What to Watch in the Week Ahead and on Monday, July 14

Fri Jul 11, 2014 4:00pm EDT

(The Day Ahead is an email and PDF publication that includes the day's major stories and events, analyses and other features. To receive The Day Ahead, Eikon users can register at . Thomson One users can register at RT/DAY/US. All times in ET/GMT) WEEK AHEAD Earnings for the biggest U.S. banks will continue with JPMorgan Chase & Co and Goldman Sachs Group Inc on Tuesday, Bank of America Corp on Wednesday and Morgan Stanley on Thursday. Analysts are expecting subdued results as a slowdown in revenue from mortgage refinancing and trading is offsetting gains from other areas like investment banking and money management. Higher legal, regulatory and compliance are also weighing on results. Wells Fargo's report on Friday underscored some of those problems as the largest U.S. mortgage lender reported a 39 percent decline in revenue from that business. From Google and Yahoo to General Electric, next week will bring a full gamut of corporate results as the earning season shifts into high gear. For Google, the company behind the No. 1 search engine, investors want specifics on its plans to push Android software into cars, smart-watches and other areas. For GE, an engine maker in its own right, investors want more details about its $16.9 billion deal with France's Alstom. Speaking of engines, Canadian Pacific Railway will report as well, all with three big health-related companies - Johnson & Johnson, Abbott Labs and UnitedHealth. On Tuesday, International Council of Shopping Centers is scheduled to release weekly chain store sales. On the same day, labor department is expected to issues an increase of 0.3 percent and 0.2 percent in import and export Prices for June, respectively. The commerce department also releases the data for retail sales for June, expecting 0.6 percent of raise and the department issues business inventories for May on the same day. The commerce department is scheduled to issue housing starts for June on Thursday, while the labor department is expected to issue weekly Jobless Claims. Federal Reserve Chair Janet Yellen testifies on the central bank's monetary policy, in a semi-annual appearance before the Senate and House. The remarks, mandated by the Humphrey-Hawkins Full Employment Act of 1978, have Yellen speaking before the Senate Banking Committee on Tuesday, and a House panel on Wednesday. Yellen is expected to hew closely to the Fed's last policy statement. Investors will parse her comments closely for any signs that data released since the Fed's last meeting has shifted the central bank's thinking at all. Federal Reserve Bank of Dallas President Richard Fisher speaks on "Monetary Policy and the Maginot Line" on Wednesday, the same day the Fed releases its so-called Beige Book. St. Louis Federal Reserve Bank President Bullard delivers a speech on the economy on Thursday. Intel posts second-quarter results, following signs of PC stabilization. In June, the world's largest chipmaker increased its revenue outlook on the back of signs of improved demand for laptops. But it remains to be seen whether the PC industry is set for expansion following years of decline due to consumers' preferences for tablets. The oilfield services providers, Schlumberger and Baker Hughes are both expected to report a rise in second-quarter profit on Thursday, helped by increased drilling activity in the United States. The companies have been competing for a smaller number of new contracts in North American shale fields as natural gas prices remained weak for several years, putting a damper on drilling. But activity has slowly picked up this year with companies spending more to drill and complete wells as prices improve after an unusually harsh winter in North America left stockpiles depleted. The companies have also warned of weakness in Brazil and Russia. Investors will look for details on the impact of sanctions in Russia and the political turmoil in Iraq. BlackRock, the world's largest money manager, is scheduled to report second-quarter earnings results on Wednesday morning before market open. Analysts expect the New York-based asset manager, which now manages more than $4.4 trillion in assets, to earn $4.41 per share, up from $4.15 per share a year ago. CEO Larry Fink said in June that he stands by his 5 percent organic growth rate target for the company. During the second quarter, EBay Inc faced a series of challenges including a massive data breach in its marketplaces division and the departure of the head of its PayPal unit. The e-commerce company, which is expected to report a 68 cents per share profit on Wednesday, also saw its traffic fall after Google updated its search engine, analysts said. Investors will be looking for insight into how eBay has fortified its marketplaces unit from future attacks. They will also want clarity on who will lead its fast-growing PayPal after chief David Marcus stepped down last month to join Facebook. U.S. Bancorp is expected to report second-quarter earnings on Wednesday, as analysts at Morningstar say, "prudent management and low cost funding give U.S. Bancorp the ability to earn excess returns." The company said the $200 million settlement with the Justice Department in June and sale of Visa Inc Class B shares are expected to be neutral to earnings in the second quarter. During Q2 the company sold 3 million Class B common stock of Visa resulting in a net pretax gain of $214 million. Analysts say the company's net interest margin expansion will be minimal as interest rates remain low. The company had said net interest income will continue to grow, and given