Reporter of the Economic Business: Li Menglin Reporter of the Economic Business Business: Lan Suying
This Friday (October 14), many Wall Street major banks will release their latest quarterly financial reports, and US stock financial report season will kick off. Investors will have a glimpse of the impact of the Federal Reserve's interest rate hike, inflation and strong US dollar on the operating conditions of enterprises.
According to the latest survey by Bloomberg, most investors believe that the financial report season will drag down the U.S. stock market further decline, and the performance of Apple will become the top priority of attention.
financial report season is about to kick off, S&P may continue to fall
This week, JPMorgan Chase (JPM, stock price $105.98, market value $310.8 billion), Morgan Stanley (MS, stock price $78.93, market value $135.5 billion), Citigroup (C, stock price $42.19, market value $8 Large banks such as Wells Fargo (WFC, stock price of US$41.79, market value of US$158.5 billion), as well as giant companies such as Pepsi (PEP, stock price of US$161.61, market value of US$223 billion), Delta Air Lines (DAL, stock price of US$29.39, market value of US$18.845 billion) will release financial reports, officially kicking off the US stock financial report season.
According to Bloomberg's latest rapid market survey (MLIV Pulse Survey), more than 60% of 724 respondents believe that the latest quarter's company financial report will drag down the S&P 500 index further decline. Since the beginning of this year (as of the close of October 7), the S&P 500 has fallen by 24.12%, which means the index is very likely to usher in its worst performance since the 2008 financial crisis.
Image source: Google Finance
More than half of the respondents believe that the valuation of US stocks will continue to deteriorate. Of these, about 70% expect the S&P 500's P/E ratio to fall to its 2020 low (14 times), while a quarter believes it will fall to its 2008 low (10 times). Currently, the S&P 500 has a price-to-earnings ratio of about 16 times, which is lower than the average of the previous decade.
"The third quarter financial report will be disappointing, and it will obviously bring the risk of analysts lowering their expectations in the fourth quarter." Peter Garnry, head of securities strategy at Saxo Bank (Saxo Bank). "The main risk of the third-quarter financial report is that the cost of living crisis affects consumer goods demand" and the rising wages erode the profits of companies.
survey shows that investors expect inflation and recession to become the dominant keywords in the earnings call, with only 11% of respondents saying that corporate management will mention the word "confidence".
"Based on the weakness and uncertainty of the economic environment, as well as the tightening of the monetary policy , I expect to see more cautious and negative performance guidance," said James Atey, head of investment at British asset management company Abrdn.
According to financial data company FactSet, analysts have lowered their third-quarter profit expectations for the S&P 500 component , more than double the average reduction in the past decade. In addition, analysts lowered their expectations for the fourth quarter and 2023.
Apple has become the focus of attention
Survey shows that 60% of respondents believe that the company that needs to be paid attention to this financial report season is Apple (AAPL, stock price of US$140.09, market value of US$2.25 trillion), and the company will release its financial report on October 27.
As the most weighted component of the S&P 500 index, Apple's performance will reflect the impact of a series of key factors on corporate operations, such as changes in consumer demand, supply chain situation, strong US dollar and rapidly rising interest rates, which can be regarded as the weather vane of the entire economic environment.
Since the beginning of this year, Apple's stock price has fallen by 23.03%, but against the backdrop of the general sharp drop in technology stock , Apple's performance is better than other technology giants. Amazon (AMZN, stock price of US$114.56, market value of US$1.17 trillion), Google (GOOGL, stock price of US$98.68, market value of US$1.29 trillion), Microsoft (MSFT, stock price of US$234.24, market value of US$1.75 trillion) have all fallen by more than 30%.
Image source: Google Finance
Apple launched the latest iPhone 14 series mobile phones on September 8, but did not usher in the expected popularity, showing the weakness of consumer demand.According to Bloomberg on September 28, Apple has canceled its plan to increase production of 6 million iPhone 14s and has determined its goal of producing about 90 million iPhone 14s by the end of 2022, which is the same as last year's production.
html At the end of September, Bank of America rare downgraded its rating on Apple's stock, downgraded from "buy" to "neutral", and its target price was downgraded from $185 to $160, while also lowering its performance expectations for Apple in fiscal 2023.In addition to weakening demand for iPhone 14, Bank of America pointed out that Apple's downside risks also include a decline in gross profit in the US dollar and pressure on exchange rate . In fact, this is also a common risk faced by large American companies. Data shows that overseas revenue accounts for about one-third of the overall revenue of S&P 500 companies. The recent strong rise in the US dollar will cause this part of revenue to decline after conversion.
After Apple, the company that respondents paid the most attention to was JPMorgan Chase. In addition to the financial market situation reflected by JPMorgan's performance, investors are eager to hear what JPMorgan's management thinks about the economic outlook. The bank's CEO Jamie Dimon (Jamie Dimon) often expresses views on the economic situation and policies, and has a great influence. In June this year, he predicted that a "hurricane" in the US economy was about to arrive, warning investors to prepare.
In addition, the US consumer price index data released this Thursday (October 13) will also become the focus of attention. Investors will predict the next rate hike of the Federal Reserve based on this inflation data.
As of press time, CME’s FedWatch tool showed that the probability of the Federal Reserve raising interest rates again by 75 basis points at its November interest rate meeting was 77.6%.
(Cover image source: Photo by Zhang Jian, reporter of Meike (data photo))
Disclaimer: The content and data of this article are for reference only and do not constitute investment advice. Verification is made before use. Operations based on this are at your own risk.
Daily Economic News
