absorb potential losses.
Diplomatic Balance: Vietnam’s China Visit
Vietnam’s Prime Minister, Pham Minh Chinh, is set to embark on a diplomatic visit to Beijing from June 25 to 28, coinciding with the rare port call of the USS Ronald Reagan to Vietnam, slated until June 30. This diplomatic engagement comes in the aftermath of a recent South China Sea dispute, wherein Vietnamese vessels followed a Chinese survey ship and its armed escort within Vietnam’s exclusive economic zone over several weeks. While the South China Sea issue is expected to be on the table, the likelihood of any significant progress remains slim. The primary objective of this visit appears to be Vietnam’s efforts to maintain equilibrium between its outreach towards the United States and its partners, and its engagements with China and Russia. This series of diplomatic maneuvers could be a precursor to the possible visit of Vietnamese Communist Party chief Nguyen Phu Trong to Washington in July.
Stratfor.com
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