The Week Ahead (SHOP, SMCI, LLY and DIS Earnings; Canada Employment Report)

As the earnings release approaches, the sentiment as per Seeking Alpha's Quant Rating system has fluctuated, oscillating from a Buy to a Hold rating, before reverting to a Buy. The consensus among Wall Street analysts remains a Buy rating.

In a recent move, Bank of America has elevated Shopify to a Buy status and increased its price target to $82. The upgrade is attributable to a combination of sustained growth and margin enhancement, a strategy attributed to the new CFO, Jeff Hoffmeister. Analyst Brad Sills projects robust revenue expansion and efficient conversion to free cash flow, attributing this to a thriving e-commerce sector, consistent market share expansion, and stringent cost control. The firm envisions Shopify maintaining its stronghold in the U.S. small business sector and expects it to make headway with its new merchant solutions.

Analysts project that Novo Nordisk's drugs will help lift the Danish drugmaker's revenue and income. Analyst estimates compiled by Visible Alpha project Novo Nordisk will report a year-over-year jump of about 26% in revenue to 68.47 billion Danish kroner ($9.9 billion), with a rise of nearly 10% in profit to 21.27 billion kroner ($3.08 billion).

The drugmaker is projected to report $9.97 billion in revenue, a 20% bump from last year's mark of $8.31 billion, with net income also projected to rise over 35% to $2.39 billion from $1.76 billion a year ago, according to estimates compiled by Visible Alpha.

Demand for weight-loss drugs has boosted the revenue and shares of Eli Lilly and Novo Nordisk over the past year, as the companies have increased production capacity to meet demand.

In the second quarter, Disney said revenue from its experiences segment surged, driven by growth from its parks and cruises.

Disney CEO Bog Iger said the company sees "lots of opportunities to continue to grow attendance, both domestically and internationally," especially in its cruise business. Disney recently announced it is launching a Tokyo-based cruise ship.

Analysts expect experiences revenue to come in at $8.59 billion, per consensus estimates, which would represent nearly 5% growth from the year-ago period.

The upcoming Canadian employment report for July is anticipated to reveal a continuing downturn in job market conditions.

The forthcoming release on Friday is likely to mirror the trend of diminishing job growth observed during the current summer period. Analysts foresee the unemployment rate remaining unchanged at 6.4%. Pre-pandemic levels were notably lower at 5.6% at the start of 2020, and analysts even saw figures dip below the 5% mark amid the post-pandemic employment surge in the summer of last year.

Presently, predictive measures provide scant evidence of any impending rebound in hiring activity. Job vacancies in Canada have been on a downward trajectory in the past few months, and feedback from enterprises in the Q2 Bank of Canada business survey indicates a persistent tepidness in both hiring and investment plans for the forthcoming year.

While the pace of employment expansion has decelerated, wage growth figures from the labor force survey have remained robust. This stands in stark contrast to other sources, such as the SEPH survey, which signals a more marked deceleration in the rate of wage increases. Furthermore, according to the Bank of Canada Business Outlook Survey, corporate projections for wage hikes have also seen a significant downward adjustment in line with the diminished appetite for new hires. In sum, we project a downtrend in wage growth and do not anticipate it to be a driving force behind future inflationary pressures. This should alleviate some of the Bank of Canada's inflation-related apprehensions as it persists with interest rate reductions.

USD bears and Fed doves were finally vindicated with another batch of weak economic data, and the Fed signalling rate cuts from next month. This week, ISM manufacturing contracted at a faster pace than expected. And if this is to be coupled with another weak ISM services report, it could further spook investors into thinking the Fed are late with cuts and they have finally broken something.

Last month’s report revealed the headline ISM figure contracted the services sector contracted at its fastest pace since the pandemic. New orders, employment and business activity were also negative. And if we are to see an extension of these patterns, then it points to a US (and therefore a global) recession on the horizon. That should be a bearish case for US indices, although it may be inadvertently bullish for the US dollar on a safe-haven basis, even if it does point to more aggressive easing from the Fed. Regardless, the ISM services report is the main economic event to watch next week.