The stock market made quite the move this past week after Federal Reserve officials suggested the central bank may refrain from completing its efforts to taper quantitative easing (QE) this month. Fueling that potential delay were the uncertain economic tones in the eurozone and China, as well as the unknown knowns that are Ebola; the Islamic State militant group; and the Middle East.
Two things aided the market move this week. First, a round of flash purchasing manager index (PMI) headlines suggested the world was not going to hell in a hand basket -- but, as Versace has pointed out, the internals on the China PMI suggest that it's not all peaches and cream. As for the eurozone, flash PMI Composite Output Index there came in at a two-month high. (Talk about trying to put a happy face on what was the second worst reading of 2014!) The report did reflect falling backlogs of work, and prices being cut in order to boost sales. All that said, the eurozone outlook points to more worry than reward ahead.
We think the vector and velocity of those two regions will give the dovish Fed ample cover to stay on the sidelines with QE, and when it comes to interest-rate hikes on U.S. Treasuries. In fact, barring a sharp economic turnaround, those rate hikes are not likely to happen until the third quarter of 2015 at the soonest -- and this view has been aided by the September consumer price index (CPI) report. Both CPI and core CPI (the latter of which excludes food and energy) were up just 0.1%.
Also aiding the market were earnings reports. Yes, many a headline focused on Amazon's (AMZN) quarter, which missed analyst expectations by a wider margin than expected. However, there were a number of better-than-anticipated numbers from the likes of Microsoft (MSFT), Caterpillar (CAT), 3M (MMM), UPS (UPS), Ford (F) and Procter & Gamble (PG).
Overall, of the 208 S&P 500 companies that have reported September-quarter results, 75% have beaten earnings expectations and 60% have reported better-than-expected sales. The net result is that the blended earnings growth rate for the third quarter is shaping up to look more like 5.6%, per FactSet, as compared with the 4.6% expectation seen on Sept. 30. At the same time -- and I don't mean to scour for a hair on the plate -- we have seen robust stock-buyback activity in the past quarter. So, given this, we'll be doing some tabulating in the coming weeks to see if this quarter's operating-profit growth matched earnings-per-share (EPS) growth.
All the week's positives led the Dow Jones Industrial Average to climb 425 points last week, or 2.6%, pushing the index back into the black on a year-to-date basis. While many tend to focus on that index, much to our dismay, in our view the better market indicator is the S&P 500. This more diversified index climbed more than 4% last week, and closed Friday less than 3% away from its 52-week high.
At any rate, if you thought last week was busy, this week will be a barnburner of data and earnings. All told, the coming trading week boasts more than 980 scheduled webcasts, several regional Fed manufacturing reports and the September figures for durable orders and personal income and spending -- the latter of which could see a boost from lower gas prices.
Also in the mix is a Federal Open Market Committee (FOMC) interest-rate decision. While the decision itself will likely contain few surprises -- we're unlikely to see any change in rates -- the commentary around the "no-change" announcement will be parsed for clues for what lies ahead.
At the same time, a number of high-profile earnings reports are set for release in the coming five days, and these will surely drive headlines and the market, depending whether they deliver a meet or beat for the numbers themselves and for December-quarter guidance.
Some of these include Twitter (TWTR), Facebook (FB), Starbucks (SBUX), Pfizer (PFE), Merck (MRK), Buffalo Wild Wings (BWLD), Panera Bread (PNRA) and GoPro (GPRO). We're also due to see get a fair amount of industrial-company earnings -- Parker Hannifin (PH), Eaton (ETN), Trinity Industries (TRN), AGCO (AGCO), Cummins (CMI) and more -- as well as the start of retail results with Ralph Lauren (RL), GNC (GNC) and Hanesbrands (HBI).
In sum, 159 S&P 500 companies are scheduled to report earnings for the third quarter this week. That's quite a bit more than the 130 S&P 500 companies that issued numbers last week. Our advice is: Fasten that seat belt a little tighter. It could get a tad bumpy following last week's strong upward market move.
