After last week’s roller coaster of market gains and declines, this week could see more of the same. However, it won’t be the economy causing the volatility this week; the week is relatively light on data coming from various agencies, with the majority housing related. This week sees the release of building permits, housing starts and measures of home prices.
And while the housing-related data is important, driving the week and the market’s returns will be the slew of earnings reports slated for this week. As we are now in the third week of so-called earnings season, the number of reports and different sectors are critical gauges of the overall health of the U.S. economy. Guidance numbers will continue to be the key. Even though the Fed doesn’t necessarily take into account these numbers, they could be a window into the minds of the Fed’s governors with regards to raising interest rates.
Also playing into the week’s volatility is ever-present China and its market issues. Last week, Beijing announced a few new stimulus measures to prop up the stalling economy. This week could see more of the same.
Monday kicks off the week especially light: the National Association of Home Builders (NAHB) Housing Market Index is the only reported data. The survey looks at 900 different builders and showcases how they feel about home sales and renovations. The measure has been trending up over the course of the year. Normally, it has a muted impact, but as the only game in town, it could help the markets rally.
Also scheduled is a speech by Federal Reserve Bank of Richmond President Jeffrey Lacker at the University of Richmond.
- After the market close on Monday, Badger Meter (BMI ) is set to report EPS. The maker of water and gas meters as well as other flow measurement devices is estimated to earn 63 cents per share. BMI yields 1.32%.
- NAPA Automotive owner Genuine Parts (GPC ) will also report earnings on Monday. GPC is set to make $1.23 in profits and yields 2.96%.
- Investors will get a look at how badly the energy industry sank when oil service giant Halliburton (HAL ) reports on Monday. HAL is set report profits of just 28 cents per share. King HAL yields 1.83%.
- Asset manager Morgan Stanley (MS ) continues the trend of big financial firms to report this October. MS will announce earnings of 63 cents per share before market open. Morgan Stanley yields 1.79%.
- Investors are looking for Sonic’s (SONC ) earnings to be as sweet as its famous cherry limeades. The owner/operator of drive-thru restaurants should earn 42 cents per share. SONC yields 1.39%.
Tuesday continues the housing data binge for the week, with several pieces of data to be reported. First up is the Census Bureau’s Residential Building Permits Index. The gauge of future construction activity has recently regained its footing and started to rise after dipping in the last two months. Analysts expect a slight rise again this month. The Bureau will also report housing starts. The annualized number of new residential buildings that actually began physical construction has less of an effect than building permits, but it’s still a good indicator of future economic activity. The metric has dipped in the last two months, but analysts are forecasting a slight increase this month.
- Custodial mega-bank Bank of New York Mellon (BK ) is set to report earnings of 71 cents per share before the market opens. BK yields 1.68%.
- Chili’s Grill & Bar owner Brinker International (EAT ) hopes to get its “baby back, baby back” with regards to earnings. EAT is set to earn 55 cents per share and yields 2.49%.
- Analysts estimate that Discover Financial Services (DFS ) will report earnings of $1.33 per share. The consumer credit and finance firm yields 2.02%.
- Despite clamp downs on discretionary spending, people are still lining up to buy Harley-Davidson’s (HOG ) famous motorcycles. HOG is expected to report EPS of 79 cents and yields 2.26%.
- Despite recent stumbles, Lockheed Martin (LMT ) still has the defensive goods, at least according to analysts. The weapons maker is estimated to earn $2.72 per share when it reports before the bell. LMT yields 3.16%.
The only economic data reported on Wednesday will be crude oil inventories, which is a good thing as there is a TON of earnings reports being released Wednesday. As for inventories, they are set to drop once again on cutbacks in the oil patch.
- Abbott Laboratories (ABT ) will report earnings of 53 cents per share before market open. The drug and health care giant yields 2.29%.
- Consumer credit stalwart American Express (AXP ) will report EPS of $1.31. Investors hope to “never leave home without” a dividend increase from the firm. AXP yields 1.51%.
- Boeing (BA ) hopes that orders for its new series of passenger jets will result in higher earnings. The aerospace pioneer is estimated to earn $2.21 per share and yields 2.65%.
- You could buy the world a lot of cokes with Coca-Cola’s (KO ) 3.15% dividend. That dividend should increase as KO reports EPS of 50 cents per share.
- General Motors (GM ) may finally have gotten its mojo back; the automotive manufacturer is set to report profits of $1.18 per share. GM yields 4.32%.
- Illinois Tool Works (ITW ) makes pretty much everything. The firm has a huge product catalog and that breadth of items should help the firm earn $1.32 per share. ITW yields 2.57%.
- As one of the major chipmakers, Texas Instruments’ (TXN ) earnings could move the markets. Luckily for investors, it’s scheduled to report a profit of 68 cents per share. TXN yields 2.9%.
Thursday will come in hot-n-heavy on the housing front. The day will see the release of the Fannie Mae and Freddie Mac Housing Price Index which looks at the change in home prices. After showing slight declines, the number has started to trend up. That’s key for homeowners still underwater on their mortgages. The National Association of Realtors will also release its existing home sales figures. That number took an unexpected dip last month. However, with the Fed keeping interest rates down, analysts predict there should be a slight uptick in the data.
Unemployment numbers and more earnings reports than you can shake a stick at will also be released Thursday.
- Diversified industrial firm 3M (MMM ) is set to earn $2.01 per share. The former Minnesota Mining and Manufacturing yields 2.75%.
- American Electric Power Company (AEP ) will earn EPS of 95 cents. As one of the largest utilities in the nation, AEP has a mega-yield of 3.61%.
- Diversified telecom AT&T (T ) is set to earn 69 cents per share. The earnings report will be the first since its buyout of DirecTV. T yields 5.61%.
- Based on its previous guidance, we already know that Caterpillar’s (CAT ) earnings are going to be ugly. Still, analysts have the diversified machinery and trucking firm earning 78 cents per share, CAT yields 4.35%.
- Steelmaker Nucor’s (NUE ) earnings could be seen as a window into the global economy. NUE will earn EPS of 47 cents and yields 3.53%. However, its guidance on the fate of the steel industry should be the key driver of its share price.
- In keeping with the housing theme, homebuilder PulteGroup (PHM ) will report earnings of 43 cents per share. PHM yields 1.68%.
After the torrid pace of earnings reports in the last few days, Friday goes out like a lamb. Additionally, investors will get a much needed break from economic data. The only report to close out the week is Markit’s Purchasing Managers’ Index (PMI). The measure tends to have a muted effect as other PMI reports have already been issued for the month.
- Smaller aerospace and bearings producer Barnes Group (B ) will announce earnings of 64 cents per share. B yields 1.25%.
- Michigan’s largest utility, DTE Energy (DTE ), yields 3.51%. Helping pay for that yield will be DTE’s earnings of $1.17 per share.
- Investors in Procter & Gamble (PG ) hope that the firm’s continued dominance in consumer products pads the bottom line. PG is estimated to earn EPS of 95 cents and yields 3.57%.
The Week Ahead
All in all, the upcoming week is dominated by earnings reports and more specifically, the forward guidance contained in those reports. With the number of sector and industry bellwethers starting to work through earnings season, the markets could react and be quite volatile based on the nature of the guidance. Investors should plan accordingly.
As for the housing data, it shouldn’t be a major factor for the stock market when faced with the earnings. However, the data could play into the Fed’s rate decisions, so it’s still worth paying attention to.