- Stocks move lower to begin busy earnings week. U.S. equities are slightly lower in early trading, starting off a busy week for earnings and President Trump’s first official week in office. The S&P edged down slightly last week, with both healthcare and financials posting losses of at least 1.5%; consumer staples was the only notable outperformer, climbing 2.1%. Stocks finished mixed overnight in Asia; Japan’s Nikkei (-1.3%) dropped sharply amid a strengthening yen, while the Shanghai Composite (+0.4%) and Hang Seng (+0.1%) rose. European markets are modestly lower in afternoon trading as the U.K.’s FTSE (-0.5%) is leading the way lower on the heels of a multi-week rally that included 15 consecutive higher closes. Finally, the yield on the 10-year Treasury note is down slightly to 2.46%, WTI crude oil ($52.42/barrel) is up 1.5% following encouraging comments on supply from Saudi Arabia’s energy minister, and COMEX gold ($1211/oz.) is higher by 0.5%.
- Good start to earnings season for financials but little Q4 upside. With 62 S&P 500 companies having reported results thus far, earnings (65%) and revenue (44%) beat rates are both slightly disappointing relative to recent trends based on Thomson data (other sources have different numbers). As a result, the growth rate at 6.3% is only marginally higher than estimates at quarter end (6.1%). At the sector level, financials upside has been offset by shortfalls in energy and consumer discretionary companies. Guidance has generally been good, as S&P 500 estimates for 2017 have held steady on energy increases, which-although it’s early in the season-is a positive development given the historical pattern of reductions in estimates. This week (January 23-27) is a busy one with 70 S&P 500 companies reporting.
- GDP, Fed quiet period, PMIs on tap this week. The Federal Reserve Bank will honor its unofficial “quiet period” ahead of next week’s FOMC meeting, but market participants will have plenty to digest this week nonetheless, especially on the political front. President Trump’s cabinet appointees continue their confirmation process in the U.S. Senate, and the U.K.’s Supreme Court is expected to make a key ruling on Brexit on Tuesday, January 24. On the data front, Q4 gross domestic product (GDP) reports in the U.S. and U.K. are likely to get top billing from the media, but the manufacturing PMIs for January 2017 in the U.S., U.K., Eurozone, and Japan are more forward looking and more important.
- Fed NowCasts tracking to 2.5% with first estimate of Q4 GDP coming at the end of the week. The Atlanta Federal Reserve (Fed) and New York Fed are now both producing NowCasts, regularly updated data-driven models that provide forecasts of the quarter’s GDP starting months before the actual release. Taking the average of the two NowCast models, GDP for the fourth quarter of 2017 is tracking to a solid 2.5%, helped by a pickup in business spending. NowCasts have been no more (or less) accurate than consensus forecasts, but can provide valuable added insight on how GDP expectations are evolving.
- ECB’s Draghi Speaks in Torino
- Japan: Nikkei’s Mfg. PMI
- Markit Mfg. PMI (Jan)
- CBO Releases its Economic and Budget Outlook for 2017-2027
- Eurozone: Markit Mfg. PMI (Jan)
- UK Supreme Court Rules on Brexit/Article 50
- Germany: Ifo (Jan)
- New Home Sales (Dec)
- Leading Indicators (Dec)
- UK: GDP (Q4)
- Japan: CPI (Dec)
- GDP (Q4)
- Durable Goods Orders and Shipments (Dec)
- Eurozone: Money Supply and Bank Lending (Dec)
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