New Zealand markets closed
  • NZX 50

    12,066.79
    -73.87 (-0.61%)
     
  • NZD/USD

    0.7353
    -0.0021 (-0.29%)
     
  • NZD/EUR

    0.6043
    -0.0003 (-0.05%)
     
  • ALL ORDS

    7,105.70
    +56.30 (+0.80%)
     
  • ASX 200

    6,834.00
    +56.20 (+0.83%)
     
  • OIL

    62.96
    -0.57 (-0.90%)
     
  • GOLD

    1,761.30
    -14.10 (-0.79%)
     
  • NASDAQ

    12,828.31
    0.00 (0.00%)
     
  • FTSE

    6,651.96
    -7.01 (-0.11%)
     
  • Dow Jones

    31,402.01
    -559.85 (-1.75%)
     
  • DAX

    13,879.33
    -96.67 (-0.69%)
     
  • Hang Seng

    29,193.36
    -880.81 (-2.93%)
     
  • NIKKEI 225

    28,966.01
    -1,202.26 (-3.99%)
     
  • NZD/JPY

    78.0410
    -0.2290 (-0.29%)
     

Fed meeting, Big Tech earnings, Q4 GDP: What to know in the week ahead

Emily McCormick
·Reporter
·11-min read

Traders will have no shortage of events to consider this week, with the Federal Open Market Committee’s January policy meeting and bevy of major corporate earnings results and economic data releases all on deck.

January FOMC meeting

In recent public statements, Federal Reserve officials have signaled a commitment to keeping their feet on the gas pedal with respect to their crisis-era monetary policy support.

Namely, Fed officials have signaled that interest rates would stay at their current near-zero level through at least 2023, and that their aggressive asset purchase program would continue at the current rate of $120 billion per month until “substantial further progress” is made in the economic recovery.

“We think that it’s a very high bar to the Fed withdrawing stimulus at this point. And if you listen to what they’re saying, they’re saying that the downside to withdrawing stimulus more quickly is much greater to the downside to keeping on stimulus perhaps a bit too long,” Jon Adams senior investment strategist at BMO Capital Markets, told Yahoo Finance. “It does appear the Fed is looking for inflation to run for at least 12 months above that 2% target before they’ll consider raising rates.”

As a result, many economists are expecting this month’s FOMC meeting to be yet another buffer meeting, as officials wait to ascertain the strength of the economic recovery once the COVID-19 vaccine is widely distributed and the pandemic comes under control.

Fed Chair Jerome Powell himself said during public remarks earlier this month that he currently sees the U.S. economy as “far from our goals,” and added that the Fed was looking to “be careful not to exit too early.”

“We expect no change in policy stance and little change in the FOMC statement,” Morgan Stanley economist Ellen Zentner said in a note on Thursday. “Expect Chair Powell to stress these are early days and a change in the purchase program remains some ways off. We continue to expect an announcement of tapering at the December meeting to start January 2022.”

Others noted that Fed officials would likely brush off concerns over the recent rise in bond yields and inflation expectations, as historic amounts of stimulus generate massive liquidity infusions in the market but also improve prospects for a strong economic recovery.

“Inflation will be key to tapering as well as tightening, and most officials appear skeptical that a few strong quarters for growth will suddenly lead to a sustained pickup in the trend. We are skeptical as well,” TD Securities economists said in a note Friday.

What will change at this first Fed meeting of the new year, however, will be the cast of voting members as part of the FOMC. The new voting members for the 2021 calendar year will be Chicago Fed’s Charles Evans, San Francisco Fed’s Mary Daly, Atlanta Fed’s Raphael Bostic, Richmond Fed’s Thomas Barkin and Fed Governor Christopher Waller. The new composition of voting members, however, will be unlikely to meaningfully impact policy decisions this year, given the consensus among Fed officials to maintain their current policy positioning while the coronavirus pandemic continues to impact the economy.

Q4 GDP

One of the most comprehensive reports on the U.S. economy at the end of last year will come on Thursday, in the form of the Commerce Department’s advance fourth-quarter gross domestic product (GDP) report.

Economists largely expect to see another relatively strong quarter-over-quarter increase in U.S. economic activity at the end of last year, albeit with slowing improvements coming in 2021.

Specifically, consensus economists anticipate U.S. economic activity rose at an annualized 4.2% rate in the final three months of 2020, pulling back significantly after the third quarter’s record 33.1% spike. That in turn had followed a record 31.4% plunge in the second quarter, leaving the economy still short of its pre-pandemic output levels.

