Get ready for a tricky earnings season
It may be the worst 3 years, starting with Alcoa, Yum Brands, JPMorgan and Wells Fargo this week. Also watch oil, gold and corn prices.
Now come the earnings reports for the second quarter, and they're likely to test investor patience big time. Europe is starting to hurt results -- just as economists have been warning for months.
If there's any good news to expect over the next few weeks, it will be decent profits from Apple (AAPL) and maybe some stocks related to, dare we say it, housing.
This week features Alcoa (AA), Yum! Brands (YUM) and banking giants JPMorgan Chase (JPM) and Wells Fargo (WFC). The economic reports include Monday's report on consumer credit, the minutes from the June Federal Reserve meeting and the June Producer Price Index report.
The reports will come after a week where the Dow Jones industrials ($INDU) fell 0.8%. The Standard & Poor's 500 Index ($INX) dropped 0.6%, and the Nasdaq Composite Index ($COMPX) managed a small gain.
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The Nasdaq-100 Index ($COMPX) finished 1% higher, thanks to a 19.6% gain for Netflix (NFLX), a 12.5% increase for Green Mountain Coffee Roasters (GMCR) and a 3.8% increase for Apple, which finished the week above $600 for the first time since the end of April.
It was a downer of a jobs report
And, of course, there was the jobs report that suggested payroll employment rose only a seasonally adjusted 80,000 in June, and April and May weren't much better.
Seasonal adjustments smooth out the usual events like the end of a school year when faculty and other staff in schools, colleges and universities leave for the summer. Without them, July would be a month everyone dreaded. But the adjustments for June took a raw gain of 391,000 and turned it into 80,000. (Yes, that means the economy may be a touch better than you hear.)
Still, the report was a downer for investors around the world, and stocks tumbled. The Dow was off 194 points before the usual speculation that the Federal Reserve would step in and buy up billions of dollars of government bonds to stimulate the economy.
Maybe the Fed will. Maybe it won't. But the speculation and bargain-hunting trimmed the Dow's loss to 124 points.
But the worries about the domestic economy and how slowdowns in Europe will affect the domestic economy won't go away over the weekend.
Alcoa and JPMorgan are the key reports, but listen to Wells Fargo
The earnings season begins after Monday's close when aluminum giant Alcoa reports its second-quarter results. What will be more important than the earnings themselves will be the guidance.
The company is expected to report 6 cents a share in earnings, down from 32 cents a year ago. Revenue is seen falling 11.4% from a year ago to $5.83 billion. Aluminum is used in cars, planes, new buildings and the like. The market has been glutted with the supply from China, and prices have fallen.
And the big question is how the widening recession in Europe is affecting Alcoa's results -- if the answer is badly, then the next question is when a rebound may come. The stock fell slightly on the week, but it tumbled 12.7% in the second quarter.
Yum! Brands, the owner of Taco Bell, KFC, Pizza Hut and other chains, is closely watched for what it says about its fast-growing business in China. China is a puzzle because it apparently is suffering through a miserable real-estate bubble, and expectations are that growth will slide substantially. China is 45% of Yum's business.
JPMorgan Chase is going to have a lot to say about that disastrous trade announced in May that may cut quarterly profit by $4 billion, maybe more. The trade was a complex series of buy-and-sell moves involving credit default swaps and other derivatives that went wrong because Europe didn't fall apart this winter.
Analysts see earnings of 79 cents a share for the quarter, compared with $1.27 a share a year ago. The estimates have come down because of the trading debacle. At the end of April analysts were projecting $1.24 a share in earnings.
Wells Fargo is seen delivering good earnings, 81 cents a share, up 16% from a year ago. It's a huge bank and the nation's largest mortgage lender. One in three mortgage loans are now originated through a Wells Fargo office.
It has modified some 772,000 mortgages as of May 31, and so far, the company says, borrowers are paying on time.
There are concerns about the business getting too big. But the company has insisted it has the experience to handle the risk. So far, investors agree; the stock is up 19.9%, compared with JPMorgan's 2% gain.
One other earnings report to watch: Marriott International (MAR). The hotel operator is expected to report 42 cents a share in earnings, up from 37 cents a year ago, with revenue off slightly to $2.8 billion. Marriott has a big international presence, and so far, investors don't seem worried. The guidance and analyst call will confirm whether investors are right.
The stock is up 35% this year but appears to have peaked right around $40.
|Markets for the week|
|7/6/2012||6/29/2012||% chg.||YTD chg.|
|U.S. Dollar Index||83.56||81.75||2.21%||3.77%|
Fed minutes are the big economic report
In quantity, it's a light week for economic reports.
But the Fed's minutes from its June 19-20 meeting will be perused carefully for signals on when the Fed might organize a new program of quantitative easing. The divisions within the Fed and its members on whether to make a move at all have been quite strong. The minutes may shed light on how inflexible the opponents are for any more easing.
The most important reports after the Fed meeting include its own report on consumer credit. A gain in nonsecured credit (aka credit cards) would suggest more economic confidence than recent data have indicated.
Also due are reports on oil and natural gas inventories (Wednesday and Thursday, respectively), initial job claims on Thursday and the University of Michigan Consumer Sentiment Index.
Lastly is the Labor Department's Producer Price Index. This should show falling energy prices, but it also shows the first signs of a new round of food inflation from the drought in the Midwest and South.
Outside the United States, a few economic reports could move markets. These would include reports on industrial production in France, Italy and Britain on Tuesday; the Bank of Japan's interest-rate announcement on Wednesday.
