What to Watch in the Week Ahead and on Monday, Aug. 11
(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 Investors head into next week with global uncertainty on the radar - conflicts in Ukraine, Iraq and Gaza keeping a lid on bidding in equity markets at a time when valuations are already a bit stretched. The government debt markets should continue to find buyers, but with supply in the form of three-, 10-, and 30-year auctions, the best action may be in the five-to-seven year area of the yield curve in what should be an otherwise quiet week. The dollar's recent run of strength appears to have ended, with some two-way flow re-emerging in the euro as investors believe the Russian government will work to de-escalate tensions there.
Retail sales and manufacturing data next week could support views the economy started the third quarter on firmer ground. The Commerce Department is expected to report on Wednesday that retail sales increased 0.3 percent in July after rising 0.2 percent in June. On Friday, the Federal Reserve is expected to report that industrial production rose 0.3 percent in June after increasing 0.2 percent the prior month. Factory output is forecast to have increased 0.3 percent after gaining 0.1 percent in June. Producer price data from the Labor Department on Friday is expected to show muted inflation pressures at the factory gate. The producer price index for final demand is forecast rising 0.1 percent after increasing 0.4 percent in June.
On Wednesday, New York Fed President William Dudley and Eric Rosengren of the Boston Fed could again warn about the risks posed by the shadow banking industry, while on Friday Minneapolis Fed President Narayana Kocherlakota gives a speech on community bank regulation. Dow components Cisco and Wal-Mart are scheduled to report results on Wednesday and Thursday, respectively. Cisco reported a shallower-than-expected drop in revenue last quarter as it introduced new technology to deal with the growing threat of commoditized servers, a growing threat to its declining hardware market. Investors will focus on whether the company can maintain that momentum and successfully dive into the software-defined network market, which has dramatically reduced demand for its expensive hardware. Wal-Mart, which has been struggling with slowing quarterly sales growth in North America, had forecast second-quarter profit below analysts' expectations in May. Investors will be looking for comments on any changes in execution following the appointment of new chiefs for its U.S. business and U.S. online business during the quarter.
Deere & Co, the world's largest maker of tractors, harvesters and other agricultural, construction and forestry equipment, reports third-quarter results on Wednesday. With another record crop putting pressure on commodity prices, farmers are already cutting back on their investments in new machinery. Investors will look out for whether growing tensions in Russia and the slowdown in Brazil add to the company's farm-based woes and whether the apparent rebound in U.S. building can offset that weakness. Department store operator Macy's is scheduled to report second-quarter results on Wednesday after a harsh U.S. winter hurt its first quarter. Analysts expect the company's sales to rise 4 percent. Investors will look for a possible raise in 2014 forecast. They will also look for details on whether store-remodelling and sales initiatives helped boost sales and possible increases to its share repurchases program and dividend. Department store operator J.C. Penney, midway through a major turnaround, reported a strong 6 percent rise in same-store sales in the first quarter and said at the time it expected the sales momentum to continue into the second quarter. But that optimism has been cast into doubt after several other department store operators posted or warned of poor sales. When the company reports results on Wednesday, investors will be keeping an eye out JCP's comparable sales figures and on the health of its balance sheet to see signs of whether the company's turnaround efforts are sustainable. Estee Lauder has seen a surge in growth as the luxury market thrives. The company's sales growth has been ahead of the category and large prestige beauty peers. When the cosmetics maker reports fourth-quarter results on Friday, investors will look for whether it can sustain the momentum. They will also look for details on growth in emerging markets and response to its new shower gel, body lotion and limited edition mascara. According to StarMine, the company will beat revenue estimates but miss earnings estimates. Applied Materials, the largest maker of chip manufacturing equipment, posts its fiscal third-quarter results on Thursday as contract chipmakers invest in new technology to build cutting-edge components for smartphones and tablets. Wall Street will be looking for an update on the company's plan to buy Tokyo Electron for $9.4 billion in stock to consolidate in an industry with a shrinking number of major customers. Advance Auto Parts, the largest auto parts retailer in North America, is expected to report second-quarter results on Thursday. The company is expected to report better-than-expected results due to higher demand. Data storage equipment and services provider NetApp's first-quarter profit and revenue, scheduled for release on Wednesday, are likely to beat estimates, according to Thomson Reuters data. Analysts expect the company to benefit from higher demand for its storage products.