“Expectations have been lowered marginally on the back of weaker consumer spending numbers and falling employment in December, but we should still expect a 4%+ growth figure,” James Knightley, ING chief international economist, wrote in a note Friday. “We are more worried about Q1 given the loss of economic momentum following the latest COVID spikes and the reintroduction of containment measures in many areas.”

The biggest contributor to U.S. economic growth — the consumer — weakened notably especially in December, and net payrolls turned negative for the first time since April. Retail sales dropped on a month-over-month basis for each of October, November and December largely as a result of declining services spending, though they remained higher year-over-year.

All told, personal consumption in the fourth quarter likely increased at a 3.2% annualized pace over the prior quarter, also decelerating sharply from the record 41.0% rate from the September quarter.

Other components of GDP are likely to be mixed, reflecting the still-turbulent economic backdrop caused by the pandemic.

“Non-residential fixed investment was likely mixed with continued recovery in business equipment investment and IPP [intellectual property products] but another decline in structures investment,” Lewis Alexander, Nomura U.S. chief economist, said in a note. “Residential investment likely contributed solidly again to top line growth in Q4, bolstered by elevated demand. Monthly trade data suggest firm gains in both imports and exports, but more drag from net exports considering the better performance for imports.”

“Moreover, while federal government spending likely rose during the quarter, we expect state and local government spending to decline for the third consecutive quarter,” he added. “Finally, signs of inventory rebuilding in Q4 should result in a roughly 1.4 [percentage point] contribution to top line growth from changes in private inventories.”

“Altogether, we expect the Q4 report to highlight continued recovery in 2020, but believe the within-quarter pattern of activity is consistent with a relatively steep loss of momentum heading into 2021,” he said.

Facebook, Apple, Tesla earnings

This week will mark one of the busiest for fourth-quarter earnings season, with a number of heavily weighted companies in the S&P 500 poised to report results.

As of Friday, 86% of the S&P 500 companies that had already reported results had posted a positive earnings surprise for the fourth quarter, according to an analysis from FactSet. While the vast majority of S&P 500 companies still need to report their actual results, assuming that percentage held, it would represent the greatest percentage of index components reporting a positive earnings surprise since FactSet started tracking the metric in 2008.

But while earnings are coming in better than feared, they are still lower compared to the same quarter a year ago. S&P 500 companies are still on track to post a fourth straight quarter of year-over-year drop in profits, according to FactSet.

A number of the Big Tech companies that are reporting results this week likely held up more strongly, however, as many were beneficiaries of last year’s stay-at-home phenomena.

Facebook CEO Mark Zuckerberg testifies before the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law on ?Online Platforms and Market Power? in the Rayburn House office Building on Capitol Hill, in Washington, U.S., July 29, 2020. Mandel Ngan/Pool via REUTERS
Facebook CEO Mark Zuckerberg testifies before the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law on ?Online Platforms and Market Power? in the Rayburn House office Building on Capitol Hill, in Washington, U.S., July 29, 2020. Mandel Ngan/Pool via REUTERS

Facebook (FB), Apple (AAPL) and Tesla (TSLA) are each slated to report quarterly earnings results Wednesday after market close, offering a look at how some of the companies with last year’s best performing stocks fared at the close of the year.

Facebook’s core advertising revenue had already grown 22% year-over-year in the third quarter, and is expected to see yet another top-line acceleration in the final quarter, as advertising around the holiday shopping season fueled results. Consensus analysts are looking for fourth-quarter revenue growth of 25%.

“We look for FB to accelerate revenue growth this year on the back of a strong digital ad market, and begin to monetize newer products including FB Shops/IG Checkout and Reels,” JPMorgan analyst Doug Anmuth, who rates Facebook shares at Overweight, wrote in a note.

Expectations are even higher for Apple, which is anticipated to post its first-ever $100 billion revenue quarter as the launch of the new iPhone 12 catapulted sales higher. The company released the iPhone 12, 12 Mini, 12 Pro and 12 Pro Max in October, or a month later than usual this year, due to the pandemic. As a result, any benefits from these sales were pushed into Apple’s fiscal first quarter ending in December.

Finally, Tesla will also post results on Wednesday, in the company’s first quarterly report as a member of the S&P 500. As usual, the company pre-reported quarterly deliveries in early January, which came in at a quarterly record of 180,570 and brought its full-year deliveries just trivially below the half-million target Wall Street had homed in on for the year.

One main focus of Tesla’s earnings report and call will likely be on the company’s manufacturing capacity to meet demand, with production facilities near Berlin and in Texas each under way. Tesla has also been ramping production at its about one-year-old Shanghai Gigafactory for deliveries into China, the world’s largest electric-vehicle market. Updates on other longer-term goals will also be of interest, after Tesla CEO Elon Musk introduced a goal of having Tesla produce its own tabless batteries in the coming years and reduce the cost of production enough to introduce a $25,000 car.

