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  1. Home
  2. / Investing
  3. / Technology

The Week Ahead: At Least It's Short

Is there more good news out there?
By CHRIS VERSACE AND LENORE HAWKINS Feb 15, 2015 | 05:00 PM EST
Stocks quotes in this article: CSCO, WFM, AMZN, EXPE, OWW, FEYE, PANW, CAKE, PNRA, MCD, QSR, PBPB, JACK, NDLS, DENN, TRN, ARII, RAIL, VA, CNK, AMC, H, JWN, CAR, NCLH, EQIX, RAX, TOL

You're probably only just now coming off Valentine's Day, or perhaps you've just gotten your 50 Shades of Grey fix. Either way, we are once again getting you prepped for the week ahead.

In our view, perspective is always helpful, and looking over the last week, all three major stock market indices put in respectable gains, moving them even further into the green for 2015. Would-be euphoria over an announced path to peace for Ukraine, more easy-money policies (yes, we mean you, Sweden!), the Bank of England's commentary that implied inflation would not pick up until 2016 and several key earnings surprises more than offset another weak retail sales report for January.

Of the three domestic major market stock indices, it was the Nasdaq Composite Index that rallied the hardest as earnings from Cisco Systems (CSCO), Whole Foods (WFM) and others bested expectations. The index was also helped by Amazon.com (AMZN) shares, which benefited from continued online shopping gains per the January retail sales data, as well as Expedia's (EXPE) bid for Orbitz (OWW).

Cybersecurity stocks, such as FireEye (FEYE), Palo Alto Networks (PANW) and others climbed in response to President Obama signing an executive order today aimed at encouraging companies to share more information about cybersecurity threats with the government and each other. Mitigating that good news, Cheesecake Factory (CAKE) and Panera Bread (PNRA) echoed McDonald's (MCD) weak top line and higher cost commentary.

While we're jawing on the Nasdaq's move, let's not forget that Friday's market close saw the S&P 500 finish at a new record high of 2,096.99. Viewed slightly askew, it means the index closed Friday trading at 17.4x 2015 earnings expectations. Regular readers know we're keeping a close eye on the mismatch between the S&P 500's valuation and earnings growth, which is shaping up to be the weakest in several years. Even after another few dozen S&P 500 companies reported their quarterly results last week, the most recent data from FactSet put 2015 earnings growth at only 3.1% for the S&P 500. Even the most bullish bull has to have a little voice in the back of his or her brain wondering how much higher the market can go on that level of growth.

We're asking a more direct question: How long will that mismatch continue?

In some respects, it comes down to figuring when all the good news to be had is, well, had. The European Central Bank stimulus has been announced, as has reduced interest rates in other regions, a road to peace in Ukraine looks likely, Greece and the EU -- or the new word "Grexit" -- have yet to be sorted out, but as of this writing it appears some progress is being made. Federal Reserve Chair Janet Yellen will speak on Feb. 24, and odds are she will continue at least for a little while longer the overly dovish stance. In our view, this week's PPI report will give the Fed more fire cover to hold off any interest rate movement.

At some point, however, the market will once again expect the Fed will raise rates, we'll start to see the impact of shutdowns along the Pacific ports, as well as the toll severe winter weather is taking, particularly in the Midwest and the Northeast. In other words, soon after the dust settles on December quarter earnings, we'd expect analysts and economists alike to sit down and sharpen their view on the current quarter. We already know it will be far slower than 4Q 2014; now it's a question of how much slower.

With one more day to go in your holiday weekend, odds are you're looking forward to another day off from both work and the market. Not that Versace likes being a Debbie Downer, but the flipside is we will have another shortened trading week on our hands. The good news is we finally see a slowdown in the number of companies reporting quarterly results, but with just over 100 S&P 500 companies yet to issue said reports, we're only just now coming to the edge of the earnings forest.

Following on the commentary from restaurant stocks, this week we'll be looking for confirmation on protein costs from Restaurant Brands (QSR), Potbelly (PBPB), Jack in the Box (JACK), Noodles & Co. (NDLS) and Denny's (DENN).

Is the oil-related hit to railcar manufacturers warranted? Tune in to Trinity Industries (TRN), American Railcar (ARII) and FreightCar America (RAIL) to find out.

Where are consumers opening their wallets and spending? Virgin America (VA), Cinemark Holdings (CNK), AMC Entertainment (AMC), Hyatt Hotels (H), Nordstrom (JWN), Avis Budget (CAR) and Norwegian Cruise (NCLH) should shed some light on the subject.

Will Equinix (EQIX) and Rackspace (RAX) ride the Cisco wave after last week's better-than-expected results?

Underneath all those questions and others, we're watching one of Hawkins' favorite topics -- the impact of share buybacks on earnings. While it's a little too early to tell the exact impact on 2015 earnings expectations, we'd be willing to wager it's only helping put some lipstick on the pig that would be even slower EPS growth.

The compressed week also means the velocity of earnings reports will be a little faster than last week. Last week we said January retail sales would be THE report of the week, and we are now saying that January housing starts and January industrial production (both out Wednesday) will be the feature economic reports of the week. While multifamily housing starts have been relatively flat over the last few months, single-family housing starts have been all over the place, but that hasn't stopped the homebuilders like Toll Brothers (TOL) from climbing 10% or so over the last month. Let's see if those moves were warranted or if they're overdone.

