Market Perspective for May 2, 2016

April marked the third consecutive monthly gain for the Dow and the second for the S&P 500 this year. Markets opened in the green on Monday. This week earnings are again in focus: Duke Energy, Pfizer and Tesla Motors as well as Alibaba, Chesapeake Energy and Merck are all scheduled to report. The key second quarter economic report this week will be April’s employment report on Friday.

Shares were hampered by Apple’s (AAPL) poor earnings and meager stimulus from world central banks last week, but on the whole earnings are coming in better than expected. Consumer discretionary, healthcare and telecom are reporting earnings much higher than estimates, led by consumer stocks such as Ford (F) and Amazon (AMZN). This week a new crop of companies will try to keep the ball rolling on the earnings front.  On Tuesday, Duke Energy (DUK) is expected to meet consensus estimates of $1.14 per share in earnings as well as $6.05 billion in revenue. Duke Energy is the largest electric power holding company in the United States. Shares of DUK were up 11.5 percent through April 30, aided by the broad rally in the utilities sector. Analysts will review Tesla Motors’ (TSLA) earnings report and future production targets on Wednesday. The company is expected to report a loss of $0.57 per share on revenues of $1.6 billion.

On Thursday, global online and mobile commerce company Alibaba (BABA) is forecast to report earnings of $3.63 and top-line revenues of $23.11 billion. The company figures prominently in Chinese technology funds. Chesapeake Energy (CHK) reports its earnings as well. Analysts are looking for earnings of $0.10 per share and revenues of $2.55 billion, but they are more focused on potential bankruptcy. Seventy Seven Energy (SSE), a CHK fracking unit spun-off in 2014, plans to file for bankruptcy, but CHK shares have rallied strongly amid the rebound in energy prices.

This is a big week for pharma. Pfizer (PFE) is scheduled to report earnings per share of $0.55 on revenues of $12.0 billion. Investors will look to the company’s pipeline of new drugs and its long-term revenue prospects. Merck (M) is expected to release an EPS of $0.85 and revenues of $9.47 billion. Like Pfizer, the company’s drug pipeline and annual forecast will also be at the center of attention.

On Friday, the government is expected to report a slight uptick to 5 percent in unemployment from 4.9 percent currently. The number ticked up in March as discouraged workers returned to seek jobs. The manufacturing sector reported continuing expansion, with both the Markit and ISM surveys reading 50.8 (anything above 50 signals expansion). Overseas PMI figures will also be watched. China’s official PMI showed expansion Sunday night, but the privately produced number from Caixin is expected to indicate contraction. April auto sales will be released on Tuesday; economists forecast 17.5 million vehicles sold. On Wednesday, the ADP unemployment report for April and the March trade balance data will be reported. Trade data are expected to be favorable, with the deficit falling nearly $7 billion from February’s $47.1 billion to $40.5 billion.

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