Solar panel maker Canadian Solar is expected to report a second-quarter profit on Wednesday, as it benefits from higher shipments. The company is targeting new solar markets in South Africa, South America and the Middle East. Separately, Chinese solar panel maker ReneSola is expected to report a smaller second-quarter loss on Tuesday, helped by a rise in shipments and selling prices. Investors will be looking for comments on the company's business in the United States.
Canada faces a relatively quiet week on the economic front, with only a couple of middle-tier reports on tap. Manufacturing sales are on the docket later in the week, with economists expecting the pace of sales growth at Canadian factories will ease to 0.2 percent in June after a jump in May pushed sales up to near record levels. MONDAY, AUG. 11 In an otherwise quiet week, Federal Reserve Vice Chair Stanley Fischer discusses what steps are yet needed to move beyond the Great Recession at a conference in Stockholm. Investors will parse those comments for hints on when interest rates will finally rise from near zero. Tata Motors, India's biggest auto manufacturer, is expected to report a higher profit in the first quarter, partly helped by strong sales at its luxury Jaguar and Rover unit. The domestic business, which posted losses in four of the last eight quarters, is expected to post lower profits as the sale of its passenger cars continue to nosedive. Tata, which will launch a compact sedan Zest a day after its results, is betting on the new car - the first product under its new strategy - to help turnaround sales in its home market where a slowing economy has also impacted its truck and bus business - a segment where Tata leads the market.
Travel website owner Priceline Group has been experiencing strong growth, driven by its expansion in international markets. It recently entered into a partnership with travel website Ctrip.com International to strengthen its presence in China. The company, scheduled to report second-quarter results, is also likely to benefit from the recent surge in the global travel industry. Investors will be looking at the company's plans for its U.S. market, where rival Expedia has the larger presence. Nuance Communications, whose voice-recognition software powers the Siri feature on iPhones, is likely to miss third-quarter revenue expectations, according to Thomson Reuters data. The company, which is struggling to hold on to pricing for its mobile software, has reportedly held talks with Samsung Electronics and some private equity firms for its sale. Rackspace Hosting is likely to beat second-quarter profit estimates, according to Thomson Reuters data, due to higher demand for its cloud-management services. Recently, Rackspace discontinued its web-hosting service as it couldn't compete against steep price cuts offered by Amazon, Google and Microsoft. Rackspace said it would focus on providing cloud management and support services to customers. Bond insurer Ambac Financial Group's second-quarter profit is expected to steeply drop compared with the previous quarter. The company's insurance subsidiary, Ambac Assurance Corp, said late last month that its final settlement in Detroit's bankruptcy case over the treatment of limited-tax general obligation bonds that it insured for the city would result in a 34 percent recovery, plus another possible 19 percent from a litigation reserve. Non-bank mortgage servicing company Walter Investment Management's second-quarter revenue and profit are expected to drop, compared with the previous year. Some analysts expect slower transfer of mortgage servicing rights and regulatory scrutiny to weigh on the company's earnings.
Mexican President Enrique Pena Nieto will sign into law a series of bills needed to implement the opening of the state-run energy sector, paving the way for companies to announce investment decisions. The WTO director Roberto Azevedo speaks in Mexico City. Separately, industrial production for June will show if there has been any pick up after a sluggish first half of the year. Canada's week kicks off with housing starts, which are expected to have moderated slightly to a still-strong 191,500 in July. Starts bounced back strongly in the second quarter after being hit by an unusually severe winter at the start of the year, and the sector looks set to have continued that strength into the summer. (Compiled by Ayesha Sruti Ahmed in Bangalore; Editing by Maju Samuel)