Preview of the week starting 16 Dec 2024 - is Jabil worth a look?

Public Holidays

There will be no public holidays in Singapore, Hong Kong, The USA or China in the coming week.

Economic Calendar (16Dec24)

Notable Highlights

• FOMC interest rate decision will be the most watched news in the coming week. The market expects an interest rate cut. A contrary decision is likely to cause some market volatility.

• The core PCE Price Index will be the next most watched indicator for inflation. This is the preferred reference that the Federal Reserve uses for inflation. Surprises in this can lead to market volatility.

• S&P Global US Manufacturing PMI reflects the growth or contraction of the manufacturing sector. The Philadelphia Fed Manufacturing Index shows the development of the manufacturing sectors in Philadelphia.

• S&P Global US Services PMI reflects the growth or contraction of the Services sector.

• Core Retail Sales and Retail Sales represent consumption in America.

• Existing Home Sales is a good reference for home real estate in America.

• GDP Q3 figures will also be updated.

• Initial jobless claims will be announced. The Federal Reserve uses this as one of the key macro data references as it balances inflation and employment in the economy.

• Crude Oil Inventories can be seen as forward indicators of market demand and consumption. If the trend of excess inventories continues, demand erosion can lead to reduced production & weakening consumer spending.

Earnings Calendar (16Dec24)

There are a few notable earnings in the coming week namely Nike, Micron, Accenture and Jabil.

Let us look into Jabil

The price slipped -0.7% from a year ago.

The P/E ratio is 11.9.

Technical Analysts recommend the rating of “Strong Buy” for the stock.

Analysts Sentiment recommends a “Buy” rating. The target price is $147.25 which implies an upside of over 8.97%.

Observations about Jabil:

• Revenue grew from $17.8B (2015) to $28.8B (2024)

• Operating profit grew from $0.588B (2015) to $1.43B (2024)

• EPS grew from $1.45 (2015) to $11.17 (2024)

• FCF (10-year median margin) is 1.7%

Jabil’s forecasted EPS and Revenue are $1.88 and $6.61B respectively. For now, I prefer to monitor Jabil’s performance as a spectator and not an investor.

Market Outlook of S&P500 - 16Dec24

Observations:

• The MACD indicator is showing a downtrend.

• Moving Averages (MA). Both the MA50 line and the MA200 line are on an uptrend. Both MA50 and MA200 lines are below the last candle. Thus, it could be read as bullish for both the mid and the long-term.

• The 3 Exponential Moving Averages (EMA) lines are on an uptrend but are looking to converge (implying a potential change in trend).

• Chaikin’s Monetary flow (CMF) shows an uptrend. However, there seems to be more selling momentum than buying. This can lead to a potential trend change.

The 20 indicators are pointing to a “Strong Buy” rating for the S&P500 (for Daily interval). 16 indicators recommend a “Buy” and 4 recommend a “Sell” rating.

From the candlestick pattern, the latest seems to point to a more “bearish” outlook amidst the ranging pattern.

From the above, the S&P500 should see a downtrend in the coming days.

News and my thoughts from last week (16Dec24)

• US BANK DEPOSITS FELL TO $17.839 TLN FROM $17.906 TLN IN PRIOR WEEK.

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The US budget deficit spiked by a massive $367 billion in November 2024. This was $14 billion above the median expectation of $353 billion. For the first 2 months of the Fiscal Year 2025, the total deficit now stands at $624 BILLION, the highest on record. This is up a staggering 64% from the $380 billion seen last year and above 2020 pandemic levels. To put this into perspective, the budget gap was 3 TIMES lower on average during the 2013-2017 period. The debt crisis is worsening. - X user The Kobeissi Letter

• Entitlement can bend reality

• The average contract interest rate for 30-year fixed-rate mortgages to 6.67% from 6.69% Applications to refinance a home loan surged 27% week to week and were 42% higher than the same week one year ago. - CNBC

• Exxon Mobil Corp has unveiled plans to increase spending to $28-$33 billion annually with a goal of lifting oil and gas output by 18% by 2030. - Oil Price

• Ray Dalio added that the indebtedness seen in the US, China and all major countries except Germany has increased at "unprecedented levels" and the amount will not be sustainable - Yahoo Finance

• Mark Bouris warns Australia now on the ‘verge of a full-blown recession’ - News AU

• Two years ago ... 3 out of 4 economists were saying we’re going into a recession,” said David Zervos, chief market strategist for Jefferies LLC. “They’ve really had it wrong.” - CNBC

• Realize that most are happy with the reality they have defined or the reality that others have framed for them. To go against the tide is not the norm as part of a herd mentality. It will be awesome if things can be better communicated. Truth hurts but sometimes, it's needful

• China's exports rose 6.7% in U.S. dollar terms from a year ago, sharply lower than the 12.7% growth in the previous month and missing the forecast 8.5% increase. Import data surprised with a decline of 3.9%, marking the sharpest fall since September 2023, missing analysts' expectation of a 0.3% growth. - CNBC

My Investing Muse (16Dec24)

Layoffs & Closure news

• Evonik aims to spin off assets and could shed 7,000 jobs - Reuters

• Another low-cost airline filed for Chapter 11. GOL announced on Dec. 10 that it filed a reorganization plan that promises to convert $1.7 billion of debt into equity and raise $1.85 billion of new financing through new investors. - The Street

• Luxury Brands Face A Retail Labor Crisis As 51% Of Employees Plan To Leave Their Jobs - Forbes

• Cruise, SF's embattled self-driving car company, is finally folding after $10B in losses - SF Gate

Supply Chain News

• In 2025 the deliveries of new vessels will again raise the capacity oversupply, said Braemar, “even allowing for Red Sea avoidance, oversupply is expected to increase from 3-4% in 2024 to 7-8% in 2025,” said the broker. - SeaTrade Maritime

• “Tariffs make trade less efficient by adding costs, time, and complexity,” said Christian Roeloffs. “businesses may rely on transshipments, rerouting through Mexico, or diversifying production and assembly sites. This inefficiency requires additional capacity, much like what we saw during Red Sea diversions." - FreightWaves

The supply chain is the lifeblood of the economy — it is how goods and services move, and its activities foretell economic activities.

My final thoughts

The consumer price index showed a 12-month inflation rate of 2.7% after increasing 0.3% on the month. Excluding food and energy costs, the core CPI was at 3.3% on an annual basis and 0.3% monthly. All of the figures were in line with forecasts. - CNBC

Inflation looks stubborn (unsurprisingly). More have raised their concerns about the Federal debts and their impact on America's future development.

We are coming to the end of the Q3/2024 earnings season. A new season will start in 2+ weeks and Q4 earnings will be upon us. President-Elect Trump is putting pressure to end the conflicts and charting America on a course to greater influence and efficiency. There is much to be hopeful for as allies like Germany, Japan and South Korea are facing various challenges.

There is no easy ride but there is much to be hopeful for. Let us consider a review of the portfolios we hold and it is time to cut loss with ones showing falling fundamentals.

@TigerStars

$.SPX(.SPX)$

$Jabil Circuit(JBL)$