Friday closed the books on trading for January, and that means we are already through a twelfth of 2015 -- not to mention that in just a couple of weeks we'll be halfway through the 1Q 2015. Thus far, all the major domestic stock market indices are in the red, with the Dow Jones Industrial Average taking the largest drop, down 3.7%. Both the S&P 500 and Nasdaq Composite Index are not far behind, down between 2% and 3.1%. A week ago we said the coming week would be an onslaught composed of an earnings deluge, Fed commentary and the initial read of fourth-quarter 2014 GDP. To say we got all of that in spades would not be an understatement.
On the earnings side, there were big and positive surprises from Apple (AAPL) and Amazon (AMZN), but beneath it all there were several key themes among the plethora of announcements from S&P 500 and Dow companies. In our view, these are the key themes:
- There is little to no economic growth in the eurozone.
- Economic growth in China is steadily declining.
- The U.S. enjoys relatively consistent growth, even though, as we learned on Friday, at 2.6% 4Q 2014, GDP disappointed and marked the lowest level since 2Q 2013.
- The stronger U.S. dollar is having a material impact -- again, not a surprise given its move in 4Q 2014
- Lower oil and gas prices are having an effect on oil-sector jobs and spending plans amid newfound frugality as consumers are not spending their gas savings. "We haven't seen the extra savings from lower gas prices translate into additional discretionary consumer spending," said MasterCard (MA) CEO Ajaypal Banga on the company's 4Q 2014 earnings call last week. A survey of 4,500 consumers conducted for Visa (V) in early January found that consumers are hanging onto roughly half of their gasoline savings.
While the Fed upgraded its view that growth in the world's biggest economy is "solid," the backdrop of weak global growth renewed concern over Greece and the disappointing 4Q 2014 GDP print, as well as a relatively tame employment cost index figure for 4Q 2014. That means Fed watchers will be dialed in to Fed Chair Janet Yellen's February testimony before Congress. It also means that Friday's January nonfarm employment report will be scrutinized as much for wage growth as for job creation.
Prospects for the Fed boosting interest rates again seem to be later rather than sooner. That leaves us wondering how much higher stock market indices and multiples can go. Bears are no doubt pointing to the Baltic Dry Index (which measures shipping costs for dry bulk commodities such as minerals and metals, grain and other food) hitting a 28-year low and sounding the "Danger, Will Robinson! Danger!" alarm.
Stepping back, earnings growth expectations are being revised lower, but at Friday's market close the S&P 500 was trading at 16.4x 2015 earnings per share of $122.05. That's more than a tad rich for what is shaping up to be contracting earnings in the first half of the year, which in our view puts even more pressure on earnings expectations for the back half of the 2015 in order to growth expectations of 4.4%, according to FactSet.
Helping further refine those expectations during the week ahead we have another 100 S&P 500 companies (including three Dow 30 components) reporting December quarter results. Yes, that's another 20% of the S&P 500 sharing results and outlooks in the coming days. Following the 8% upward move in oil last week, earnings from Exxon Mobil (XOM), Cliffs Natural Resources (CLF) and Anadarko Petroleum (APC) will be in focus this week. Highfliers for the week include Chipotle Mexican Grill (CMG), Disney (DIS), Clorox (CLX), General Motors (GM), Under Armour (UA), Whirlpool (WHR), Buffalo Wild Wings (BWLD), Dunkin Brands (DNKN), Michael Kors (KORS), NXP Semiconductor (NXPI), Twitter (TWTR), Yelp (YELP) and Yum! Brands (YUM).
Other earnings reports to watch include Eaton (ETN) and engine company Cummins (CMI) following Friday's results from heavy truck company Paccar (PCAR), as well as wallboard companies USG (USG) and Domtar (UFS), to take the pulse of the U.S. housing market. Were things buzzing ahead of the Super Bowl? We'll find out when Church & Dwight (CHD) reports this week.
We briefly touched on Friday's January jobs report, but that finishes off what will be a week heavy with economic data. Kicking it off is a smorgasbord of global PMI data as well as December personal income and spending data. In between, we'll get January auto and trucks sales and December construction figures. We'll also get productivity and unit labor cost data for the December quarter. Mixed among the data are several speeches from Federal Reserve presidents, and we expect those to only fuel the back and forth that tends to make as much sense as a jar that premixes peanut butter and jelly.
Enjoy the Super Bowl. Versace is "Go Pats!" while Hawkins is still in denial that her Chargers didn't even come close -- maybe some good commercials, pale ale and guacamole dip with soothe her. If you live in the Midwest or Northeast, you are probably keeping one eye on the game and one on winter storm Linus, which is expected to drop a foot of snow on Chicago before reaching the Northeast. Making matters worse, a rash of Artic cold is slated to follow. Stay bundled up and, for Versace, turn up those thermostats to help his Utilities SPDR (XLU) and United States Natural Gas Fund (UNG) positions. More weather-related trading ideas can be found here.
