Will Alcoa cast a pall on earnings season?
The aluminum giant's earnings, due Monday and expected to be weak, may cause investors to forget about signs of a strengthening economy. JPMorgan Chase and Lennar also report. Worries about Europe and Iran won't go away.
There was good news on manufacturing and decent news on auto sales. The services sector of the economy showed some buoyancy. There was weak news from Europe, and worries about oil prices if Iran were to try to blockade the Strait of Hormuz. Retailers' holiday sales offered some cheer and some jeers.
On the surface, investors seemed to shrug the worries off. The stock market moved higher for the week, but the finish on Friday was disappointing after the jobs report.
The week ahead offers some more potential stumbling blocks: earnings from Alcoa (AA), Lennar (LEN) and JPMorgan Chase (JPM); the Federal Reserve's Beige Book report on the economy; and continued worries from Europe.
The weekly gains weren't bad: The Dow Jones industrials ($INDU) were up 1.2%, with the Standard & Poor's 500 Index ($INX) up 1.6% and the Nasdaq Composite Index ($COMPX) up 2.7%.
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Those were better results than in 2011's opening week, although not as good as the start for 2010, when the Dow rose 1.8%, with the S&P 500 up 2.7% and the Nasdaq up 2.1%.
But fear was a part of the market this past week as well. Gold (-GC) finished the week up 3.2% to $1,616.80 an ounce. Silver (-SI) added 2.8%. Crude oil (-CL) in New York moved up 2.8% to $101.56 a barrel.
The national average price of gasoline moved up 2.5% to $3.352 a gallon, according to AAA's Daily Fuel Gauge Report, leaving motorists to wonder if they'll be smacked around by prices again this year. Iran may well determine the answer.
Every sneeze in Europe was felt in the U.S. markets. The euro fell 1.5% against the dollar during the week. It dropped 3.2% against the dollar in 2011.
|Markets for the week|
|1/6/2012||12/30/2011||% chg.||YTD chg.|
|U.S. Dollar Index||81.60||80.52||1.34%||1.34%|
Alcoa kicks off earnings season -- for better or worse
Alcoa, one of the 30 Dow stocks since 1959, reports fourth-quarter earnings after Monday's close. They won't be pretty. The question is whether they will be so awful as to depress the entire stock market.
The consensus estimate is for a loss of 2 cents a share on revenue of $5.74 billion, compared with earnings of 28 cents and revenue of $5.65 billion a year ago.
The stock fell 43.8% in 2011, although it jumped 5.9% this week. The company announced Thursday it's permanently shutting down its smelter in Blount County, Tenn., near Knoxville, and facilities elsewhere to reduce its capacity by some 17%. Alcoa started the Tennessee operations in 1919. The smelter has been idle since 2009.
Alcoa's problem is that there is way too much aluminum capacity globally, and it is a high-cost producer of a product whose manufacturing process requires huge amounts of electricity. The metal settled at $2,039 a ton in London trading on Friday, down 25% since May.
It is a considered a bellwether stock because its products are used in cars, planes, construction and other areas. So, a critical question investors will ask isn't so much about prices but about how Alcoa views global demand, especially in Europe and China.
Lennar: Is there life in housing?
Also due in the coming week is homebuilder Lennar with earnings for the fiscal fourth quarter, which ended in November. The important question is how the builder sees demand, especially in troubled markets like Florida, Nevada, Arizona and California.
The company's fiscal-third-quarter earnings slumped 31% as it delivered fewer homes than a year earlier. But orders climbed and Lennar said it expects a profitable fourth quarter. It recently bought 650 finished lots in the Seattle and Portland, Ore., markets.
Analysts expect 4 cents a share in earnings, unchanged from a year ago, on revenue of $909 million, up slightly from a year ago. Revenue for the fiscal year is expected at $3.06 billion. That's down 81% from its peak in 2006.
JPMorgan: Can the colossus deliver?
