By Wallace Witkowski, MarketWatch
SAN FRANCISCO (MarketWatch) -- Corporate earnings will command
the attention of investors in the coming week with about one-third
of the S&P 500 and the Dow Jones Industrial Average reporting
quarterly results.
"We're looking at the big industrials for indicators of global
growth," said Mark Luschini, chief investment strategist at Janney
Montgomery Scott.
Economic data in the past week have indicated a cooling off in
the manufacturing sector as the Federal Reserve said March
industrial production levels were unchanged in February, and
manufacturing gauges in the New York and Philadelphia regions
declined.
Also, slowing growth in China and a possible recession in Europe
threaten to throw cold water on U.S. exports.
Among the big earnings reports beginning Tuesday are Apple Inc.
(AAPL) along with Dow components AT&T Inc. (T) , United
Technologies Corp. (UTX) , and 3M Co. (MMM).
Other Dow (DJI) components reporting include Boeing Co. (BA) and
Caterpillar Inc. (CAT) on Wednesday, Exxon Mobil Corp. (XOM) on
Thursday, with Chevron Corp. (CVX), Procter & Gamble Co. (PG),
and Merck & Co. (MRK) wrapping up the week on Friday.
Other high-profile earnings include Netflix Inc.(NFLX) on
Monday, and Amazon.com Inc.(AMZN) on Thursday.
Of the 106 companies on the S&P 500 Index (SPX) that have
reported earnings this season, 83% have reported earnings above
consensus Wall Street estimates, according to John Butters, senior
earnings analyst at FactSet Research. If that rate holds, it will
be the highest upside surprise rate during earnings season in three
years, Butters said.
One nonearnings factor that may color the week is the first
round of the French presidential election on Sunday, where
front-runners Nicolas Sarkozy and challenger Francois Hollande are
expected to go to a runoff election.
"There may be a little spillover from France but it will be more
of the same from earnings," said Luschini. "The numbers have been
exceeding by a sizable amount, so either management was good at
keeping expectations low or analysts were too cautious."
Luschini said Tuesday and Wednesday will be busy days for
economic data and Fed watching. On Tuesday, Case-Shiller home-price
data come out, along with April consumer confidence data and March
new-home sales. Then, on Wednesday comes durable-goods orders for
March, and the Federal Open Market Committee announcement followed
by a news conference from Fed Chairman Ben Bernanke.
"Anybody and everybody will be trying to interpret where the
Fed's psyche is at the moment," Luschini said.
Financial stocks, which are the best performing sector with
regards to earnings expectations this season, will continue to be a
focus. Over the past week, the blended earnings growth rate in the
S&P 500 improved to 2.2% from 1% in the previous week. That was
fueled by a 12.8% blended earnings growth rate from financial
firms, according to Butters.
Now that the big banks have reported earnings, focus will turn
to their regional counterparts, said Kevin Fitzsimmons, managing
director of equity research at Sandler O'Neill.
On Monday, Zions Bancorp (ZION) and SunTrust Banks Inc. (STI)
report quarterly results. On Tuesday, Regions Financial Corp. (RF)
reports.
That follows a week where Bank of America Corp. (BAC) and
Citigroup Inc. (C) met or exceeded earnings. The previous week,
J.P. Morgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC)
surpassed Wall Street expectations.
The sector has benefited from a reduction in credit costs and
nonperforming assets as well as modest loan growth, and that comes
when first-quarter seasonal costs such as payroll expenses are
higher and improving margins remain an uphill battle, Fitzsimmons
said.
Still, even if strong earnings extend to this week's regional
banks, Fitzsimmons doesn't expect a huge rally in the sector.
"The group has had such a run over the last six months, we're
not seeing any dramatic stock moves," Fitzsimmons said.
Year-to-date, the Financial Select Sector SPDR ETF (XLF), which
tracks the financial stocks in the S&P 500 Index, is up 17%;
and the KBW Bank Index (BKX), which tracks the 24 leading U.S.
banks, is up 21%.
On Monday, S&P 500 companies Ameriprise Financial Inc.(AMP),
ConocoPhillips (COP), Eaton Corp.(ETN), Hasbro Inc.(HAS), Texas
Instruments Inc.(TXN) and Xerox Corp.(XRX) will report quarterly
earnings.
Then, on Tuesday, comes reports from Ace Ltd.(ACE), Aflac
Inc.(AFL), Air Products & Chemicals Inc.(APD), Amgen
Inc.(AMGN), Baker Hughes Inc.(BHI), C.R. Bard Inc. (BCR), C.H.