Below is a more detailed look at what's coming in the week ahead. Be sure to check back midweek for our column, 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.
Economic Calendar
| Date | Release | For |
| 2-Feb | HSBC China Manufacturing PMI | Jan |
| 2-Feb | Markit Eurozone Manufacturing PMI | Jan |
| 2-Feb | Markit US Manufacturing PMI | Jan |
| 2-Feb | JPMorgan Global Manufacturing PMI | Jan |
| 2-Feb | Personal Income | Dec |
| 2-Feb | Personal Spending | Dec |
| 2-Feb | PCE Prices - Core | Dec |
| 2-Feb | ISM Index | Jan |
| 2-Feb | Construction Spending | Dec |
| 3-Feb | Factory Orders | Dec |
| 3-Feb | Auto Sales | Jan |
| 3-Feb | Truck Sales | Jan |
| 4-Feb | MBA Mortgage Index | Weekly |
| 4-Feb | ADP Employment Change | Jan |
| 4-Feb | ISM Services | Jan |
| 4-Feb | Crude Inventories | Weekly |
| 4-Feb | JPMorgan Global Composite PMI | Jan |
| 4-Feb | Cleveland Fed President Loretta Mester speech | |
| 5-Feb | Challenger Job Cuts | Jan |
| 5-Feb | Initial Claims | Weekly |
| 5-Feb | Continuing Claims | Weekly |
| 5-Feb | Trade Balance | Dec |
| 5-Feb | Productivity-Prel | Q4 |
| 5-Feb | Unit Labor Costs | Q4 |
| 5-Feb | Natural Gas Inventories | Weekly |
| 6-Feb | Nonfarm Payrolls | Jan |
| 6-Feb | Nonfarm Private Payrolls | Jan |
| 6-Feb | Unemployment Rate | Jan |
| 6-Feb | Hourly Earnings | Jan |
| 6-Feb | Average Workweek | Jan |
| 6-Feb | Atlanta Fed President Dennis Lockhart speech | |
| 6-Feb | Consumer Credit | Dec |
Earnings Calendar
| Monday, February 2 | |
| ADVS | Advent Software |
| FLWS | 1800flowers.com |
| LLNW | Limelight Netwk |
| PBI | Pitney Bowes In |
| RTEC | Rudolph Tech |
| SYY | Sysco Corp |
| TEN | Tenneco Inc |
| TNAV | Telenav Inc |
| XOM | Exxon Mobil Crp |
| Tuesday, February 3 | |
| ACI | Arch Coal Inc |
| ADM | Archer Daniels |
| AET | Aetna Inc-new |
| AFG | Amer Finl Group |
| AGCO | Agco Corp |
| AN | Autonation Inc |
| APAM | Artisan Ptnr Am |
| APC | Anadarko Petrol |
| ARG | Airgas Inc |
| BHE | Benchmark Eletr |
| BIP | Brookfield Infr |
| CARB | Carbonite Inc |
| CEVA | Ceva Inc |
| CHD | Church & Dwight |
| CLF | Cliffs Natural |
| CMG | Chipotle Mexicn |
| DIS | Disney Walt |
| EMR | Emerson Elec Co |
| ENTR | Entropic Commun |
| ETN | Eaton Corp Plc |
| FHCO | Female Health |
| FISV | Fiserv Inc |
| GCI | Gannett Inc |
| GILD | Gilead Sciences |
| LSCC | Lattice Semicon |
| MHO | M/i Homes Inc |
| MYGN | Myriad Genetics |
| NSR | Neustar Inc -a |
| NYT | Ny Times A |
| OI | Owens-illinois |
| PNR | Pentair Plc |
| R | Ryder Sys |
| RCII | Rent-a-center |
| ST | Sensata Technol |
| TTWO | Take-two Inter |
| TWIN | Twin Disc |
| UPS | Utd Parcel Srvc |
| VASC | Vascular Solutn |
| VTSS | Vitesse Semicon |
| WYNN | Wynn Resrts Ltd |
| Wednesday, February 4 | |
| ACXM | Acxiom Corp |
| ADP | Automatic Data |
| AFL | Aflac Inc |
| ATML | Atmel Corp |
| BPY | Brookfield Ppty |
| BSX | Boston Scientif |
| CATM | Cardtronics Inc |
| CBG | Cbre Group Inc |
| CKSW | Clicksoftware |
| CLX | Clorox Co |