Shares of Tesla have risen more than 640% over the past 12 months. Facebook and Apple shares have increased 24% and 75% over that period, respectively.

Earnings Calendar

Monday: Kimberly-Clark (KMB) before market open

Tuesday: Raytheon Technologies (RTX), Johnson & Johnson (JNJ); General Electric (GE), DR Horton (DHI), 3M (MMM), Lockheed Martin (LMT), American Express (AXP), Verizon (VZ) before market open; Microsoft (MSFT), Starbucks (SBUX), Advanced Micro Devices (AMD), Texas Instruments (TXN), Capital One (COF) after market close

Wednesday: Abbott Laboratories (ABT), Boeing (BA), The Progressive Corp (PGR), Blackstone (BX), Anthem (ANTM), VF Corp (VFC), AT&T (T), Nasdaq (NDAQ) before market open; Facebook (FB), ServiceNow (NOW), Ameriprise Financial (AMP), Tesla (TSLA), Apple (AAPL), Las Vegas Sands (LVS), Whirlpool (WHR) after market close

Thursday: Xilinx (XLNX), Dow Inc. (DOW), T Rowe Price Group (TROW), McDonald’s (MCD), Comcast (CMCSA), McCormick & Co (MKC), The Sherwin-Williams Co. (SHW), United States Steel Corp (X), American Air Lines (AAL), Southwest (LUV), JetBlue (JBLU), Mastercard (MA), Altria (MO) before market open; Skyworks Solutions (SWKS), Visa (V), Mondelez International (MDLX) after market close

Friday: Colgate-Palmolive (CL), L3Harris Technologies (LHX), Chevron (CVX), Honeywell (HON), Eli Lilly and Co. (LLY), Synchrony Financial (SYF), Caterpillar (CAT), Charter Communications (CHTR) before market open

Economic Calendar

Monday: Chicago Fed National Activity Index, December (0.1 expected, 0.27 in November); Dallas Fed Manufacturing Activity Index, January (12.0 expected, 9.7 in December)

Tuesday: FHFA House Price Index, month-over-month, November (0.6% expected, 1.5% in October); S&P CoreLogic Case-Shiller 20-City Composite Index, year-over-year, November (7.95% in October); S&P CoreLogic Case-Shiller 20-City Composite Index, month-over-month, November (0.85% expected, 1.61% in October); Conference Board Consumer Confidence, January (89.0 expected, 88.6 in December); Richmond Fed Manufacturing Index, January (19 in December)

Wednesday: MBA Mortgage Applications, week ended January 22 (-1.9% during prior week); Durable Goods Orders, December preliminary (1.0% expected, 1.0% in November); Durable Goods Orders excluding transportation, December preliminary (0.5% expected 0.4% in November); Non-defense Capital Goods Orders excluding aircraft, December preliminary (0.5% in November); Non-defense Capital Goods Shipments excluding aircraft, December preliminary (0.5% in November); FOMC Decision

Thursday: Advance Goods Trade Balance, December (-$83.0 billion expected, -$84.4 billion in November); Wholesale Inventories, month-over-month, December preliminary (0.0% in November); GDP annualized, quarter-over-quarter, 4Q first print (4.2% expected, 33.4% in third quarter); Personal Consumption, quarter-over-quarter, 4Q first print (3.2% expected, 41.0% in third quarter); Core Personal Consumption Expenditures, quarter-over-quarter, 4Q first print (1.2% expected, 3.4% in third quarter); Initial jobless claims, week ended January 23 (880,000 expected, 900,000 during prior week); Continuing claims, week ended January 16 (5.000 million expected, 5.054 million during prior week); Leading Index, December (0.2% expected, 0.6% in November); New Home Sales, December, month-over-month, (1.1% expected, -11.0% in November); Kansas City Fed Manufacturing Activity, January (14 in December)

Friday: Personal income, December (0.1% expected, -1.1% in November); Personal spending, December (-0.5% expected, -0.4% in November); Employment cost index, 4Q (0.5% expected, 0.5% in 3Q); PCE Core Deflator, month-over-month, December (0.1% expected, 0.0% in November); PCE Core Deflator, year-over-year, December (1.3% expected, 1.4% in November); MNI Chicago PMI, January (58.3 expected, 59.5 in December); Pending home sales, month-over-month, December (-1.0% expected, -2.6% in November); University of Michigan Consumer Sentiment, January final (87.7 in prior print)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

Read more from Emily:

Find live stock market quotes and the latest business and finance news

For tutorials and information on investing and trading stocks, check out Cashay

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and reddit.