Nasdaq And 3 Potential Pitfalls: Weekly Nifty 9

ISM New Orders Index registered 64.3% in April, down 3.7 percentage points compared to the 68% reported in March. This indicates that new orders grew for the 11th consecutive month. “All of the six largest manufacturing sectors — Fabricated Metal Products; Chemical Products; Food, Beverage & Tobacco Products; Transportation Equipment; Computer & Electronic Products; and Petroleum & Coal Products — expanded at strong levels,” says Fiore.

ISM’s Employment Index registered 55.1 percent in April, 4.5 percentage points lower than the March reading of 59.6 percent. “The Employment Index grew for the fifth month in a row. Of the six big manufacturing sectors, four (Fabricated Metal Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Computer & Electronic Products) expanded. Continued strong new-order levels, low customer inventories, and expanding backlogs indicate potential employment strength for the balance of the quarter. For the eighth straight month, survey panelists’ comments indicate that significantly more companies are hiring or attempting to hire than those looking to reduce headcounts,” says Fiore.

Research Report Excerpt #6

Finom Group is anticipating strong rises in the PPI and CPI readings this coming week. We also believe that is the majority expectation, and as such, surges in prices should be recognized as commonplace and part of the typical “base effect” previously discussed. We should expect the base effects of Consumer Price inflation over the coming 3-5 month period to show up in CPI. The chart below identifies the clear inverse from the  2020 trough (negative CPI) in the 2021 forecast.

Research Report Excerpt #7

Based on the past week’s released earnings amongst S&P 500 companies, Finom Group is upwardly revising our FY21 EPS outlook. Our former EPS outlook called for $185 per share in earnings for the calendar year and we have raised this outlook to reflect $193 in FY21 EPS. We believe that the abundant deleveraging that has taken place at both the corporate and household level will lend itself to that much more consumer spending and earnings power in the back half of 2021.

Cutting costs and boosting prices for products seems to be working well for companies already.  Net margins (ex-Financials) have jumped to a record high thus far. It’s clear that commodity cost impacts are not negatively reflected in margins, as they are largely offset by deleveraging costs elsewhere. Don’t lose sight of this metric should PPI and CPI cause market disruptions in the coming week.

Research Report Excerpt #8

Buybacks generally prove another tailwind for earnings growth, beyond that of improving gross margins through deleveraging and streamlining of business operations. Least we forget the impact of a weaker dollar on earnings growth, which also provides a boost to the bottom line? The chart below shows the dollar has broken the 2021 uptrend line as of this past week, to the downside!

Research Report Excerpt #9

Nonetheless, the biggest risks to the markets and for investors will generally come from the macro-economic trends. Some of the bigger risks ahead include the following:

  • Tax increases: The Biden Administration has outlined plans for the $2.25 trillion American Jobs Plan and the $1.8 trillion American Family Plan, and corporate and individual tax increases are the potential ways to pay for these stimulus packages. The “consensus” view is that any eventual tax increases will not be as large as initially proposed. Any divergence from that “assumption” would be a market negative.
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