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, February 16-February 20  
     
Date Release For
16-Feb US Stock Markets Closed - Presidents Day  
17-Feb Empire Manufacturing Feb
17-Feb NAHB Housing Market Index Feb
17-Feb Net Long-Term TIC Flows Dec
17-Feb E-Commerce Retail Sales 4Q 2014
18-Feb MBA Mortgage Index Weekly
18-Feb Housing Starts Jan
18-Feb Building Permits Jan
18-Feb PPI Jan
18-Feb Core PPI Jan
18-Feb Industrial Production Jan
18-Feb Capacity Utilization Jan
18-Feb FOMC Minutes December
19-Feb Initial Claims Weekly
19-Feb Continuing Claims Weekly
19-Feb Philadelphia Fed Feb
19-Feb Leading Indicators Jan
19-Feb Natural Gas Inventories Weekly
19-Feb Crude Inventories Weekly
20-Feb Atlanta Fed Business Inflation Expectations  
Earnings Calendar, February 16-February 20
   
Monday, February 16
US Stock Markets Closed - Presidents Day
   
Tuesday, February 17
Symbol Company
A Agilent Tech
ADI Analog Devices
ALE Allete Inc
AMC Amc Entertainmt
ANAD Anadigics Corp
FOSL Fossil Grp Inc
GPC Genuine Parts
GT Goodyear Tire
IHG Intercontl Htls
MDT Medtronic
MGM Mgm Resorts Int
PBPB Potbelly Corp
PES Pioneer Egy Svc
QSR Restaurant Brands
RAX Rackspace Hostg
RBC Regal Beloit
USAT Usa Tech Inc
VDSI Vasco Data Sec
VECO Veeco Instrs-de
WM Waste Mgmt-new
WWW Wolverine World
   
Wednesday, February 18
ANGI Angies List Inc
ARRS Arris Group Inc
BJRI Bj's Restaurant
CF Cf Indus Hldgs
CNK Cinemark Hldgs
CONE Cyrusone Inc
CYBE Cyberoptics
DENN Denny's Corp
DTLK Datalink Corp
DUK Duke Energy Cp
DVN Devon Energy
FLR Fluor Corp-new
FLS Flowserve Corp
GRMN Garmin Ltd
H Hyatt Hotels Cp
HLT Hilton Ww Hldg
IPAS Ipass Inc
JACK Jack In The Box
KALU Kaiser Aluminum
KEYW Keyw Holding Cp
LOPE Grand Canyon Ed
LZB La-z-boy Inc
MANT Mantech Intl -a
NBR Nabors Ind
NCLH Norwegian Cruis
O Realty Income
OMI Owens & Minor
RAIL Freightcar Amer
ROG Rogers Corp
RPAI Retail Properts
SCTY Solarcity Corp
TEX Terex Corp
TMICY.PK Trend Micro Inc..
VA Virgin America ..
VMI Valmont Inds
VNO Vornado Rlty Tr
WAB Wabtech
WTS Watts Water Tec
XRAY Dentsply Intl
YNDX Yandex Nv-a
   
Thursday, February 19
ABX Barrick Gold Cp
ACTG Acacia Research
ARII Amer Railcar
BCC Boise Cascade
BLMN Bloomin Brands
BRC Brady Corp Cl A
BRCD Brocade Comm Sy
CAR Avis Budget Grp
CDR Cedar Realty Tr..
COHU Cohu Inc
CVG Convergys Corp
CW Curtiss Wright
DAN Dana Holding Cp
DAVE Famous Daves
DISCA Discovery Com-a
DTV Directv
EQIX Equinix Inc
FUN Cedar Fair
HRL Hormel Foods Cp
IDCC Interdigitl Inc
IMAX Imax Corp
INAP Internap Netwrk
INTU Intuit Inc
IPI Intrepid Potash
JRVR James River Gp
JWN Nordstrom Inc
MAR Marriott Intl-a
MHLD Maiden Holdings
MIFI Novatel Wireless
MRO Marathon Oil Cp
MRVL Marvell Tech Gp
NBL Noble Energy
NDLS Noodles & Co
PCLN Priceline.com
PDCO Patterson Cos
PKD Parker Drilling
PWR Quanta Services
ROVI Rovi Corp
SIX Six Flags Entmt
TMUS T-mobile Us Inc
TRN Trinity Inds In
TTC Toro Co
WMB Williams Cos
WMT Wal-mart Stores
   
Friday, February 20
Symbol Company
AUQ Aurico Gold Inc
BLDR Builders Firsts
CHH Choice Hotels I..
COG Cabot Oil & Gas
DANOY.PK Groupe Danone
DE Deere & Co
MHK Mohawk Inds Inc
MRC Mrc Global Inc
NEM Newmont Mining
PNW Pinnacle West
PSA Public Storage
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At the time of publication, Versace and Hawkins had no positions in the stocks mentioned.

TAGS: Investing | U.S. Equity | Technology | Markets

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