Week Ahead: Fed meets, US GDP & Big Tech earnings

In the week ahead, the Federal Reserve holds its first meeting of the new year, with a range of new appointments in place, but a major policy change seems unlikely. Latest US GDP figures are released too. Forecasts are showing a mixed but optimistic outlook for Q4 2020’s numbers. Finally, earnings season continues with big tech firms leading the large caps in the latest earnings calls. 

FOMC meeting & press conference 

The first Federal Reserve meeting of 2021 goes ahead next week, off the back of newly inaugurated Joe Biden’s plans for additional stimulus and Treasury pick Janet Yellen’s calls to ‘act big’ on fiscal policy. $1.9 trillion is the ballpark figure for additional economic stimulus as the US seeks to shore up its economy against the continued Covid-19 onslaught. 

Four new regional Fed presidents are being rotated into the key voting spots this January – a rotation that could indicate a more dovish Fed for 2021. Out go Mester (hawk), Kashkari (dove), Kaplan (neutral) and Harker (neutral). In come Evans (dovish), Daly (neutral), Bostic (dove), and Barkin (neutral).  

New members provide a little interest, but the Fed is not about to change course, with Jay Powell making it clear that now is not the time to talk about tapering bond purchases, although some policymakers have suggested this may be warranted later in 2021. 

According to December 2020’s Fed meeting minutes, policymakers see rates staying in the 0%-0.25% currently targeted range until 2022, with a long-range estimate of 2.5%. No one foresees a rate hike this year. The status quo is very much in favour. According to Atlanta Fed President Bostic, a lot would have to happen for that to occur. 

There is a possibility of some increases in 2023, and maybe even as early as the second half of 2022. Three key points will be looked at: the health of small businesses, the effect of Fed lending programmes, many of which were closed by the end of 2020, and temporary vs permanent job losses. Overriding all of those though will be the continued response to the Covid-19 pandemic.  

Right now, it appears that the Fed will essentially be staying the course, committing to policy established across the course of 2020. 

Latest US GDP figures released

Like pretty much every advanced economy worldwide, the US was rocked by repeated blows from the Covid-19 pandemic. Thursday sees the advanced reading of Q4 GDP stats and the picture looks muddled to say the least. GDP diagnoses really depend on who you ask. 

The Atlanta Fed’s GDPNow model forecasts 7.4% annualised growth in Q4 as of its January 15th release, although this has been revised down from 8.7% forecast on January 8th., The New York Fed’s Nowcast model indicates 2.5% expansion.  

GDP growth will all depend on which economic sectors can back on their feet fastest. The US Commerce Department stated recently that consumer spending, the US main economic engine, had been revised upward slightly, alongside fixed business investments. However, these were tempered by a drop in exports. Services, where 61% of consumer spending goes, were down 17% year-on-year in third quarter of 2020 – can they recover? Time will tell.  

Earnings Season – Apple, Microsoft and Facebook lead the large caps 

Earnings season continues on Wall Street and this week the focus shifts to tech giants. Big tech seems like it’s getting bigger and bigger with lockdowns playing into the sector’s hands. Will earnings reports confirm that? 

Apple could be onto its first-ever $100bn quarter as the consensus EPS climbs 12% year-on-year to $1.40. Holiday shopping season falls squarely into Apple’s first-quarter reporting, and with a multitude of iPhone 12 models hitting markets – enough for 30% rise in production numbers this quarter – the indicators a bumper earnings call coming from the California tech giants are pretty strong. 

Microsoft has been a winner. If you’re working from home, you’ve probably had to grapple with Microsoft Teams, now the de facto business communications software of choice for businesses around the globe.  

Cloud computing solutions are helping Microsoft push record quarterly revenues. With the increased uptake of products like Azure, GitHub, SQL Server, and Windows Server, commercial cloud services have generated 31% more revenue y-o-y in the recent quarter, hitting $15.2bn. Combined with its other productivity-led software, i.e. Office, Teams, etc., Microsoft Q1 2021 revenues are on course to reach $40.2bn.  

Facebook’s reputation has taken a bit of a hit in recent months. The spread of fake news and hate speech on the platform is one of the major complaints levelled at the company. 

Despite this, Facebook reported 12% growth in active daily users in the last quarter, up to 1.82bn, while monthly active users grew at the same rate, reaching 2.74bn – just over a quarter of the global population. Ad revenues are up 22% yoy too, even in the face of a boycott from 1,000 prominent advertisers. 

See below for a full breakdown of the large caps reporting earnings this week. 