JPMorgan Chase's results, due before Friday's open, will be watched closely. One of the most profitable banking companies, it has exposure to Europe and Asia.
It has become a huge domestic lender, with big mortgage and credit card businesses.
Investors will be watching its guidance in a regulatory environment that's become much stricter in recent years, causing CEO Jamie Dimon to loudly criticize Federal Reserve Chairman Ben Bernanke, President Obama and others.
The stock fell 22% in 2011 but was up 6.4% this week.
The economy, foreign and domestic
It's a busy week for economic events, although there's nothing as closely watched as Friday's jobs report. Here's a rundown:
Sarkozy and Merkel meet Monday. France’s President Nicolas Sarkozy will meet German Chancellor Angela Merkel in Berlin for talks likely to center on new rules to enforce budget discipline across the European Union. The leaders are anxious to flesh out a plan agreed at a December summit by all EU members except Britain for a new treaty to forge closer fiscal integration, as Europe battles to stem a sovereign debt crisis in the eurozone. More meetings among the 27 nations will be held later this month.
Consumer credit, due Monday from the Federal Reserve. This is watched as a signal of consumer confidence.
French industrial production, due Tuesday. This should enlighten investors about the health of Europe.
The Federal Reserve's Beige Book report, due Wednesday. This is a narrative look at the domestic economy and may identify some markets where housing is starting to make a comeback.
U.S. retail sales for December, due Thursday from the Commerce Department. Look for small gains, despite all those reports about big Christmas sales.
Initial jobless claims, due Thursday. It's good news if it is below 400,000. But the reports that come during the holidays can be volatile.
Bond auctions in Italy, due Thursday. If they went as badly as France's auction this week, look for markets to react badly.
Interest-rate decisions from the Bank of England and European Central Bank, Thursday before U.S. markets open. These may offer an idea of how both will combat weakening economies in Europe.
University of Michigan Consumer Sentiment Survey for early January, due Friday. This should show some optimism.
Lastly, here's a calendar of when the Dow components and other important stocks will report. It's not complete. Check MSN Money's earnings calendar for more. For the calendar of U.S. economic reports, check here.
|4th quarter earnings season|
|3M||Jan. 26||4||Hewlett-Packard||Feb. 22||1|
|Alcoa||Jan. 9||4||Home Depot||Feb. 21||4|
|Amazon.com||late January||4||IBM||Jan. 19||4|
|American Express||Jan. 19||4||Intel||Jan. 19||4|
|Apple||Jan. 24||1||Johnson & Johnson||Jan. 24||4|
|AT&T||Jan. 26||4||JPMorgan Chase||Jan. 13||4|
|Bank of America||Jan. 19||4||Kraft||Feb. 6-8||4|
|Boeing||Jan. 25||4||McDonald's||Jan. 24||4|
|Caterpillar||Jan. 26||4||Merck||Feb. 2||4|
|Chevron||Jan. 27||4||Microsoft||Jan. 19||2|
|Cisco Systems||Feb. 8||2||Morgan Stanley||Late January||4|
|Citigroup||Jan. 17||4||Pfizer||Jan. 21||4|
|Coca-Cola||Feb. 7||4||Procter & Gamble||Jan. 27||2|
|Dell||Feb. 21||4||Target||Late February||4|
|DuPont||Jan. 24||4||Travelers Companies||Jan. 24||4|
|Exxon Mobil||Jan. 31||4||United Technologies||Jan. 25||4|
|Ford||Late January||4||Verizon||Jan. 24||4|
|General Electric||Jan. 20||4||Wal-Mart Stores||Feb. 21||4|
|General Motors||late February||4||Walt Disney Co.||Feb. 7||1|
|Goldman Sachs||Jan. 18||4||Wells Fargo||Jan. 17||4|
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[BRIEFING.COM] There wasn't a lot of excitement in the stock market today and there is nothing wrong with that. After rallying in broad-based fashion on Friday, the major indices stood their ground (for the most part) amid a lack of conviction from buyers and sellers alike.
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