Wall Street Breakfast: The Week Ahead
Economic reports in the week ahead
Investors are likely to see some more early warnings shots next week on Q2 earnings reports and back-half guidance revisions to follow on the recent updates from General Motors (GM), Kohl’s (KSS), and Micron (MU) that rattled their respective sectors. Watch the airline sector in particular, with monthly traffic reports likely to include some new forecasts from major players like Southwest Airlines (LUV), American Airlines Group (NASDAQ:AAL), and Delta Air Lines (DAL). The economic calendar includes the factory orders report on July 5, the JOLTS job openings release on July 6, and the employment report on July 8. The U.S. economy is anticipated to have added 250K jobs in June, which is a pace of job additions that is close to the pre-pandemic level. FOMC minutes will also be released next week and there will be a smattering of Fed speakers as the guessing on the central bank’s tightrope walk with inflation and interest rates continues.
Earnings spotlight: Wednesday, July 6 – Simulations Plus (NASDAQ:SLP).
IPO watch: Analyst ratings will start on Phoenix Motor (NASDAQ:PEV) following the expiration of the quiet period. IPO lockup expirations hit on July 6 for Amylyx Pharmaceuticals (NASDAQ:AMLX), CinCor Pharma (NASDAQ:CINC), Vigil Neuroscience (VIGL), and Hour Loop (NASDAQ:HOUR). CinCor is the only one of the four trading above its IPO pricing level.
Dividend watch: Companies forecast to boost their quarterly dividend payout include John B Sanfilippo (JBSS) to $0.75 from $0.70, Essential Utilities (NYSE:WTRG) to $0.2858 from $0.2682, J.M. Smucker (SJM) to $1.05 from $0.99, and Clorox (NYSE:CLX) to $1.20 from $1.16.
Jobs report: The U.S. jobs report for June is expected to show 250K jobs were added to the economy during the month and the unemployment rate held steady at 3.6%. Bank of America is on the high side of the estimates with a NFP forecast for 325K jobs adds after noting that its most recent data on the labor market leading up to the report pointed to ongoing strength. The ongoing strength of labor demand is anticipated to translate into another month of solid wage growth. The firm sees a third consecutive monthly increase and wages being reported at a level 5.0% higher than a year ago.
Interest rate watch: Traders will pore over the minutes from the last FOMC meeting as they assess the trajectory of interest rate increases. Bank of America’s latest forecast is for the Fed to deliver another 75 point rate hike at the July meeting, followed by a 50 point increase in September. Following that, the firm expects the Fed to move in more traditional 25 point increments. “Based on the outcome of the June FOMC meeting, including the June SEPs, we suspect that most FOMC participants have a similar rate path in mind, and we will look for signs of confirmation in the June minutes,” previewed BofA.
Levi Strauss earnings preview: Levi Strauss (LEVI) reports earnings, with analysts projecting revenue of $1.43B and EPS of $0.23 will be reported. Following the sharp drop in share price, Levi Strauss (LEVI) was recently added to Bank of America’s list of top SMID cap ideas list for the second half. The firm thinks the stock will continue to benefit from the casualization/denim cycle as the apparel seller continues to gain market share position. “Furthermore, from a margin perspective, we expect outsized growth from margin accretive categories such as women’s, tops, international, and Beyond Yoga will help offset margin headwinds from a normalization in promotional activity,” updated BofA.
Corporate events: Ford (NYSE:F) will report monthly U.S. sales on July 5. Investors will be watching for the tally of all-electric F-150 Lightnings that were moved. Shareholders with Social Capital Suvretta Holdings Corp III (NASDAQ:DNAC) will meet on July 6 to vote on the deal to take ProKidney public in a SPAC deal. Social Capital Suvretta Holdings Corp III has Chamath Palihapitiya as a backer. On July 7, Advent Technologies Holdings (NASDAQ:ADN) will host a virtual Investor Day and Cidara Therapeutics (NASDAQ:CDTX) will host a virtual research and development day. The twice-delayed Spirit Airlines (SAVE) shareholder vote on the planned sale to Frontier (ULCC) is set for July 8. Watch JetBlue Airways (JBLU) as well as the drama plays out. Read more about the events next week that could impact shares prices in Seeking Alpha’s Catalyst Watch.
Box office preview: The fifth installment in the Universal (CMCSA) Despicable Me/Minions franchise will roll into theaters this weekend, with Minions: The Rise of Gru expected to lead the box office. Romance film Mr. Malcolm’s List from Bleecker Street will also debut, while holdovers Top Gun: Maverick and Elvis are expected to do well over the three-day holiday. As of last weekend, the U.S. box office haul was up 263% from last year to $3.63B in ticket sales. “Even with a third-less content, summer 2022 is rolling along as audiences and theaters have found their cinematic groove,” noted Exhibitor Relations analyst Jeff Bock. Notably, Maverick has moved up to become the No. 14-grossing domestic film of all time, with its $534.5M total passing Rogue One: A Star Wars Story.
Barron’s mentions: Income investing makes the cover this week. Yields across the board have pushed higher as the market weakness and the Fed’s battle with inflation has sent investors scrambling. Some of the stocks of interest to dividend hunters mentioned by the publication include Alerian MLP (NYSEARCA:AMLP), Kayne Anderson NextGen Energy & Infrastructure (KMF), Salient Midstream & MLP (NYSE:SMM), Verizon (VZ), AT&T (T), JPMorgan Chase (JPM), Goldman Sachs Group (GS), Morgan Stanley (MS), and Wells Fargo (WFC). Opportunities with junk bonds, REITs, and TIPS are also broken down in the new higher-rate environment. “It’s still a challenging macro backdrop, given high inflation, but most of that is priced into the market,” noted Nuveen Chief Investment Officer Anders Persson. “The yield profile is a lot more interesting,” he added.
Sources: EDGAR, Bloomberg, CNBC, Reuters, The Hollywood Reporter