The reports with the biggest potential impact on markets: China's reports on gross domestic product and industrial production, both on Thursday.
Floating- Most Americans don't have a problem with"legal" immigration. Why should someone illegal stay limiting the right of someone that applied in the proper manner for passge into the US.
We need a complte shutdown of immigration to the US. The economy currently can not obsorb the number of illegals. By the way,. Why are we taking the poor and uneducated and denying a rocket scientist from Germany entry.
So let's see. What happens to a Salvadorian that is caught crossing the Mexican border? Can you tell me? There is simply not a country in the world dealing with an immigration problem like ours. There is not a country with such a lousy policy as ours. The only country I know of that could qualify is France. A country being destoyed by another bunch of Liberals.
Now, You stated. If Romney picks Rubio, he's for illegal immigration? What a stupid comment..
Marc was the son of exiles. Cuban Americans "forced" off their beloved island after the thug, Fidel Castro, took power. Does Mexico force it's citizen over the border?
Mexico is an Aristocratic Society. I believe they have free elections. See the difference between Rubio and the average border runner. Get your facts straight.....
But the Fed's minutes from its June 19-20 meeting will be perused carefully for signals on when the Fed might organize a new program of quantitative easing.
Translation: The market manipulators are looking for the fed to throw money to them so the ensuing poor earnings season and faltering economy won't look so bad come election time, if only they can just keep propping up the stock market for a few more months.
I mean really, otherwise, someone might have to sell their summer house in the Hamptons to cover their losses...and how embarrassing would that be??
Is the economy weak? 33K of the 80K jobs created were temporary hires! That shows you just how enthusiastic business people are about the economy and Obama's job performance.
I expect earnings to reflect this, but an even scarier prospect is the next job report. I'm not in the prediction business, but I do pay attention to trends. There isn't anything uplifting about the current one.
remember the dems are the ones who just walk out of any talks how can anything ever get done, we had a employee that did the same thing anytime her department was challenged and we fired her things got much better after that we were able to discuss, come up with solutions and get on with correcting the problem, nothing will change unless these idiots stay take the heat for there mistakes and work towards a solution
Same old garbage - get ready for a crapy earnings season - if we are to believe the past few months as portrayed by these columists and collective media - then there should be absolutely no reaction since everyone knew the news already - but I'd still expect a rough ride since obviously it must be the smaller investors rocking the share prices up and down 2-3 percent every week. So if this comes to pass, then obviously reinforces the belief that both the media and large institutions are in bed and doing whatever they can to screw the last dollar out of every smaller investor as well as economy as they can. But on the flipside, might just see a few of those so called 'surprises' that rallies the market that 'nobody' was expecting - and that would further reinforce the belief that either the medai and market knows absolutely nothing, or that they are indeed in bed together trying to screw us all. Either way, whatever the result, UNLESS the market shows absolutely no reaction will justify most investors beliefs that the market both locally and globally is controlled and the biggest ponzi scheme in history.
I understand and agree with your frustration, but... are THEY the problem or is the campaigning and election system the real problem? I think so. I would love to run for Office. I am not willing to sell my life liberty pursuit of happiness and freedom in exchange for puppet money funding. I agree that no lobby should exist or any direct campaign or party funding whatsoever. There should be one way to enter an application to run, one method of base qualification with security check and one format for aligning views and purpose with the public. We are STILL stumping much the same way it has been done for centuries. Also... time to end Law Firms altogether. A lawyer has no business in politics at all, much less a nest of them.
Hey , Romney will still have job if he loses to Obama. You won't have ajob if Obam wins. He's got us headed into a depression.
This is pitiful........10 dating sites(spam) on the first page....This is hardly worth coming to; To try and read.
See ya....Enjoy your Sunday.
V_L why don't you and Max get a room already... too socialist idiots supporting the moron-in-thief...
Fat Cat, what incentive do we have to put another Republican in the White House, in 2001 we had a balanced budget with a $237 billion dollar surplus and a 10 year projected $5 trillion dollar surplus that would have eliminated our National debt. Instead we got Republicans in all houses acting like a Monkey humping a football.
First they dropped the fed rate from over 6% to below 2% during the biggest housing boom of all time, flooding the markets with easy cash and exploding a already bad situation. Then they cut taxes for millionaires and reduced our federal revenues by 4.6% and at the same time increased government spending by 5.61%, a 10.21% negative revenue swing yearly. Only increased revenue from the housing boom kept things from spinning out of control, but once the boom was over, it was time to pay the Piper for the $5.07 trillion dollar spending spree. Even though Obama has cut added spending to it's lowest level in 60 years 1.4% annually from 7.7% during Bush, were still paying for the unfunded madness of the Republican years, 2 trillion in war debt, 2 trillion in tax cut debt and added entitlements and new agencies costing hundreds of billions every year, Medicare D, Home Land Security, No Child Left Behind, TSA etc. How can anybody actually trust these football humping Monkey's to fix their own mess. Romney's only plan is to cut Corporate taxes for His Fat Cat buddies and dump the burden on the working classes, were over $2 trillion in the hole from the last tax cut. ( DEET DA DEE )
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[BRIEFING.COM] Stocks ended modestly higher as the S&P 500 climbed 0.2%, and the Dow added 0.4% to register its 19th consecutive Tuesday of gains.
The major averages saw little change during morning action, but afternoon buying interest helped lift the indices to session highs. Most cyclical sectors (with the exception of materials and technology) finished among the leaders, but the defensively-geared health care sector settled atop the leaderboard as biotechnology outperformed. ... More
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