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.
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Economic Calendar
Monday, Oct. 27
- Pending Home Sales (September)
- Dallas Fed Manufacturing Survey (October)
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Tuesday, Oct. 28
- Durable Orders (September)
- Case-Shiller 20-City Index (August)
- Consumer Confidence (October)
- Richmond Fed Manufacturing Index (October)
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Wednesday, Oct. 29
- Mortgage Bankers Association (MBA) Mortgage Index (Weekly)
- Crude Oil Inventories (Weekly)
- FOMC Rate Decision (October)
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Thursday, Oct. 30
- Initial and Continuing Jobless Claims (Weekly)
- Gross Domestic Product (GDP) -- Advanced (Third Quarter of 2014)
- Natural Gas Inventories (Weekly)
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Friday, Oct. 31
- Personal Income & Spending (September)
- PCE Prices (September)
- Employment Cost Index (Third Quarter of 2014)
- Chicago PMI (October)
- Michigan Sentiment Index -- Final (October)
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Earnings Calendar
Monday, Oct. 27
- Advent Software (ADVS)
- Allergan Inc. (AGN)
- Armstrong World (AWI)
- Buffalo Wild Wings (BWLD)
- Crocs (BROX)
- Denny's Corp. (DENN)
- Heartland Financial (HTLF)
- Integrated Devices (IDTI)
- Merck & Co. (MRK)
- Plum Creek Timber (PCL)
- Regal Entertainment (RGC)
- Roper Industries (ROP)
- Trex Company (TREX)
- Twitter Inc. (TWTR)
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Tuesday, Oct. 28
- Arch Coal (ACI)
- Aetna Inc. (AET)
- AGCO Corp. (AGCO)
- Aixtron AG (AIXG)
- TD Ameritrade (AMTD)
- Cummins Inc. (CMI)
- Coach Inc. (COH)
- Capella Education (CPLA)
- Crane Co. (CR)
- DuPont (DD)
- DineEquity (DIN)
- Extreme Networks (EXTR)
- Facebook (FB)
- Freeport McMoRan (FCX)
- Gilead Sciences (GILD)
- Corning Inc. (GLW)
- Starwood Hotels (HT)
- Harris Corp. (HRS)
- II-VI Inc. (IIVI)
- Internap (INAP)
- KEYW Holdings (KEYW)
- Masco (MAS)
- McKesson Corp. (MCK)
Medidata Solutions (MDSO) - Martha Stewart Living (MSO)
- Manitowoc Inc. (MTW)
- Novartis AG (NVS)
- Paccar Inc. (PCAR)
- Pfizer Inc. (PFE)
- Parker Hannifin (PH)
- Spirit Airlines (SAVE)
- Comscore Inc. (SCOR)
- Sherwin Williams (SHW)
- Sirius XM (SIRI)
- Sensata Technologies (ST)
- Timken Co. (TKR)
- T-Mobile USA (TMUS)
- TRW Automotive (TRW)
- Vasco Data Security (VDSI)
- Wabtech (WAB)
- Whirlpool Corp. (WHR)
- Wynn Resorts (WYNN)
- Xylem Inc. (XYL)
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Wednesday, Oct. 29
- ADP (ADP)
- Aflac Inc. (AFL)
- Akami Technologies (AKAM)
- Ameriprise Financial (AMP)
- Anadarko Petroleum (APC)
- Baidu Inc (BIDU)
- Cardtronics (CATM)
- Cavium (CAVM)
- Carlyle Group (CG)
- Cott Corp. (COT)
