Market Preview: Fed Holds Predicted Course, Earnings from Carnival and BlackBerry

As expected, the Federal Reserve raised interest rates by a quarter of a percentage point from 2.00% to 2.25%. The Fed had done an excellent job of telegraphing the move, as the CME reported that 95% of traders expected the quarter point increase. With no surprises, the markets took the raise in stride, and finished flat. The only notable change to the Fed’s policy statement language was the removal of the word “accommodative” to describe Fed policy. With the rate increase out of the way, the market will likely turn back to trade tariffs as the main headline for the rest of the week. James Hackett, CEO of Ford (F), rekindled the tariff discussion Wednesday afternoon when he stated the tariffs on aluminum and steel have now cost the automobile manufacturer $1 billion in profit. It’s likely we’ll hear from several more companies in the days ahead as to the negative impact of the tariffs on their bottom lines.

Thursday morning Accenture  (ACN) and Carnival (CCL) will report earnings. The consulting and outsourcing company has put in a good showing this year with continued growth in both its business lines. Accenture has expanded its offerings in recent years by acquiring cloud and internet of things (IOT) companies that can augment its core business. Analysts are watching margins closely at the $110 billion company, as competition has been steadily increasing in both consulting and outsourcing. This is the biggest quarter of the year for Carnival. The company generates a disproportionate amount of its revenue and operating income in Q3. The stock has basically traded flat thus far in 2018. The main focus for investors as the company reports is whether Carnival can contain expenses as revenue rises. This quarter will definitely set the tone for the remainder of the year for the cruise company.

While the market was focused on the Fed and its Wednesday afternoon announcement, the remainder of the week is full of economic numbers to chew on. Thursday we’ll get reports on durable goods, GDP, international trade, jobless claims, pending home sales, wholesale inventories, retail inventories and corporate profits. Corporate profits are expected to jump to a healthy 6.7% year-over-year for Q2 ‘18. That’s a major uptick from .1% reported in Q1. On Friday we’ll see personal income and outlays, Chicago PMI, and consumer sentiment. The consumer sentiment number is expected to come in at 100.8, an important reversal of the downward trend in place since March of ‘18. The survey of 600 households measures both current conditions and expectations for future economic opportunity.

Friday earnings will include Vail Resorts (MTN) and BlackBerry (BB). While the summer earnings report from ski operator Vail Resorts may not be the most important of the year, it does give the company a chance to report on infrastructure improvements headed into the busy winter season. The company can also preview early season pass sales numbers for investors. BlackBerry isn’t your old BlackBerry anymore. But, the transformation has been long and arduous, and the accounting for old businesses along the way has clouded earnings. This may be the quarter the company’s connected car business comes into focus. Analysts are looking for a strong showing from the BlackBerry Technology Solutions (BTS) unit which houses the connected car operating system.

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