Weekly Market Outlook: December 18, 2023

Market Watch: Key Events and Earnings Reports Ahead of Christmas Break

As the holiday season approaches, investors are gearing up for an eventful week ahead, with a mix of economic releases and earnings reports set to influence market sentiment. This article provides a comprehensive overview of the key events and earnings reports scheduled for the week leading up to Christmas, shedding light on critical indicators like the core PCEPCE stands for Personal Consumption Expenditures. It is a measure of how much money households spend on goods and services. More inflation gauge, FedEx’s financial performance, and other significant developments in the market.

The Economic Calendar: Housing, Manufacturing, and Consumer Sentiment

The upcoming week’s economic calendar is packed with essential releases, spanning areas such as housing, manufacturing, and consumer sentiment. These indicators will provide valuable insights into the state of the economy just ahead of the Christmas holiday. However, one release stands out among the rest—the monthly update on core PCE.

The core PCE inflation gauge (Thursday, December 21, 2023) is closely monitored by the Federal Reserve as its preferred measure of inflation. In November, it is forecasted to show a modest 0.2% month-over-month increase. This uptick is anticipated to bring the year-over-year inflation rate down to +3.4%. Crucially, this figure would imply a six-month annualized inflation rate slightly above 2.0%, aligning with the Fed’s target. If the core PCE report aligns with these expectations, it could fuel discussions about potential interest rate adjustments in the near future.

At the time of writing, federal funds futures trading indicates a 95% probability that the Fed’s target rate will be lower than the current level after the May FOMC meeting. This suggests that lower interest rates may be on the horizon if economic conditions continue to evolve as expected.

Internationally, the Bank of Japan’s meeting scheduled for the upcoming week (Monday, December 18, 2023) also holds significant potential for market-moving news. Speculations abound regarding the possible conclusion of the negative interest rate era in Japan.

FedEx Earnings Report: Revenue, EPS, and Cost Savings Program

FedEx (FDX), a major player in the shipping industry, is set to release its fiscal Q2 earnings report on Tuesday, December 19, 2023. The market expects the company to report revenue of $22.4 billion and earnings per shareEarnings per share (EPS) is a fundamental financial metric that provides valuable insights into a company's profitability. This widely used indicator helps investors and analysts g... More (EPS) of $4.20. Furthermore, it is anticipated that FedEx generated an adjusted operating marginThe operating margin is a critical financial metric that measures a company's ability to generate profit through its core operations. It provides valuable insights into a company's... More of $1.49 billion during the quarter, translating to an operating margin rate of 6.57%. The report is also expected to include free cash flowThe cash flow statement provides a detailed overview of the cash inflows and outflows of a company over a specified period of time. It includes cash received from operations, inves... More figures of $695 million.

Bank of America has been closely monitoring FedEx’s performance ahead of its earnings report. The firm notes that pre-holiday shipping volumes have been moderately in line with targets, albeit somewhat subdued. One focal point for investors will be FedEx’s ability to enhance returns while executing its ambitious $4 billion cost savings program by Fiscal Year 2025. Additionally, market observers are keen to see if FedEx maintained pricing discipline, especially in light of competitor UPS’s recent efforts to capture market share through aggressive rebate strategies.

A substantial increase in profits could serve as a catalystA stock catalyst is an engine that will drive your stock either up or down. A catalyst could be news of a new contract, SEC filings, earnings and revenue beats, merger and acquisit... More for a higher share price for FedEx. Watch for signs of improving trends in package volumes and margins, which could help narrow the valuation gap between FedEx and its rival, UPS.

Upcoming Events and Earnings Reports

While the economic calendar is relatively light due to the impending Christmas holiday, several noteworthy events and earnings reports are on the horizon:

Bank of America Hydrogen Conference (December 18 & 19): This event will feature presentations by Plug Power (PLUG) and CF Industries (CF), offering insights into the hydrogen industry.

Earnings Reports (December 18-21): The week ahead includes earnings reports from various companies, with notable releases as follows:

• Monday, December 18, 2023: HEICO (HEI)
• Tuesday, December 19, 2023: FedEx (FDX), Accenture (ACN), FactSet (FDS), and FuelCell Energy (FCEL).
• Wednesday, December 20, 2023: General Mills (GIS), Micron Technology (MU), Toro (TTC), and Winnebago (WGO).
• Thursday, December 21, 2023: CarMax (KMX), Paychex (PAYX), Carnival (CCL), and Nike (NKE).

These earnings reports will be closely watched by investors, offering insights into the financial health and outlook of these prominent companies as the year draws to a close.

Bottom-line: As the holiday season approaches, the financial markets remain active, with key economic releases and earnings reports on the horizon. The core PCE inflation gauge, FedEx’s earnings report, and other events will provide critical insights into economic trends and corporate performance. These developments will continue to shape market sentiment and influence investment decisions as we head into the Christmas break.