What to Watch in The Day Ahead; Thursday, July 17

Wed Jul 16, 2014 2:36pm 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) Google is expected to release second-quarter results after the bell. The company has unveiled a string of new initiatives to push its Android mobile software into more areas of everyday life, from televisions to smartwatches. Wall Street will be keen to hear the Internet company's view on the time frame for these new initiatives to contribute to Google's revenue, which continues to be primarily driven by its dominant search advertising business, as well as the spending involved. But the primary focus for investors will be on Google's decreasing advertising rates, which have been under pressure as consumers increasingly access Google's online services from their smartphones. Morgan Stanley is scheduled to report earnings for the second quarter. The period was another tough one for trading, with low market volatility resulting in sluggish client trading. For Morgan Stanley, which is reducing exposure to bond trading as it builds more stable businesses like wealth and investment management, the weak trading quarter may not affect it as much as some rivals, like Goldman Sachs, Citigroup and JPMorgan Chase. International Business Machines is likely to post second-quarter earnings after the bell. Analysts expect a flat performance in IBM's software sector, which was down four percent last year as the company struggles to implement grand visions for its middleware products. Analysts also expect a one percent decline in services, and more commentary on the company's slumping hardware sales, which last quarter brought the company its worst revenue in five years. Investors will also look to see if a recent announcement of a $3 billion investment in chip R&D will influence CFO's projections of a stable hardware sector in 2014 and growth in 2015. General Motors CEO Mary Barra testifies to the U.S. Senate Commerce Committee on the automaker's ignition-switch problems which have been linked to 13 fatalities. Senate panel continues its probe into why it took GM more than a decade to recall cars with faulty ignition switches linked to fatal accidents. UnitedHealth Group, the largest U.S. health insurer is scheduled to report second-quarter earnings before the bell. Market will look for signs if the company could control its medical cost ratio, which reflects the percentage of premiums paid out in claims to cover customer procedures and doctor visits. Analysts expect UNH to earn $1.26 per share on revenue of $31.98 billion. Market will be keen to see if the insurer continues to back its previous view of 2014 earnings of $5.40 to $5.60 per share. Drugmaker Novartis is expected to report second-quarter results following its April announcement of a portfolio revamp. The 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. Oilfield services providers Schlumberger and Baker Hughes are both expected to report a rise in second-quarter profit, 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. U.S. housing starts likely rebounded last month after falling 6.5 percent in May. The Commerce Department is expected to report that the groundbreaking for homes increased to a 1.018 million-unit rate in June from 1.001 million units in May. (0830/1230) Initial unemployment insurance claims for the week ended July 12th are likely to have rebounded back to 310,000, up from 304,000 in the week ended July 5th. Continuing claims should hover around 2.575 million for the week ended July 5th. (0830/1230) Separately, Philadelphia Federal Reserve Bank releases a survey on business activity, which is expected to have slipped to 16.0 for the month of July. (1000/1400) Federal Reserve Bank of St. Louis President James Bullard is scheduled to speak on the U.S. economy and monetary policy before the Owensboro in 2065 conference. (1335/1735) SAP is expected to report second-quarter results. Focus will be on whether the German business software company has succeeded in implementing cost cutting and how it is faring in its transition to offering internet-based, or cloud-based, software, away from its traditional on-premise products. Capital One Financial is expected to report second-quarter earnings after the bell, 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 the quarter, it would mostly be done with the impact of the 2012 takeover of HSBC's U.S. credit card division on its monthly domestic card charge-off rate. 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. Baxter International is likely to release second-quarter results before the bell. Wall Street expects the drug and medical device maker to hit the top end of its own adjusted earnings expectations, based mainly on recent acquisitions. Investors will also be looking for more on the impending spin off of its biotechnology operations to focus on its core medical technology business in 2015. Orthopedics products maker Stryker Corp is expected to report higher second-quarter profit on increased sales, rebounding from a drop in profit in the first quarter. But investors will be more focused on anything management has to say about its acquisition strategy after Stryker felt compelled to deny rumors that it was attempting to buy Smith & Nephew. 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. Mattel, the world's largest toymaker, is expected to report second-quarter results before the bell. 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. Private equity firm Blackstone Group is scheduled to report second-quarter earnings with investors focused on the appreciation of its portfolio amid strong equity markets. AutoNation, the biggest U.S. auto dealer group and usually the first of the groups to report earnings, is scheduled to release second-quarter results before the bell. Athenahealth, the healthcare technology company is scheduled to report second-quarter results after the bell and Cepheid, the biotechnology company is also expected to report second-quarter results after the bell. Canada's second-largest rail operator, Canadian Pacific Railway, is expected to report strong second-quarter revenue growth as freight volumes continue to improve. CEO Hunter Harrison's initiatives to cut costs has raised margins over the last several quarters, but analysts expect softer margins for the second quarter as operating costs increase. Canadian Pacific and its bigger rival Canadian National have come under a lot of pressure to clear a big crop backlog, which resulted from a record harvest last year and subsequent disruptions of service caused by an unusually harsh winter. (Compiled by Sourav Bose in Bangalore; Editing by Savio D'Souza)

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