In the week ahead a dozen of the Dow 30 components are scheduled to report their earnings, along with about one-fourth of the companies in the Standard & Poor’s 500 Index. Notable names reporting this week include Apple, Johnson & Johnson, McDonald’s, Procter & Gamble, AT&T, Amgen, Caterpillar, Colgate-Palmolive, Ford, and Chevron.
Of the 60 S&P 500 companies that have already reported earnings for the fourth quarter of 2011, 62% have reported earnings above the average estimate (according to data from FactSet Research). This is lagging the levels that we have been accustomed to seeing in the past several quarters, when over 70% of companies exceeded analyst estimates. So far we have certainly seen a few misses and there has been a general ratcheting down of expectations. Nevertheless, some high profile earnings beats by the likes of IBM, Intel, and Microsoft have injected enthusiasm into the markets and generated optimism for upcoming reports.
Additionally, stocks are moving on the big picture of a gradually improving domestic economy along with an overall reduction in the stress level regarding the euro zone crisis. With each passing week, European events seem to be less and less of a driving force in our financial markets. One of the results of this has been a reduction in market volatility and a less tumultuous investing environment. So when it was all said and done last week, the major stock market averages posted decent gains.
The Dow Jones Industrial Average rose 2.4% to 12,720. The NASDAQ Composite gained 2.8% to 2787 and the Standard & Poor’s 500 Index added 2% to 1315. In addition to trading off of earnings in the week ahead, these indices will have plenty of macroeconomic data to digest.
Reports on December Durable Goods Orders, December Leading Indicators, December New Home Sales, and Initial Jobless Claims all have the potential to move markets – as do two other events in the week ahead. On Wednesday the Federal Reserve releases its economic outlook, after which Chairman Bernanke holds a press conference. Also, fourth quarter Gross Domestic Product is released on Friday and street estimates are for economic growth of around 3%, its best pace since the second quarter of 2010.
Disclaimer: Data obtained from resources believed to be reliable, but we do not guarantee its accuracy or completeness
