By Andrea Riquier
144 S&P 500 components also are set to report in the coming
week
Wall Street is gearing up for a quarterly results whirlwind this
coming week.
One-third of the 30 components of the Dow Jones Industrial
Average and roughly the same share of the S&P 500 index , 144
companies, are due to report, making for one of the busiest earning
stretches this season and the most frenzied for the Dow.
Ten members of the blue-chip Dow index, including Coca-Cola
Co.(KO), Caterpillar Inc.(CAT), United Technologies Corp.(UTX),
McDonald's Corp.(MCD) and Visa Inc.(V) are among the names set to
report.
Among the S&P 500, social-media giant Facebook Inc. (FB)
will deliver its results July 24, with investors likely to be
keenly focused on the company that has returned more than 50% so
far in 2019, amid its controversial Libra coin venture
(http://www.marketwatch.com/story/facebook-launches-cryptocurrency-libra-coin-stock-jumps-2019-06-18).
The parade of reports could help lend some focus to a market
that has mostly skidded lower over the past several sessions, with
all three benchmarks finishing Friday with their steepest weekly
declines since the end of May
(http://www.marketwatch.com/story/stock-market-futures-rise-even-as-fed-clarifies-dovish-comments-made-by-williams-2019-07-19)as
investors quickly downgraded the likelihood of a 50-basis-point cut
to key interest rates by the Federal Reserve.
Results have thus far been relatively strong but the quarterly
reports may offer the clearest indication about the degree by which
some of the biggest American corporations have been buffeted by
Sino-American trade conflicts and a lackluster economic picture
outside the U.S.
Chris Dillon, capital markets investment specialist for T. Rowe
Price, agrees. After a few choppy weeks, investors have settled on
an expectation of at least one rate cut by the Federal Reserve,
Dillon said, and "now it's all about earnings."
The week will come down to "earnings, earnings, earnings," said
Sahak Manuelian, head of equity trading at Wedbush Securities.
Market participants are expecting "flat revenues and
incrementally better earnings growth," Dillon told MarketWatch, and
most of the S&P 500 constituents are likely to fare a touch
better than what he described as a "muddle-along" environment.
To be sure, analysts had been steadily dialing back forecasts
for earnings heading into the second-quarter. But an easy-money Fed
and healthy, albeit slowing domestic economy, are expected to be
sufficient to maintain the market's mostly bullish trend.
"The bar has been set very low," Manuelian said. "I don't feel
like things are that expensive yet and there's decent sentiment.
This market's still going higher," he predicted.
That said, Dillon thinks there's still capacity for earnings to
spook investors. With things so unsettled, the kind of guidance
companies will offer along with their numbers holds
"disproportionate" weight compared with a more normal environment,
he said.
A number of companies already have cited trade concerns in
earnings recent calls in recent weeks, including CSX Corp.'s (CSX)
Chief Executive James Foote, who described
(http://www.marketwatch.com/story/the-ceo-of-railroad-giant-csx-says-hes-baffled-by-the-us-economy-2019-07-17)
the "present economic backdrop as one of the "most puzzling I have
experienced in my career."
Read:Earnings season: Here are the 9 S&P 500 companies
blaming the trade war for performance or outlook, so far
(http://www.marketwatch.com/story/earnings-season-here-are-the-9-sp-500-companies-blaming-the-trade-war-for-performance-or-outlook-so-far-2019-07-19)
Caterpillar Inc.(CAT) is set to report Wednesday and could be
watched closely for further signs of tariff-induced stress.
Caterpillar "has everything to do with the cycle," Dillon pointed
out. Downbeat commentary from Caterpillar could rattle the market
in the same way that a December warning from Federal Express
(http://www.marketwatch.com/story/fedex-stock-falls-after-company-lowers-outlook-on-slowdown-in-europe-2018-12-18)
helped to exacerbate a rout in stocks that month, Dillon said.
Strategists, however, say there are a number of other
developments that merit Wall Street's attention outside of
earnings, including policy meetings from the European Central Bank
on Thursday, which could throw the market a curveball if it
attempts to front run Powell by rolling out aggressive stimulus
ahead of the Fed's July 30-31 policy gathering.
"Do they try to get ahead of the curve?"asked Jason Draho, head
of asset allocation for the Americas at UBS Global Wealth
Management. The investor said that could be one possibility if the
European policy makers believe the Fed cut rates, which stand at a
2.25%-2.50% range, by 50 basis points.
Federal-funds futures show the probability of a
half-a-percentage point rate reduction at 22.5% from as high as 60%
on Thursday, according to CME Group data, late Friday
(https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html).
If the ECB is pre-emptively much more dovish than investors
expect, that could move currency and bond markets, Draho said.
"What the ECB does could be a good indicator of what the Fed could
do," he added.
If the ECB delivers a jolt to the market, investors may not have
much time to catch much of a breather because the week after next
will be an even busier earnings period for the S&P 500.
(END) Dow Jones Newswires
July 21, 2019 16:00 ET (20:00 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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