| CTSH | Cognizant Tech |
| EVR | Evercore Partnr |
| EXP | Eagle Materials |
| FBHS | Fortune Brd H&s |
| FORM | Formfactor Inc |
| FOXA | Twenty-fst Cf-a |
| GIL | Gildan Actvwear |
| GLUU | Glu Mobile Inc |
| GM | General Motors |
| GMCR | Keurig Green Mt |
| HAIN | Hain Celestial |
| HCSG | Healthcare Serv |
| KNL | Knoll Inc |
| MPC | Marathon Petrol |
| MSI | Motorola Solutn |
| SMG | Scotts Mircl-gr |
| SNE | Sony Corp Adr |
| SO | Southern Co |
| SPB | Spectrum Brands |
| STE | Steris Corp |
| STLY | Stanley Furnitu.. |
| UA | Under Armour-a |
| VRTU | Virtusa Corp |
| WHR | Whirlpool Corp |
| WNC | Wabash National |
| Thursday, February 5 | |
| ACLS | Axcelis Tech |
| AINV | Apollo Inv Cp |
| ALL | Allstate Corp |
| APO | Apollo Global-a |
| ARW | Arrow Electroni |
| ATVI | Activision Blzd |
| BCO | Brinks Co The |
| BEBE | Bebe Stores Inc |
| BGC | Genl Cable Corp |
| BKD | Brookdale Senr |
| BLL | Ball Corp |
| BMR | Biomed Rlty Trust |
| BRKS | Brooks Automatn |
| BWLD | Buffalo Wld Wng |
| CEB | Corp Exec Brd |
| CHTR | Charter Comm-a |
| CME | Cme Group Inc |
| CMI | Cummins Inc |
| COTY | Coty Inc-a |
| CSL | Carlisle Cos In |
| CX | Cemex Sa Adr |
| DFT | Dupont Fabros |
| DLPH | Delphi Auto Plc |
| DNKN | Dunkin Brands |
| DV | Devry Education |
| EL | Estee Lauder |
| EXPE | Expedia Inc |
| FLT | Fleetcor Tech |
| FWM | Fairway Group |
| GPRO | Gopro Inc-a |
| GRUB | Grubhub Inc |
| IMPV | Imperva Inc |
| IRBT | Irobot Corp |
| IT | Gartner Inc -a |
| KORS | Michael Kors |
| LAZ | Lazard Ltd |
| LF | Leapfrog Entrps |
| LNKD | Linkedin Corp-a |
| MCK | Mckesson Corp |
| MDSO | Medidata Solutn |
| MMS | Maximus Inc |
| MTD | Mettler-toledo |
| NTGR | Netgear Inc |
| NUAN | Nuance Comm Inc |
| NUS | Nu Skin Enterp |
| NWS | News Corp-b |
| NXPI | Nxp Semiconduct |
| ORLY | O Reilly Auto |
| OUTR | Outerwall Inc |
| P | Pandora Media |
| PBH | Prestige Brands |
| PJC | Piper Jaffray |
| PLUS | Eplus Inc |
| PM | Philip Morris |
| PRGO | Perrigo Co Plc |
| PRU | Prudential Finl |
| RSTI | Rofin-sinar |
| S | Sprint Corp |
| SBH | Sally Beauty Co |
| SIMG | Silicon Image |
| SIRI | Sirius Xm Hldgs |
| SNA | Snap-on Inc |
| SNCR | Synchronoss Tec |
| SRCL | Stericycle Inc |
| SWIR | Sierra Wireless |
| SYMC | Symantec Corp |
| TWTR | Twitter Inc |
| USG | Usg Corp |
| VLP | Valero Egy Ptnr |
| VMC | Vulcan Matls Co |
| VOLVY.PK | Volvo Ab |
| VRSN | Verisign Inc |
| XYL | Xylem Inc |
| YELP | Yelp Inc |
| YUM | Yum! Brands Inc |
| Friday, February 6 | |
| AON | Aon Plc |
| ASX | Adv Semicon Adr |
| ATHN | Athenahealth In |
| AXL | Amer Axle & Mfg |
| BECN | Beacon Roofing |
| BMI | Badger Meter |
| CBOE | Cboe Holdings |
| CTS | Cts Corp |
| FLIR | Flir Systems |
| HRS | Harris Corp |
| JOUT | Johnson Outdoor |
| KIM | Kimco Realty Co |
| LGF | Lions Gate Etmt |
| MCO | Moodys Corp |
| MSG | Madison Square |
| POST | Post Holdings |
| SPF | Standard Pac |
| SSD | Simpson Mfg Inc |
| STRA | Strayer Educ |
| SXT | Sensient Tech |
| UFS | Domtar Corp |