- Cirrus Logic (CRUS)
- Dreamworks Animation (DWA)
- Equinix Inc. (EQIX)
- Express Scripts (ESRX)
- Eaton Corp. (ETN)
- Fortune Brands Home & Security (FBHS)
- Flextronics (FLEX)
- Garmin Ltd. (GRMN)
- Hyatt Hotels (H)
- Hanesbrands (HBI)
- The Hershey Company (HSY)
- IAC/Interactive (IACI)
- JDS Uniphase (JDSU)
- Kimco Realty (KIM)
- Lifelock (LOCK)
- Mueller Water (MWA)
- Panera Bread Co. (PNRA)
- PriceSmart Inc. (PSMT)
- Revlon (REV)
- Ralph Lauren (RL)
- Seale Air Corp. (SEE)
- Tanger Factory Outlets (SKT)
- SodaStream International (SODA)
- Trulia (TRLA)
- Trinity Industries (TRN)
- Take-Two Interactive (TTWO)
- Visa (V)
- Veeco Instruments (VECO)
- Waste Management (WM)
- Wabash National (WNC)
- Watts Water (WTS)
- Weight Watchers (WTW)
- Dentsply International (XRAY)
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Thursday, Oct. 30
- Barrick Gold (ABX)
- American Tower (AMT)
- Air Products & Chemicals (APD)
- American Railcar (ARII)
- Yamana Gold (AUY)
- Avon Products (AVP)
- Brinks Co. (BCO)
- Bunge Ltd. (BG)
- Biomed Realty Trust (BMR)
- Boyd Gaming (BYD)
- Caci International (CACI)
- Avis Budget Group (CAR)
- Ceva Inc. (CEVA0
- Churchill Downs (CHDN)
- Columbia Sports (COLM)
- DuPont Fabros (DFT)
- Enterprise Products (EPD)
- Ensco Plc. (ESV)
- Expedia Inc. (EXPE)
- Comfort Systems (FIX)
- Fluor Corp. (FLR)
- Greenbrier Cos. (GBX)
- GNC Holdings (GNC)
- GoPro Inc. (GPRO)
- Groupon Inc. (GRPN)
- Graftech International (GTI)
- Hhgregg (HGG)
- InterDigital Inc. (IDCC)
- Iron Mountain (IRM)
- Johnson Controls (JCI)
- Kellogg Co. (K)
- Kennametal Inc. (KMT)
- LinkedIn Corp. (LNKD)
- Live Nation Entertainment (LYV)
- MasterCard (MA)
- MDC Holdings (MDC)
- MGM Resorts (MGM)
- Altria Group (MO)
- Mosaic (MOS)
- Mylan Inc. (MYL)
- Blue Nile (NILE)
- Neustar Inc. (NSR)
- New York Times (NYT)
- Reality Income (O)
- Outerwall (OUTR)
- Pilgrims Pride (PPC)
- Elizabeth Arden (RDEN)
- Royal Dutch Shell (RDS.A)
- Sturm Ruger & Co. (RGR)
- Republic Services (RSG)
- Boston Beer (SAM)
- Steve Madden (SHOO)
- Inventure Foods (SNAK)
- Strayer Education (STRA)
- Taser International (TASR)
- Terex Corp. (TEX)
- Tempur Sealy (TPX)
- Trimble Navigation (TRMB)
- Time Warner Cable (TWC)
- VistaPrint (VPRT)
- Western Union (WU)
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Friday, Oct. 31
- Abbvie Inc. (ABBV)
- Aon plc. (AON)
- American Axle & Manufacturing (AXL)
- Anheuser Busch Inbev SA (BUD)
- CBOE Holdings (CBO)
- Clorox Co. (CO)
- Rockwell Collins (COL)
- Chevron Corp. (CVX)
- Genesee & Wyoming (GWR)
- Hilton Worldwide (HLT)
- Heartland Payment Systems (HPY)
- ITT Corp. (ITT)
- Legg Mason (LM)
- Newmont Mining (NEM)
- Newell Rubbermaid (NWL)
- Oshkosh Corp. (OSK)
- Freightcar America (RAIL)
- Standard Pacific (SPF)
- Weyerhaeuser Co. (WY)
- Exxon Mobil (XOM)
