Markets rallied for a fifth straight week Friday as a trifecta of good news was enjoyed by investors. President Trump announced a temporary reopening of the U.S. government after reaching a deal with Congress. Unless a final deal is reached before mid-February, another shutdown could ensue. But, traders are hopeful this is a sign that a permanent solution can be reached.
The WSJ reported the Fed may be close to halting its program of quantitative tightening. This could give markets the breathing room they need to regather for another rally. And, finally, positive news on the trade front is raising confidence that additional tariffs will be avoided in coming months.
We are in the heart of earnings season, and the last week of January will start off with a bang. Monday morning analysts will get right to work dissecting earnings from Caterpillar (CAT) and then interpreting releases from Whirlpool (WHR) and Celanese (CE) after the close. Caterpillar has been a bellwether in the recent trade dispute between the U.S and China, rising when there is good news and falling when tensions between the countries rise. Analysts will be looking for the real impacts of the trade dispute when Cat reports. Whirlpool has long been viewed as a measure of how the consumer is holding up. The company is expected to report $4.30 per share, with the main question being whether the company is seeing inflationary pressures from its suppliers.
The Dallas Fed Manufacturing Survey and the Chicago Fed National Activity Index will both be released Monday. The Chicago numbers could be particularly interesting as they pick up activity nationwide, and should give a better reading on how weak manufacturing has become. Last month’s reading came in at .22, and the current three month average is .12. The positive numbers indicate manufacturing is still growing above trend, even with the recent falloff reported by regional Fed Banks. Tuesday analysts will look through Redbook retail numbers, international trade numbers, and the Corelogic Case-Schiller Home Price Index (HPI). The HPI October numbers were relatively flat.
Apple (AAPL) will be the headliner Tuesday when the company reports earnings. Investors are anticipating an update on sales in China, and many analysts feel price cuts are coming in the newest iPhones. Pfizer (PFE), Verizon (VZ) and 3M (MMM) also report Tuesday. The hits keep coming Wednesday when Microsoft (MSFT), Facebook (FB), and Visa (V) all report. Facebook’s Mark Zuckerberg will likely comment on Facebook’s advertising practices after penning a piece for the WSJ addressing the issue on Friday.
Mortgage applications, impending home sales, and the ADP employment report are all released Wednesday morning. Also on the slate are GDP numbers. GDP is expected to come in at 3.4% for the quarter. Wednesday afternoon will also mark the close of a two day Federal Open Market Committee meeting, with any interest rate changes announced at 2 pm. Traders do not expect any move by the Fed, but will be watching the statement closely for any deviation in wording from the Feds last comments.
Thursday we’ll hear from Amazon (AMZN), Mastercard (MA) and General Electric (GE) as they report quarterly earnings. Investors will likely get an update on how the standup of the new Amazon headquarters is progressing. Friday will be all about big oil as both Exxon Mobil (XOM) and Chevron (CVX) report before the opening bell.
Jobless claims and the employment cost index will be released Thursday. And on the first day of February, consumer sentiment, employment situation numbers, and the PMI manufacturing index will all be released Friday. Non-farm payrolls are expected to come in at 312K and the unemployment rate is projected to be 3.9%.