the current economic conditions, it expects the level of net charge-offs to remain relatively stable in the second quarter. Capital One Financial is expected to report its second-quarter earnings on Thursday, as analysts say credit quality has been trending better than expected for card issuers, while loan growth has been solid. The company had said that by the end of second quarter it will be mostly out of the impact on monthly domestic card charge-off rate related to the takeover of HSBC's U.S. credit card division in 2012. The company said the current low charge-off levels are not necessarily sustainable, but expects the strong credit performance of its commercial banking business to continue. On Wednesday, PNC Financial Services Group's second quarter results are expected to get a boost from strong loan growth helped by a rise in commercial and industrial borrowings. However like other regional banks, net interest margin is expected to be pressured as yields from loan decline due to increased competition. Banks like PNC and US Bancorp have been making more business loans in recent times at lower interest rates to compete with bigger rivals like JP Morgan and Wells Fargo. Sales of auto turbochargers and chemicals for the energy industry are expected to help Honeywell International offset tepid revenue from its aerospace division when the U.S. diversified manufacturer reports second-quarter results on Friday. Analysts will also be keen to learn more about Honeywell's acquisition plans after the company said in March it planned to spend $10 billion on deals over the next five years. Novartis, the drugmaker reports second-quarter results on Thursday following its announced portfolio revamp in April. Focus will be on any changes to its outlook now that competitor Ranbaxy has finally been given the green light by U.S. health regulators to produce a cheaper, copycat version of its once best-seller Diovan. Trust bank BNY Mellon will report second quarter earnings on Friday. The report comes as the company faces questions about the performance of its investment management arm, a key area in its competition with State Street Corp. Johnson Controls is scheduled to release third-quarter results on Friday. The company has been cutting its reliance on the automotive industry to focus on its fast-growing heating and cooling systems business for buildings. But Johnson Controls said last quarter it expected sluggishness in its heating and cooling business to continue until the start of the next fiscal year. Investors will be looking for comments on forecast for the remainder of the year. Yum! Brands is scheduled to report second-quarter results on Wednesday. Is Yum's KFC recovery in China still on track? The fast-food giant gets more than half of its overall sales from China, where most of its 6,300 restaurants are KFCs. Sales slumped badly in KFC china after an avian flu outbreak and a food safety scare that pummelled demand for chicken last year. CSX Corp is scheduled to report second-quarter results on Tuesday. Demand for thermal coal is expected to recover in the United States after two years of decline as power producers switch back to coal due to a recent run-up in natural gas prices. That should bode well for railroad operator CSX which depends on shipments of coal products for about a quarter of its revenue. Investors will be looking for comments on coal volumes and outlook for the remainder of the year. SanDisk posts its second-quarter results on Wednesday as the memory chipmaker's stock surges on its recent successes selling its own solid-state drives. Investors are keen for an update on the outlook for gross margins as SanDisk uses more of its NAND memory chips to build its own high-end storage devices for enterprise customers. VF Corp, the apparel manufacturer will report second-quarter results before the bell on Friday. Sales at the company's higher-margin outdoor and action sports brands such as Timberland and The North Face are expected to have been boosted by the prolonged cold weather. Analysts expect this to make up for lower demand for its jeanswear, contemporary, and sportswear brands as consumers hold back on discretionary spending due to stagnant wage growth and weak economic activity. KeyCorp, which has been under pressure from lower net interest margins, is expected to report second quarter earnings on Thursday. Higher loan losses from Key's commercial and industrial lending portfolio, which makes up about 45 percent of total loans, could hurt earnings, according to analysts. The company had said it expects to match net charge-offs with provisions for bad loans over the coming quarters, and also expects loan growth to continue. The company expects to incur efficiency related charges of about $20 million, in the second quarter. Omnicom, the No.1 U.S. advertising company is scheduled to report quarterly results on Tuesday. Company's second-quarter profit and revenue is likely to beat analysts' estimates, according to StarMine data. Omnicom, whose $35 billion merger with France's Publicis failed to materialize in May, is expected to benefit from higher ad spending in the United States. On Thursday, Fifth Third Bancorp, the Midwestern bank's second-quarter results are expected to be in line with estimates. Regional banks like Fifth Third are expected to report strong loan growth helped by a rise in commercial and industrial borrowings. Net interest margins, however, will be pressured as yields from loan are still declining due to increased competition. The credit card processor, Alliance Data Systems is expected to report a second-quarter profit on Thursday, helped by