Buckle up! Qantas, Wesfarmers, Woolworths headline the biggest week of reports

Welcome to Charts and Caffeine - Livewire's pre-market open news and analysis wrap. We'll get you across the overnight session and share our best insights to get you better set for the investing day ahead.

MARKETS WRAP

• S&P 500 - 4,228 (-1.29%)
• NASDAQ - 12,705 (-2.01%)
• CBOE VIX - 20.60
• FTSE 100 - 7,550 (+0.11%)
• STOXX 600 - 437.76 (-0.77%)
• US 10YR - 2.984%
• USD INDEX - 108.10
• GOLD - US$1,760/oz
• WTI CRUDE - US$89.95/bbl
• SPI FUTURES - 6,994 (-0.41%)

EARNINGS WEEK AHEAD

Buckle up.

• Monday: Adairs (ASX: ADH), Ampol (ASX: ALD), EML Payments (ASX: EML), Lendlease (ASX: LLC), Nick Scali (ASX: NCK), Reliance Worldwide (ASX: RWC), Star Entertainment (ASX: SGR) 
• Tuesday: Alumina (ASX: AWC), Ansell (ASX: ANN), Breville Group (ASX: BRG), Boral (ASX: BLD) Endeavour Group (ASX: EDV), Kogan (ASX: KGN), Scentre Group (ASX: SCG)
• Wednesday: Coles Group (ASX: COL), Domino’s Pizza (ASX: DMP), IDP Education (ASX: IEL), Nine (ASX: NEC), Platinum Asset (ASX: PTM), Qantas (ASX: QAN), Regis Resources (ASX: RRL), Seven Group (ASX: SVW), Tabcorp (ASX: TAH), WiseTech (ASX: WTC), Worley (ASX: WOR), Zip (ASX: ZIP)
• Thursday: Allkem (ASX: AKE), Appen (ASX: APX), Charter Hall (ASX: CHC), Costa Group (ASX: CGC), AP Eagers (ASX: APE), Flight Centre (ASX: FLT), Link (ASX: LNK), Perpetual (ASX: PPT), Pilbara Minerals (ASX: PLS), Platinum Investment (ASX: PTM), Qube (ASX: QUB), South32 (ASX: S32), St Barbara (ASX: SBM), Tyro Payments (ASX: TYR), Whitehaven Coal (ASX: WHC) , Woolworths (ASX: WOW) 
• Friday: BWX (ASX: BWX), Dusk (ASX: DSK), Jumbo Interactive (ASX: JIN), NextDC (ASX: NXT), Ramsay Health Care (ASX: RHC), Wesfarmers (ASX: WES)

STOCKS TO WATCH

I've been talking about the litany of earnings downgrades so far this reporting season but I couldn't help but notice the brokers who have been carrying them out. In particular, Citi made not one but four downgrades in one day. The downgrades include two new sell positions, and these will be the focus of today's stocks to watch.

The other reason I'm pointing out Citi's downgrades is that they're sticking their neck out in case their calls go the opposite way. Talk about covering all bets!

First on the naughty list is Auckland International Airport (ASX: AIA). The company delivered full-year results in line with consensus estimates but guidance is where Citi's sounding the alarm bells. A significant jump in operational costs is expected and lower retail incomes could be a crimp for years to come. After all, once you've had one $7 airport coffee, you've had them all right? To add to AIA's bear case, the stock is currently trading at 25.5x earnings, and well above the long-term average. Of course, to prove this base case wrong, airport consumption would need to be better than expected but there would also need to be proof that a pricing review currently being undertaken goes well. 

And also on the naughty list is Appen (ASX: APX) following its earnings result two weeks ago. Revenue dropped by 7% but earnings were down by nearly 70% in its latest business update as foreign exchange and CAPEX costs took a big bite out of its bottom line. The broker sees the CAPEX as necessary and right but its declining core business is a big problem. Plus, it's not a great environment for long-duration stocks anyway.

Appen reports it’s final result on Wednesday.

Finally, a quick note about the one upgrade that did catch my eye - Blackmores (ASX: BKL) is now an outperform at Credit Suisse. While the key challenge is known for the company (translation: international businesses), the broker thinks that the upside chance is greater than the downside chance. It's now a buy with a $90 price target.

THE CALENDAR

If you want an indicator of how those recession calls are going or are likely to go, you need to be looking closely at the PMIs in Europe and the US this week. Beyond all that, the ECB minutes are due on Thursday evening with a preliminary print on GDP thereafter in the states. Then, on Friday, the great smorgasbord of speeches and central bank speak that is Jackson Hole kicks off. The event is being held for the first time since the pandemic, and everything the speakers say could be market-moving. 

THE CHART

Here's one for the perma-bulls, or at least the optimists in the room. Last Friday's US session triggered a rare, but quite bullish signal. More than 90% of the components in the S&P 500 are now above their 50-day moving average. As you can see, these signals take place in strong uptrends historically. One thing that is of note though is that the US is still on its long summer recess so volumes do remain light and drifts higher may be just that - drifts.

THE TWEET

Today's report was written by Hans Lee.

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