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 A number of big banks are due to report their quarterly and
full-year results next week, including JPMorgan Chase & Co <JPM.N>
and Wells Fargo & Co <WFC.N> on Tuesday, Bank of America Corp <BAC.N>
on Wednesday, Goldman Sachs Group Inc <GS.N> and Citigroup Inc <C.N>
on Thursday, and Morgan Stanley <MS.N> on Friday.
Their results will help determine whether earnings forecasts for
2014 need to come down and whether stock values have become
overblown.
"There isn't much left to happen to this market, in terms of the
view of an expanding economy. It is generally agreed by everyone
that the economy is improving. What isn't clear is whether earnings
are improving at the same pace the market is. That's the next big
test for equities," said Rick Meckler, president of LibertyView
Capital Management in Jersey City, New Jersey.
For the first full trading week in January, the Standard & Poor's
500 Index <.SPX> rose 0.6 percent and the Nasdaq Composite Index <.IXIC>
climbed 1 percent, while the Dow Jones industrial average <.DJI>
slipped 0.2 percent.
Investors may get a better sense of how quickly the central bank
will reduce its market-friendly bond purchases from a number of
Federal Reserve officials due to speak next week. A much
weaker-than-expected December payrolls report on Friday raised new
questions about both the strength of the economy and the
aggressiveness of Fed stimulus.
Federal Reserve Bank of Atlanta President Dennis Lockhart is
scheduled to speak at events on Monday and Wednesday, while Fed
Chairman Ben Bernanke is set to speak on Thursday.
The Fed's Beige Book is due on Wednesday.
A batch of December data will be released next week, with retail
sales on Tuesday, the U.S. Producer Price Index on Wednesday, the
U.S. Consumer Price Index on Thursday and housing starts on Friday.
Another number to note on Friday will be the preliminary January
reading on U.S. consumer sentiment from the Thomson
Reuters/University of Michigan Surveys of Consumers.
HEALTHY EARNINGS OUTLOOK
For the whole S&P 500, fourth-quarter profit growth is expected to
have increased 7.7 percent from a year ago, while revenue is
expected to have risen just 0.4 percent, Thomson Reuters data
showed. The benchmark S&P 500 rose 9.9 percent in the fourth quarter
of last year, while it jumped 29.6 percent for 2013, its best year
since 1997.
Among other earnings to watch next week, General Electric Co <GE.N>
is expected to report a spike in fourth-quarter profit on Friday
with the help of the record $229 billion backlog of orders for jet
engines, oil pumps and healthcare equipment.
American Express Co's <AXP.N> fourth-quarter results on Thursday are
expected to beat estimates, helped by increased card spending and
lower default rates among customers.
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KEEPING RETAIL OPTIONS OPEN
Retail stocks have been attracting increased options activity this
week as major retailers came out with their disappointing holiday
sales figures.
Investors will get more insight into the consumers' state of mind
next week as about 150 consumer-related companies are due to
participate in the annual ICR XChange conference from Monday through
Wednesday.
The annual gathering comes after many large U.S. retailers slashed
their earnings forecasts recently because of steep discounts they
offered during the holidays to persuade reluctant consumers to buy.
"I wouldn't judge the health of the economy off of brick-and-mortar
retailers," said Paul Zemsky, head of asset allocation at ING
Investment Management in New York.
"The economy was strengthening into the end of the fourth quarter,"
and there was sufficient growth to keep earnings growing and people
buying the market.
Options volume on Five Below <FIVE.O> jumped more than six times the
norm on Friday. The value retailer's stock fell 7.2 percent to close
at $40.46 a day after the company announced disappointing holiday
sales. Five Below is expected to present at the ICR XChange
conference on Monday.
Out of the total 6,975 options contracts traded on Friday in Five
Below, 2,565 were calls and 4,410 were puts with the most activity
seen in January $45 calls. Goldman Sachs had recommended buying
January $45 calls for a relief rally in the stock following the ICR
update.
Domino's Pizza <DPZ.N> options volume also rose with a total of 861
contracts traded, compared with average daily volume of 520
contracts. The stock has moved about 8.5 percent up or down during
the past nine conferences, moving in the positive direction during
seven of the nine events, according to Goldman Sachs. The company's
presentation at the ICR XChange conference is set for Wednesday.
(Additional reporting by Rodrigo Campos;
editing by Jan Paschal)
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