| NEW YORK
NEW YORK Jan 10 After the S&P 500's impressive
30 percent return in 2013, Wall Street will get a better picture
of reality next week as the pace of companies reporting earnings
A number of big banks are due to report their quarterly and
full-year results next week, including JPMorgan Chase & Co
and Wells Fargo & Co on Tuesday, Bank of America
Corp on Wednesday, Goldman Sachs Group Inc and
Citigroup Inc on Thursday, and Morgan Stanley on
Their results will help determine whether earnings forecasts
for 2014 need to come down and whether stock values have become
"There isn't much left to happen to this market, in terms of
the view of an expanding economy. It is generally agreed by
everyone that the economy is improving. What isn't clear is
whether earnings are improving at the same pace the market is.
That's the next big test for equities," said Rick Meckler,
president of LibertyView Capital Management in Jersey City, New
Investors may get a better sense of how quickly the central
bank will reduce its market-friendly bond purchases from a
number of Federal Reserve officials due to speak next week. A
much weaker-than-expected December payrolls report on Friday
raised new questions about both the strength of the economy and
the aggressiveness of Fed stimulus.
Federal Reserve Bank of Atlanta President Dennis Lockhart is
scheduled to speak at events on Monday and Wednesday, while Fed
Chairman Ben Bernanke is set to speak on Thursday.
The Fed's Beige Book is due on Wednesday.
A batch of December data will be released next week, with
retail sales on Tuesday, the U.S. Producer Price Index on
Wednesday, the U.S. Consumer Price Index on Thursday and housing
starts on Friday. Another number to note on Friday will be the
preliminary January reading on U.S. consumer sentiment from the
Thomson Reuters/University of Michigan Surveys of Consumers.
HEALTHY EARNINGS OUTLOOK
For the whole S&P 500, fourth-quarter profit growth is
expected to have increased 7.7 percent from a year ago, while
revenue is expected to have risen just 0.4 percent, Thomson
Reuters data showed. The benchmark S&P 500 rose 9.9 percent in
the fourth quarter of last year, while it jumped 29.6 percent
for 2013, its best year since 1997.
Among other earnings to watch next week, General Electric Co
ix expected to report a spike in fourth-quarter profit on
Friday with the help of the record $229 billion backlog of
orders for jet engines, oil pumps and healthcare equipment.
American Express Co's fourth-quarter results on
Thursday are expected to beat estimates, helped by increased
card spending and lower default rates among customers.
KEEPING RETAIL OPTIONS OPEN
Retail stocks have been attracting increased options
activity this week as major retailers came out with their
disappointing holiday sales figures.
Investors will get more insight into the consumers' state of
mind next week as about 150 consumer-related companies are due
to participate in the annual ICR XChange conference from Monday
The annual gathering comes after many large U.S. retailers
slashed their earnings forecasts recently because of steep
discounts they offered during the holidays to persuade reluctant
consumers to buy.
"I wouldn't judge the health of the economy off of
brick-and-mortar retailers," said Paul Zemsky, head of asset
allocation at ING Investment Management in New York.
"The economy was strengthening into the end of the fourth
quarter," and there was sufficient growth to keep earnings
growing and people buying the market.
Options volume on Five Below jumped more than six
times the norm on Friday. The value retailer's stock fell 7.2
percent to close at $40.46 a day after the company announced
disappointing holiday sales. Five Below is expected to present
at the ICR XChange conference on Monday.
Out of the total 6,975 options contracts traded on Friday in
Five Below, 2,565 were calls and 4,410 were puts with the most
activity seen in January $45 calls. Goldman Sachs had
recommended buying January $45 calls for a relief rally in the
stock following the ICR update.
Domino's Pizza options volume also rose with a total
of 861 contracts traded, compared with average daily volume of
520 contracts. The stock has moved about 8.5 percent up or down
during the past nine conferences, moving in the positive
direction during seven of the nine events, according to Goldman
Sachs. The company's presentation at the ICR XChange conference
is set for Wednesday.
(Wall St Week Ahead runs every Friday. Questions or comments
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