Preview of the week starting 13Jun2022 - Fed announces interest rate hike this week ...

Holidays

 

No public holidays in USA, China and Hong Kong for week starting 13 June 2022.

 

 

News Summary (week ending 12Jun22)

 

US credit card revolving debts over $1.103T. Over-leverage is known to send both rich and poor into financial ruin. Let us spend within our means and invest with what we can afford to lose.

 

Another has warned about the economic turmoil from energy market volatility. JPMorgan's CEO has also warned of economic hurricane in lieu of the surging oil prices.

 

Treasury Secretary Janet Yellen appeared before lawmakers to review her annual budget. On Wednesday, Ms. Yellen said the White House is looking into reconfiguring tariffs on Chinese imports as a way to ease inflation. 

 

Strike from South Korean truckers can affect the economy and lead to supply chain bottlenecks. Be it energy, groceries, electronics or cars ... This can be painful if it is dragged out.  Hyundai is likely to be affected.

Given the current climate, inflation should worsen in the backdrop of energy, food, climate and supply chain challenges. Let us prepare accordingly.

 

 

Economic Calendar

 

Economic Calendar for the week starting 13Jun22

At the same time, let us monitor China's YoY Industrial Production.  Being the world's factory, its production sends a clear message on how the global economy is doing.  Due to the recent Covid19 lock down, it is expected to take a hit with major Chinese cities entering lockdown.  US will announce their manufacturing index too later in the week.  Thus, we can have a good indication of the production sentiments.

 

Initial Jobless Claims will also be published on Thursday and this will provide important update of the measures taken by the Fed as they manage both unemployment and rising inflation amidst this volatile market.  

 

The most important event will be the Fed's decision on interest rate hike.  While the market has "factored" in the rate hike, but how aggressive will the Fed be will be key.  The market is expected to remain nervy till the announcement is made.  A 50 basis points hike is expected but a 75 basis points or more hike would not be too surprising.  The market looks to be entering yet another volatile week.

 

Earnings Calendar

 

Earnings Calendar for the week starting 13Jun22

 

For the coming week, there are few earnings that are of interest for me.  Most of the summary and company profiles are taken from investing dot com website.

Oracle - the market has a forecast of EPS of 1.37 & Revenue of 11.62B.  Will Oracle be able to beat the market forecast?  With a drop of almost 40% from 52 week high, the coming earnings will be important for the business to stop its decline.

Oracle Corporation (Oracle) provides products and services that address enterprise information technology (IT) environments. The Company’s businesses include cloud and license, hardware and services. Its products and services include applications and infrastructure offerings that are delivered through a variety of IT deployment models. Its customers include government agencies, educational institutions and resellers. Using Oracle technologies, its customers build, deploy, run, manage and support their internal and external products, services and business operations. Its Oracle Cloud Services offerings includes Oracle Software as a Service (SaaS) and Oracle infrastructure as a service (IaaS) offering, which provides a stack of applications and infrastructure services delivered via cloud-based deployment models. Oracle Cloud Services integrate the software, hardware and services on a customer’s behalf in a cloud-based IT environment.

Kroger - This is a company of interest for me personally as Buffett's Berkshire has been increasing their ownership in this company.  The market has a forecast of 1.29 for EPS and revenue of 43.85B.

The Kroger Co. is a food retailing company that owns and operates supermarkets, multi-department stores and fulfillment centers throughout the United States. The Company manufactures and processes some of the food for sale in its supermarkets. The Company operates approximately 2,800 owned or leased supermarkets, distribution warehouses and food production plants through divisions, subsidiaries, or affiliates. These facilities are located throughout the United States. The Company also owns store equipment, fixtures, and leasehold improvements, as well as processing and food production equipment. The Company offers personalized, order online, pick up at the store services and also provides home delivery services. In addition, the Company also retails products online. The Company's brands include Private Selection, The Kroger, Big K, Check This Out, Heritage Farm, Simple Truth and Simple Truth Organic.

Adobe - the Forecast EPS and dividend are 3.31 and 4.35B respectively.

With a drop of over 40% from the 52 week high of 699.54, it leaves to be seen how this company will navigate in the current economic climate.

Adobe Inc., formerly Adobe Systems Incorporated, is a software company. The Company offers products and services used by professionals, marketers, knowledge workers, application developers, enterprises and consumers for creating, managing, measuring, optimizing and engaging with compelling content and experiences. It operates through three segments: Digital Media, Digital Experience and Publishing. Its Digital Media segment provides tools and solutions that enable individuals, small and medium businesses and enterprises to create, publish, promote and monetize their digital content. Its Digital Experience segment provides solutions and services for how digital advertising and marketing are created, managed, executed, measured and optimized. Its Publishing segment addresses market opportunities ranging from the diverse authoring and publishing needs of technical and business publishing to its legacy type and original equipment manufacturer printing businesses.

 

Market Outlook

 

1D chart of S&P500 as of 13 Jun 2022

 

From the chart above, we are likely to see a continuous decline in the coming week with the Stochastic indicator on downtrend.  The MACD indicator should confirm this downtrend in the coming days.  With the Fed's expected interest rate hike, the market is expected to be nervy.  Last week's inflation and unemployment data did not help the market.  War from Ukraine will continue to ply pressure as 20 million tons of grain could not leave Ukraine's harbour.  The recent surge in Covid with new variants is starting to put pressure back to the healthcare systems.  

Should the Fed take a more than aggressive approach to tackle the inflation, we can expect the decline of the market to be worsened.

Personally, it is a good time for me to start "identifying" great companies at fair valuations.  I will continue to set aside my "Cash for Crash" account.  It is not a good time to invest not because there are no good opportunities.  From the macro, it is pointing to "better" discounts available soon.  As always, let us research before investing.