US EARLY MORNING: US equity futures are flat; Fed Senior Loan Officer survey, Financial Stability Report and the NY Fed's inflation expectations data are due; CPI/PPI are the highlights for the week ahead

US PRE-MARKETS: US equity futures are a little above flat, and Treasury yields are mixed though have not deviated from neutral by more than a couple of basis points, while the curve continues to flatten moderately. The Dollar Index is a little lower. Weekend news flow has been limited, but has focussed on Berkshire Hathaway (operating earnings jumped in the quarter), the US fiscal drama (Yellen warns the saga could bring economic catastrophe, while Biden is set to meet Republicans on Tuesday), Apple shrugging-off the demand slump, and regional banking issues (PACW slashed its dividend but said its fundamentals were sound). The Fedspeak late Friday took a more balanced tone; Fed’s Bullard (non-voter) still sees rate hikes ahead, but is awaiting incoming data before finalising his view for June, a line echoed by Fed’s Goolsbee (voter). Today, traders will focus on the Fed’s Senior Loan Officer survey (which Chair Powell already said highlights tightening credit conditions), the Fed’s Financial Stability Report will make for an interesting read amid tensions in the banking sector, while the inflation expectations components within the NY Fed’s consumer survey will provide a useful preview ahead of this week’s CPI and PPI data. The Fedwatchers at SGH Macro believe that although the June meeting outcome is still technically dependent on incoming data, banking stress and a potential debt ceiling crisis support a pause, even if data remains strong. SGH says that even the hawks are likely to accept a more patient approach, given that policy rates are at or near a sufficiently restrictive level. However, rate cuts are not expected soon, and if activity or inflation does not moderate as expected, rate hikes could return after June.

EARNINGS SCORECARD: At the end of last week, S&P 500 companies that had published results for the March quarter have seen aggregated earnings slip by 0.7%, while revenue has risen by 3.5%, according to data from Refinitiv. Profit growth is being led by the Consumer Discretionary sector; Industrials, Energy and Financials have also reported earnings growth this quarter. Materials are the laggard, seeing earnings tumble 23%, followed by Utilities (-22%) and Healthcare (-15%). Morgan Stanley says that a H2 EPS rebound is contingent on a solid macro backdrop. The bank notes that the Q1 EPS beat rate is strong, and the guidance has been better than expected. However, "leading macro data" have been easing (MS cites the ISM, which tends to lead rolling earnings surprise for the S&P 500 by 6 months), pointing to downward trends in EPS surprise and margins over the coming months. The equity market continues to expect rate cuts and durable growth, but the likelihood of both outcomes playing out this year is low, the bank argues. It also says that consumers are planning to spend less on discretionary goods ahead, with the most negative net spending intentions for consumer electronics, leisure activities, home appliances, and food away from home. Low and middle-income consumers plan to spend more on groceries, while high-income consumers plan to spend more on travel. The high-income group indicated negative spending intentions for food away from home and leisure services. MS says the bottom line is that equities are priced for an optimistic and lower probability outcome, and consumers continue to expect a pullback in spending for most categories over the next six months.

GOLDMAN'S TECH WARNING: Goldman Sachs notes that big tech companies like Apple (AAPL), Amazon (AMZN), Google (GOOG), Meta (META), and Microsoft (MSFT) have collectively risen 29% this year, outperforming the S&P 500 by 23%, and has led to fewer types of companies driving the market. Goldman says these tech stocks are considered expensive when compared to the rest of the S&P 500, trading at a P/E ratio of 25x (a 49% premium vs its other index peers). Although some believe the high price is justified due to factors like improving earnings growth and quality, Goldman warns that if the economy improves and rates increase, these companies may not continue to perform as well. And if there is a recession, these stocks could be vulnerable since they are popular in hedge fund long portfolios.

DAY AHEAD:

EQUITY NEWS:

WASHINGTON:

ASSET ALLOCATION:

TECH:

COMMUNICATIONS:

FINANCIALS:

CONSUMER:

ENERGY:

MATERIALS:

INDUSTRIALS:

HEALTH CARE:

08 May 2023 - 09:30- EquitiesData- Source: Newsquawk

Federal ReserveInflationAMZN.USGOOG.USJanet YellenUSDUnited StatesAAPLBerkshire Hathaway IncMicrosoft CorpMSFT.USCVX.USSenior PLCPPIConsumer Price IndexBanksAMZNGoogle IncGOOGMSFTDataInsuranceMSTECHGoldman Sachs Group Inc/TheMETAHedge FundUnitedHealth Group IncECBLLYEli Lilly & CoCredit Suisse Group AGUBS AGCVXChevron CorpOXYDISAI FPAdvertisingBRK.BMediaWMT.USATVI.USINTC.USDIS.USVOD.USJPM.USFRC.USPACW.USUBS.USCS.USWAFD.USBUD.USASAZY.USSPB.USOXY.USGOLD.USLLY.USNVO.USAZN.USUNH.USUnited KingdomCSBarrick Gold CorpPARAOVodafone Group PLCVODJPMPacWest BancorpGross Domestic ProductABNBDUKAPDFederal CorpWMTVolkswagen AGLight SAOccidental Petroleum CorpOilSHELPYPLGoldCopperCARRMCKCentral BankAstraZeneca PLCKingUNHEquitiesConsumer ElectronicsInstitute for Supply ManagementCryptocurrencyMorgan StanleyINTCIntel CorpRepublicanPresidentBoJGovernorParamount GlobalChinaAsian SessionHighlightedResearch SheetEU SessionRussian FederationAZNUkraineKenyaGeopolitical

Subscribe Now to Newsquawk

Click here for a 1 week free trial

Newsquawk provides audio news and commentary for over 15,000professional traders and brokers worldwide. Services include: