Market Perspective for February 6, 2017

The Dow Jones Industrial Average saw its best day of 2017 on Friday and the Nasdaq hit a new all-time high following a strong monthly jobs report. S&P 500 earnings growth of 4.6 percent is on track to solidly exceed initial 3.1 percent estimates. Financials and technology have surprised to the upside. Consumer stocks will be in focus this week.

The December Job Openings and Labor Turnover Survey (JOLTS) will be out on Tuesday. Overseas, the Royal Bank of Australia is expected to keep interest rate and quantitative easing policies unchanged.

The weekly mortgage applications index and weekly crude oil inventory data will be available on Wednesday. Analysts are forecasting a small increase in both mortgage applications and oil stockpiles. An International Energy Administration (IEA) report covering the global energy market, including the impact of OPEC production cuts, will be released on Friday. Finally, weekly unemployment claims figures are expected to reflect a slight increase.

Just over half of the S&P 500 Index has reported earnings. Consumer-related companies, including media firms, will be among this week’s 75 reporters. Several smaller pharma and energy companies will also report.

After struggling for more than a year, Disney (DIS) stock price has rallied since November’s Star Wars movie hit the box office. The company will face tough year-over-year comparisons, however, when it reports on Tuesday as ESPN losses continue to weigh on earnings. DIS comes into the week nearly 10 percent below its all-time high.

General Motors (GM) shares two weeks ago, before falling last week when Ford’s (F) earnings disappointed. Analysts are looking for $1.14 per share in earnings. British Petroleum (BP), Mondelez (MDLZ), and biotech large-cap Gilead (GILD) are also scheduled to report on Tuesday.

Time Warner (TWX) will report on Wednesday. Analysts forecast $1.19 per share in earnings, but the company’s potential sale to AT&T (T) could impact the stock. The market isn’t confident a deal will go through. TWX trades 12 percent below AT&T’s offer price. Sanofi (SNY), GlaxoSmithKline (GSK), Allergan (AGN), and materials giant Rio Tinto (RIO) will also report on Wednesday.

Coca-Cola (KO), Pepsi (PEP), CVS Health (CVS), and NVidia (NVDA) will report on Thursday. Two oil producers will also report, Total (TOT) and Occidental Petroleum (OXY). Coke and Pepsi are transitioning away from sugar-laden soft drinks and snacks to healthier alternatives. Pepsi gained in 2016, but underperformed the S&P 500 Index by about 4 percent. Coke was one of only two Dow components to end 2016 with a loss. Both companies are key components in consumer staples funds, a sector that also underperformed last year. Along with MDLZ and CVS, these four companies are found in the top-10 of many market cap- weighted consumer staples ETFs, accounting for about 20 percent of assets.

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