higher revenue at its private label services and credit unit, amid a rebound in consumer spending. Alliance Data, which competes with GE Capital, Citi Retail Services and Capital One, operates loyalty programs and private-label credit cards. The company's proprietary data aggregation unit Epsilon, which has partnership with Twitter, Facebook and Adobe, is facing competition from other market services firms. Fewer deliveries of Bell helicopters and costs related to Beechcraft acquisition are likely to weigh on the world's largest business jets maker, Textron's second-quarter results on Wednesday. The company is under scrutiny from a defense department report alleging that the Pentagon overpaid it for its components by millions of dollars. Textron has said it does not agree with the charges in the report. Investors, however, will be watching for comments on the alleged over payment to see if this could affect the company materially. On Friday, the advertising company, Interpublic Group of Cos is likely to report second-quarter results above analysts' average estimate. Analysts expect the company's revenue growth in the United States and in Continental Europe to continue, helped by business win from Microsoft and a strengthening European market. Last quarter, Interpublic, which owns McCann Erickson and Draftfcb, reported its first quarter of growth in Continental Europe in over two years. International revenue had declined in the prior three quarters. Mattel, the world's largest toymaker will report second-quarter results before the bell on Thursday. Sales of its iconic Barbie dolls have fallen in seven of the last nine quarters as children opt for building blocks such as the ones offered by Denmark's Lego and other electronic games. Smaller rival Hasbro, however, has been performing better due to strong demand of its toys such as My Little Pony. AutoNation, the biggest U.S. auto dealer group and usually the first of the groups to report earnings, is scheduled to release second-quarter earnings on Thursday. While the Bank of Canada is universally forecast to keep its overnight rate at 1 percent on Wednesday, its language on inflation and growth in its statement will draw the most attention. Twenty-one of 30 analysts polled by Reuters expect Governor Poloz to tone down his concern over low inflation, given that overall inflation is now over the official target, but a significant minority think he will instead emphasize continued economic softness and try to avoid saying anything which would boost the Canadian dollar. The bank will likely revise down its second-quarter GDP forecast from the annualized 2.5 percent it forecast in its April Monetary Policy Report. On Wednesday, a motion is expected to be filed for preliminary approval of a settlement between Apple Inc, U.S. states and consumers over claims the iPad maker conspired to fix the prices of e-books. The settlement was announced in June, though terms were not disclosed. Motions for preliminary approval typically spell out terms of class action settlements. Mexican senate committees could vote next week regulations to implement the government's opening of the oil, gas and electricity industries that is the cornerstone of President Enrique Pena Nieto's economic agenda. Once passed in committees, the set of bills would pass to the floor of the Senate and then to the lower house for approval. On Friday, data will show if the job market is improving or not after a rise in May's jobless rate pointed to a sluggish economic recovery in Latin America's No. 2 economy. Peru's official growth figures on May are scheduled to release on Tuesday. Peru's economy slowed to grow 4 percent in the first four months of 2014 from the same period a year ago. Separately, Argentina is scheduled to release June consumer inflation data. Meanwhile, Chile's central bank holds its monthly meeting to set the benchmark interest rate. After cutting 100 basis points between October and March, it has since left the rate at 4.0 percent, as worries about high inflation offset its wish to stimulate the economy. TerraForm Power's initial public offering is expected to raise as much $421 million on Friday, valuing the unit of solar company SunEdison at up to $1.38 billion. TerraForm will operate as a "yield co", which is a way for solar companies to bundle up existing solar power plants and then spin them off into separate entities. TerraForm will own and operate solar power plants that it acquires from SunEdison and other parties. Trupanion, the pet insurance provider is expected to raise up to $100 million in an initial public offering of its shares on Friday. It is offering 7.1 million shares which are expected to be priced between $13 and $15 per share. At the top end of the range, the company will be valued at about $400 million. The company, which mainly insures cats and dogs, earns most of its revenue from the monthly premiums for the animals. MONDAY, JULY 14 The extent of the decline in Wall Street's bond trading businesses will become more clear as Citigroup posts second-quarter results before the market opens. Citigroup warned at the end of May that its market revenue could be down as much as 25 percent from the year-earlier quarter. For the entire company, net income could be down more than 14 percent, analysts have estimated. The Teranet-National Bank Composite House Price Index for June is scheduled to be released. The index measures price changes for repeat sales of single-family homes. (Compiled by Sourav Bose in Bangalore; Editing by Joyjeet Das)

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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