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The Federal Reserve’s battle to combat inflation will dominate the conversation next week with the Federal Reserve holding a two-day meeting to set policy. Expectations are high that the FOMC will fire off a full point rate hike at the meeting after the consumer price report for August came in hotter than anticipated. Nomura now expects a terminal rate of 4.50% to 4.75% by February of 2023 before inflation is expected to cool rapidly, especially as the year-over-year comparisons to the war in Ukraine start to come into play. Other high-profile events during the week that are worth tracking include Nvidia (NASDAQ:NVDA) holding its closely-watched GTC conference at a time that shares are close to their 52-week low and earnings reports from General Mills (GIS) and Costco (COST).
Earnings spotlight: Monday, September 19 – AutoZone (AZO)
IPO watch: Biotech firm Jupiter Neurosciences (JUNS) is expected to start trading on September 21 and immune therapeutics developer Alopexx (ALPX) is expected to start trading on September 22. The IPO lockup period expires for AN2 Therapeutics (ANTX) on certain blocks of shares. Also next week, watch for more developments with the highly-anticipated Volkswagen AG (OTCPK:VLKAF) IPO. The German automaker has lined up commitments from notable investors, including the Norwegian sovereign wealth fund. The IPO will see 911M Porsche AG (OTCPK:POAHY) shares offered in a nod to the famous model. The shares will be split into 455.5M preferred shares and 455.5M ordinary shares, with only the preferred shares being listed. The book building process is anticipated to start early next week. Before the recent market downturn, Volkswagen was said to be seeking a valuation of around $70B to $85B. Across the Pacific, Tencent Music’s (TME) Hong Kong listing could start trading.
FOMC meeting preview: Economists widely expect the Federal Reserve’s policy-making committee to fire off a 75-point rate hike at the two-day meeting followed by a 50 basis point rate increase at the November FOMC meeting and a 25 basis point increase in December. However, futures trading on the federal funds rate contract is still implying a 16% probability that the Fed frontloads the rate cuts with a full point hike next week in a development that could rattle the markets. The statement from the FOMC is expected to indicate that monetary policy will be moving into restrictive territory for some time, while the tone from the Jerome Powell’s press conference could increase the view that a hard landing for the economy is more likely than a soft landing amid the overarching goal of price stability.
Rocket Lab Investor Day preview: Rocket Lab USA (NASDAQ:RKLB) will host an investor day on September 21. The event is expected to include an update on the Neutron launch vehicle development. On Wall Street, Rocket Lab (RKLB) was initiated as both a “near-term Buy Catalyst Call” and a long-term Buy at Deutsche Bank last week. The German firm thinks the RKLB investor day will include crucial updates on the backlog, customer wins, and path to profitability to give shares a quick boost. Rocket Lab is seen highlighting its competitive scale advantages from the resusable design and the use of its own launch pads. “The stock has underperformed over the past month (-19% vs. Nasdaq -6%) despite what we believe is a strong trajectory heading into year-end and 2023,” previewed Deutsche Bank. Cowen is also positive on Rocket Lab (RKLB) ahead of the investor day and views it as the launch provider after SpaceX (SPACE) that is most likely to achieve financial success. The firm forecasts 35% to 40% total sales CGR with adjusted EBITDA margin of ~20% by 2025 and cash flow turning positive in 2024.
What about oil? The macroeconomic backdrop has shifted the outlook for the global oil market with demand concerns in the mix. UBS notes that spot prices have fallen, forward curves have flattened, physical differentials have come in, and refining margins have weakened. The US, South Korea and Japan have reduced their Russian oil imports from ~1 mb/d to practically zero in recent months, while European Union nation which continue to import a little over 3 mb/d. UBS thinks that it is doubtful that India, Turkey and China, which have increased Russian oil imports by a little over 1 mb/d, can or will take more, which means that when the EU import embargo comes into effect the remaining export market for Russian oil will not be large. Even as the oil market’s structural outlook remains one of tightness, cyclical demand headwinds are expected to hold back prices. UBS lowered its near-term oil price forecasts, but sees a firmer market again after Q2 of 2023.
Eyes on Nvidia: One of the bigger event of the week could be the Nvidia GTC Technology Conference which will feature CEO Jensen Huang showing off the firm’s latest chip and software advancements. Some of the key sessions circled by analysts to watch are The Opportunity of the Industrial Metaverse that includes discussion with a Mercedes-Benz exec, a panel discussion including a top Lowe’s (LOW) exec on fully digitizing the world of home improvement, and an intriguing talk titled “The Rise of Transformer AI and Digital Twins in Healthcare.” Of note, Nvidia’s (NVDA) GTC conference has led to some quick updates in the past from Wall Street analysts and share price bounces.
Corporate events: Ralph Lauren Corporation (RL) will host an investor meeting on September 19 to provide investors with an update on the apparel giant’s strategic growth plan and key initiatives. Shares of Ralph Lauren have rallied in the past after similar events. Analysts are watching in particular if the apparel giant makes a change to its current mid-teens operating margin target for the medium term. Salesforce (CRM) will hold its annual DreamForce conference. Co-CEOs Marc Beioff and Bret Taylor are scheduled to speak, as well as Vimeo (VMEO) CEO Anjali Sud, NBA Hall-of-Famer Magic Johnson, and former U.S. Vice President Al Gore. Other companies with investor events scheduled for the week include Sumo Logic (SUMO), Omnicell (OMCL), Grainger (GWW), and iRhythm Technologies. Read about more events that could lead to share price moves in Seeking Alpha’s Catalyst Watch.
Notable conferences: A busy conference schedule next week is headlined by the Wells Fargo Consumer Conference featuring appearances by Walmart (WMT), Dollar Tree (DLTR), Five Below (FIVE), Express (EXPR), Target (TGT), Chewy (CHWY), Sysco (SYY), ThredUp (TDUP), and BJ’s Restaurants (BJRI). Other conferences of note include the J.P. Morgan 13th Annual U.S. All Stars Conference, the Deutsche Bank Leveraged Finance Conference, the Sidoti Fall Virtual Investor Conference, the Credit Suisse Houston Oil & Gas Conference, the Jefferies Pet Care & Wellness Conference, the Wolfe Research Fall Consumer Conference, and the D.A. Davidson 21st Annual Diversified Industrials & Services Conference.
Barron’s mentions: The cover story delves into the changing landscape for the streaming industry as Netflix (NASDAQ:NFLX) and Disney+ (NYSE:DIS) turn to advertising to generate revenue amid increased competition for subscribers. With more advertising dollars flowing to streaming due to cable cord-cutting accelerating, Trade Desk (TTD) is called out by the publication as a potential winner. Microsoft (MSFT) is also identified as a rising ad player that should benefit. For bargain hunters, Roku (ROKU) is also said to have better odds than its collapsed stock price suggests. Despite concerns on consumer discretionary spending, media giants Walt Disney (DIS) and Warner Bros. Discovery (WBD) are expected to benefit from rich content engines. One of the biggest pullouts from the streaming breakdown is that more consolidation appears inevitable in the industry.
Sources: EDGAR, Bloomberg, CNBC, Reuters