The Day Ahead: Caterpillar Steamrolls Views

 | Jan 27, 2014 | 8:30 AM EST  | Comments
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The selloff that started last week seems to be on hold Monday morning as U.S. futures buck the global trend and point to a positive open. Concerns over weakness in emerging markets, particularly slow economic growth in China, have already undercut trading in Europe and Asia overnight.

The U.S. indices started last week's trading unable to remain in-step with one another, but by Friday's close they were going in one direction: down. The major averages finished the week deep in the red for a second straight day as the Dow and S&P 500 each fell below their 50-day moving averages Friday.

But earnings appear to be propping up sentiment Monday morning after industrial bellwether Caterpillar (CAT) delivered an upside surprise, and as Wall Street awaits results from the market's most widely held stock, Apple (AAPL).

Caterpillar beat quarterly earnings estimates by a wide margin, posting net income of $1.54 per share vs. consensus calls for $1.28, up from $1.46 a year earlier. Revenue also beat estimates but fell to $14.4 billion, compared with $16.1 billion a year earlier. The results pushed the heavy-equipment maker's shares up by more than 5% in premarket trading.

The most-anticipated earnings report of the week is due after the close, when Action Alerts PLUS holding Apple is expected to report a profit of $14.09 on sales of $57.46 billion. Wall Street will be looking at iPhone sales in China, given the company's new deal with China Mobile (CHL), as well as any clues regarding a response to activist investor Carl Icahn's demand for the company to release the grip on its massive cash hoard.

Also reporting this morning is cruise-ship operator Royal Caribbean (RCL), and we'll hear from U.S. Steel (X) after the close.

In analyst actions, ratings agency Moody's has cut Sony's (SNE) bond rating to "junk" status, citing profitability concerns for the home-entertainment conglomerate. J.P. Morgan downgraded Cisco (CSCO) shares to Underweight, and Morgan Stanley upgraded Merck (MRK) to Overweight.

The economic calendar is light, with new-home sales set for 10 a.m. ET and the Dallas Fed's manufacturing survey scheduled for release at 10:30 a.m.

Columnist Conversations

Conn's is beyond disaster du jour today. Key reason: Credit. From its earnings report:
the alibaba ipo date now set for next monday (8th).

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