Robinson Worldwide Inc.(CHRWD), Coach Inc.(COH), DeVry Inc. (DV),
Edwards Lifesciences Corp.(EW), FMC Technologies Inc.(FTI), Hershey
Co.(HSY), Illinois Tool Works Inc. (ITW), International Game
Technology(IGT), Juniper Networks Inc.(JNPR), Lexmark International
Inc.(LXK), Life Technologies Corp.(LIFE), McGraw-Hill Cos.(MHP),
Nabors Industries Ltd.(NBR), Norfolk Southern Corp.(NSC), Paccar
Inc.(PCAR), Parker Hannifin Corp.(PH), Robert Half International
Inc.(RHI), Reynolds American Inc.(RAI), Ryder System Inc.(R),
Sigma-Aldrich Corp.(SIAL), T. Rowe Price Group Inc.(TROW),
Torchmark Corp.(TMK), Total System Services Inc.(TSS), U.S. Steel
Corp.(X), Waters Corp.(WAT), and Western Union Co. (WU).
S&P 500 companies reporting Wednesday include Akamai
Technologies Inc. (AKAM), Assurant Inc.(AIZ), AutoNation Inc.(AN),
AvalonBay Communities Inc.(AVB), Avery Dennison Corp.(AVY), Cabot
Oil & Gas Corp.(COG), Citrix Systems Inc.(CTXS), Cliffs Natural
Resources Inc.(CLF), Corning Inc.(GLW) Crown Castle International
Corp.(CCI), Dr Pepper Snapple Group Inc. (DPS), Eli Lilly &
Co.(LLY), General Dynamics Corp.(GD), Harley-Davidson Inc.(HOG),
Hess Corp.(HES), Host Hotels & Resorts Inc.(HST), Hudson City
Bancorp.(HCBK), Lorillard Inc.(LO), Northrop Grumman Corp.(NOC),
O'Reilly Automotive Stores Inc.(ORLY), Owens-Illinois Inc.(OI),
Praxair Inc.(PX), Rockwell Automation Inc.(ROK), Southern Co.(SO),
Sprint Nextel Corp.(US-S), Teradyne Inc.(TER), Thermo Fisher
Scientific Inc.(TMO), WellPoint Inc.(WLP), and Xilinx Inc.
(XLNX)
On Thursday comes earnings from Aetna Inc. (AET), Altria Group
Inc.(MO), AmerisourceBergen Corp.(ABC), Ball Corp.(BLL), Bemis
Co.(BMS), BorgWarner Inc.(BWA), Bristol-Myers Squibb Co.(BMY),
Celgene Corp.(CELG), Cerner Corp.(CERN), Cincinnati Financial
Corp.(CINF), Coca-Cola Enterprises Inc.(CCE), Colgate-Palmolive
Co.(CL), Dominion Resources Inc.(D), Dow Chemical Co.(DOW), Eastman
Chemical Co.(EMN), Entergy Corp.(ETR), Expedia Inc.(EXPE),
Federated Investors Inc.(FII), Fidelity National Information
Services Inc.(FIS), Gilead Sciences Inc.(GILD), Goodrich Corp.(GR),
Helmerich & Payne Inc.(HP), Invesco Ltd.(IVZ), Iron Mountain
Inc.(IRM), Kellogg Co.(K), KLA-Tencor Corp.(KLAC), L-3
Communications Holdings Inc.(LLL), Leggett & Platt Inc.(LEG),
Lockheed Martin Corp.(LMT), Mead Johnson Nutrition Co.(MJN),
MetroPCS Communications Inc.(PCS), Moody's Corp.(MCO), Mylan
Inc.(MYL), Occidental Petroleum Corp.(OXY), PepsiCo Inc.(PEP),
PerkinElmer Inc.(PKI), Principal Financial Group Inc.(PFG), Pulte
Group Inc.(PHM), Raytheon Co.(RTN), Republic Services Inc.(RSG),
Safeway Inc.(SWY), Starbucks Corp.(SBUX), Time Warner Cable
Inc.(TWC), Tyco International Ltd.(TYC), United Parcel Service
Inc.(UPS), VeriSign Inc.(VRSN), Waste Management Inc. (WM), Western
Digital Corp.(WDC), Whirlpool Corp.(WHR), Xcel Energy Inc.(XEL),
and Zimmer Holdings Inc. (ZMH)
On Friday comes results from Coventry Health Care Inc.(CVH),
Covidien PLC(COV), Goodyear Tire & Rubber Co.(GT),
International Paper Co.(IP), Newell Rubbermaid Inc.(NWL), Newmont
Mining Corp.(NEM), Simon Property Group Inc.(SPG), Ventas
Inc.(VTR), and Weyerhaeuser Co. (WY)