Major Economic Data 

Date  Time (GMT)  Currency  Event 
Mon Jan 25       
       
Tue Jan 26  7.00am  GBP  Unemployment Claims 
       
  3.00pm  USD  CB Consumer Confidence 
       
Wed Jan 27  12.30am  AUD  CPI q/q 
       
  3.30pm  USD  US Crude Oil Inventories 
       
  7.00pm  USD  FOMC Statement 
       
  7.00pm  USD  Federal Funds Rate 
       
  7.30pm  USD  FOMC Press Conference 
       
Thu Jan 28  1.30pm  USD  Advanced GDP q/q 
       
  1.30pm  USD  Advanced GDP Price Index q/q 
       
  3.00pm  USD  CB Leading Index m/m 
       
  3.30pm  USD  US Natural Gas Inventories 
       
Fri Jan 29  8.00pm  CHF  KOF Economic Barometer 
       
  1.30pm  CAD  GDP m/m 
       
  2.45pm  USD  Chicago PMI 
       
  3.00pm  USD  Pending Home Sales m/m 

 

Key Earnings Data 

Date  Company 
Mon 25 Jan  NIDEC  
  Philips 
  Kimberely-Clark 
  ADM 
  Graco Inc. 
  Brown & Brown 
  Equity Lifestyle Properties 
   
Tue 26 Jan  Microsoft 
  Visa 
  Johnson & Johnson 
  LVMH 
  Verizon 
  Novartis 
  NextEra Energy 
  Texas Instruments 
  Starbucks 
  AMD 
  United Technologies 
  American Express 
  General Electric 
  3M 
  Lockheed Martin 
  Canadian National Railway Co. 
  UBS 
  Capital One 
  Prologis 
  Rockwell Automation 
  PACCAR 
  D.R. Horton 
  Maxim Integrated Products 
  Epiroc 
  LG Household & Health Care 
  EQT AB 
  SGS SA 
  Varian 
  Boston Properties 
  Jacobs 
  Nitto Denko Corp. 
  Metro Inc. 
  C.H. Robinson 
  Disco Corp. 
  F5 Networks 
  W.R. Berkley 
  OBIC 
   
Wed 27 Jan  Apple 
  Tesla 
  Facebook 
  AT&T 
  Abbott Laboratories 
  Boeing 
  ServiceNow 
  Stryker 
  Lam Research 
  Anthem 
  Shin-Etsu Chemical Co. 
  Blackstone 
  Automatic Data Processing Inc. 
  Crown Castle 
  Norfolk Southern Corp. 
  Edward Lifesciences Corp. 
  FANUC CORPORATION 
  MediaTek 
  Lonza AG 
  CPR 
  General Dynamics 
  TE Connectivity Ltd 
  Las Vegas Sands Corp. 
  Amphenol Corp. 
  ITC Ltd. 
  Xilinx Inc. 
  V.F Corp 
  Corning Inc. 
  Axis Bank 
  Ameriprise Financial Inc. 
  Hormel Foods Corp. 
  Teradyne 
  Nasdaq Inc. 
  Nomura Research Institute 
  Essity AB 
  Cheil Industries 
  MarketAxess Holdings 
  Hologic 
  Omron  
  United Rentals 
  Rollins Inc. 
  PTC Inc 
  Duke Realty 
  Teledyne Technologies 
  Raymond James Financial 
  Cree Inc. 
  Packaging Corp. of America 
  Whirlpool 
  Textron 
  MKS Instruments 
  Hess Corp. 
   
Thu 28 Jan  Samsung 
  Mastercard 
  Comcast 
  Danaher 
  McDonald’s 
  Diageo 
  Mondelez 
  Altria 
  Sherwin-Williams 
  Air Products & Chemicals 
  Atlassian 
  Northrop Grumman 
  HOYA 
  Dow 
  Walgreens Boots Alliance 
  T. Rowe 
  Xcel Energy 
  ResMed 
  Fujitsu 
  Hyundai 
  Stanley Black & Decker 
  Southwest Airlines 
  Skyworks Solutions 
  McCormick & Co. 
  Rogers Communications 
  Arthur J. Gallagher & Co. 
  Canon 
  UPM-Kymmene 
  Dover Corp. 
  Advantest 
  Nucor 
  Western Digital 
  Celanese Corp. 
  NVR Inc. 
  Principal 
  Eastman 
  PulteGroup 
  WestRock Co. 
   
Fri 29 Jan  Eli Lilly 
  SAP 
  Honeywell 
  Keyence 
  Charter Communications 
  Caterpillar 
  SK Hynix 
  Colgate-Palmolive 
  M3 
  Atlas Copco 
  Ericsson 
  Johnson Controls 
  H&M 
  Phillips 66 
  BBVA 
  Simon Property Group 
  Astellas Pharmacy 
  Simens Gamsea 
  Komatsu 
  LyondellBasell 
  WeyerHauser 
  LG Electronics 
  Synchrony Financial 
  Church & Dwight Co. 
  Sun Pharmaceutical 
  SG Holdings 
  Telia 
  CAIXABANK 
  NEC 
  Svenska Cellulosa AB 
  Booz Allen Hamilton