As you gaze upon these words, we know what you're thinking: "Oh no! The holidays and vacation are over! It's back to work tomorrow!" Or today, if you're catching this early Monday morning, but, yep, it's time to get back in the saddle and for that you have this week's edition of The Week Ahead to bring you up to speed if you've enjoyed too much merry and eggnog.
Last week we both closed out trading for the month of December as well as 2014 and set sail for 2015. Even though the stock market closed lower the last day in 2014 and opened up 2015 with mixed results, 2014 was another positive year for stocks with the S&P 500 notching a near-12% gain.
That marks the sixth year of positive gains for the market indices and while further monetary stimulus efforts are likely on tap in 2015 outside the US, we expect the domestic stock market will remain volatile to the extent Wall Street keeps second-guessing the timing of interest-rate hikes by the Fed. As you can imagine, that makes Wednesday's Fed minutes report a likely must read among Wall Streeters.
We would not read too much into the drift lower in the market during the last two weeks given two things: lower trading volumes and year-end tax selling, which tend to be the norm during the that time of year. Volumes should return to normal next week and that is likely to give rise to buying of stocks that traded off during the holidays like Apple (AAPL), Facebook (FB), Google (GOOGL) and others.
While the specific December global PMI data points reported last week ranged from sequential weakness to outright contraction, the quarterly view points to a slower 4Q 2014 on a broader scale. With activity winding back up, the message is be mindful ahead of December quarter earnings, which will reflect not only slower global growth, but also the sharp drop in oil prices and the strong U.S. dollar.
Odds are companies will be doing some dancing as well as hemming and hawing this reporting season around these trends. Aside from operating results, be sure to examine the impact of share repurchases on EPS, as well as any news of expanded or additional share repurchase programs. As we pointed out many months ago, profit and net income performance is one thing, while EPS comparisons are another.
Turning to the coming week, we've got the usual plethora of economic data -- auto and trucks sales, ISM data and the monthly employment report. Ahead of the December ADP Employment Survey, Bloomberg is reporting consensus expectations of 240,000 nonfarm payroll jobs being added during the month and an unemployment rate of 5.7%.
In the past we've been more keyed on wage and overtime data in the monthly employment report, and we still are, but in the short term we're more interested in credit card debt balance data coming out of the holiday shopping season. According to NerdWallet's U.S. household consumer debt profile, the average credit card debt stood at $15,611 in December. In aggregate that's $882.6 billion. Cue your best Dr. Evil impression because that's $882.6 BILLION.
Given the razor sharp drop in natural gas prices -- down almost a third over the last month -- earnings and comments from Piedmont Natural Gas (PNY) on Monday and the weekly nat-gas storage report from the Energy Information Administration bear watching. Cold temperatures in the US, including snowstorms in Southern California and blizzard warnings in Hawaii, bode well for electric utility demand and natural gas demand as well.
Other earnings on tap in the week ahead include:
- The Greenbrier Companies (GBX), which should help clear up questions over tank car demand and confirm if robust railcar demand remains intact.
- Ruby Tuesday's (RT) results could confirm MasterCard's (MA) holiday findings of a rebound in restaurant-related spending.
- Sonic (SONC) will also shed light on consumer spending patterns as well, but the company's comments on beef prices, which are slated to rise further in 2015, are what we'll be zeroing in on.
• Sticking with the tone of consumer spending, results at Bed Bath & Beyond (BBBY) as well as PriceSmart (PSMT) should offer some clarity on the situation.
Expect investors to focus on these initial consumer-related reads ahead of the earnings deluge that begins soon.
Below is a more detailed look at what's coming at you in the week ahead. Be sure to check back midweek for The Corner of Wall & Main, in which we will dish on the first half of the trading week and other key matters and thoughts, as well as how to play it all.