Market Perspective for July 21, 2014

A number of strong earnings reports last week were derailed by geopolitical events and comments made by the Federal Reserve. The impact should be temporary and we should start seeing investors focus back on earnings of a number of blue chip stocks. Apple (AAPL), Coca-Cola (KO), Netflix (NFLX) and Ford (F) are just a few household names that will be reporting.

In Europe, weak economic data out early on Monday could keep pressure on the euro. That is relatively good news for U.S. assets, which will have an easier time outperforming if the euro is weak. Overnight, Germany reported low producer price inflation and Italy announced industrial orders were much lower than expected. The European Central Bank still hasn’t launched a quantitative easing policy, although it still remains a possibility.

Two areas that spiked due to geopolitical events last week were gold and oil. Both were already having good years and the bounce interrupted recent sell-offs. We’ll see this week whether they can hold those gains. This week we’ll also see if small-caps and momentum sectors can rebound from the Fed’s comments about “stretched valuations.” Small-caps were strong on Friday, indicating investors believe there is still value to be had.

The S&P 500 and Dow Jones Industrial Averages are close to their all-time highs and both could break those records this week. The Russell 2000 will likely need two or three positive weeks to get back to a 52-week high.

Economic Reports: This will be a relatively light week for economic data ahead of next week’s second quarter GDP report.  The flash PMIs for various nations, including the United States and China, will be closely watched.

Earnings:  This is an important week for earnings. Among the major names reporting are Netflix (NFLX), Apple (AAPL), Texas Instruments (TXN), Coca-Cola (KO), Microsoft (MSFT), Altria (MO), McDonald’s (MCD), Lockheed Martin (LMT), Harley-Davidson (HDI), Boeing (BA), Facebook (FB), Delta Air Lines (DAL), AT&T (T), Freeport McMoRan (FCX), Pepsi (PEP), Gilead (GILD), Ford (F), General Motors (GM), Amazon (AMZN), Celgene (CELG), Caterpillar (CAT), Eli Lilly (LLY), 3M (MMM), Starbucks (SBUX), Baidu (BIDU) and Visa (V)


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