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Earnings season will kick off this week, with a number of blue chips set to take the stage on Tuesday and Wednesday. Across the pond, European leaders were locked in meetings for 17 hours on Sunday, with a bailout deal finally coming to fruition in the early hours. Requesting a €53.5 billion loan, Prime Minister Tsipras received a three year bailout estimated at €86 billion. Terms will need to be approved by the European and Greek Parliaments. Market commentary was mixed with a number of analysts’ citing the damaging effects the agreement would have on European relations.
Goldman Sachs over the weekend highlighted that the recent Chinese equity market pullback was more like a ‘fast and furious correction’ than a ‘crash’. Although positive on the outlook, the investment bank still believes that the market could sell off a further 400 million renminbi. The Shanghai Composite has rallied over 10% since stabilization measures were implemented last week.
Macro-wise, a host of data will be released including PPI, Retail Sales, Initial Claims, CPI, Building Permits and Housing Starts. The Fed will comment on the Beige Book on Wednesday at 2pm.
The Dow looks set to follow European markets with the futures pointing to a 0.7% rise on the open. News that Greece had agreed to bailout terms over the weekend, helped subdue investors’ concerns. The Treasury Budget for June will be announced at 2pm with the market expecting a $41.2 billion surplus.
Earnings will take prime position on Tuesday with Wells Fargo, Yum Brands, JP Morgan and Johnson & Johnson expected to report. Economically, Retail Sales will be released before the market opens with a 0.3% rise expected. This would be an adjustment of 0.9% from the previous period. Export and Import Prices will also be announced during the session.
Leading up to the Fed’s Beige Book in the afternoon, key economic data including the Producer Price Index and Industrial Production data will be released. PPI is forecast to come in below the previous period at 0.2%. Core PPI, which excludes food, energy and trade is expected to remain at 0.1%.
Investors will be cautiously looking for signs of a recovery in Initial Jobless Claims, with the market factoring in 282,000 for the period.
Key economic data to be released on Friday included CPI, Building Permits, and Housing Starts. Investors will watch for changes in inflation and how this could affect the Fed’s monetary policy decision.
Greece’s decision to agree on bailout terms could help support the markets early in the week, with European leaders expected to meet on Wednesday. Investors will be closely watching for earnings surprises, with Tuesday and Wednesday the busiest reporting days.