Get ready for earnings season

Alcoa, JPMorgan Chase and Google start the parade of companies reporting third-quarter results. While gains for this past week were welcome, Europe's debt-and-banking crisis may dominate markets. Futures trading suggests a big US open Monday.

By Charley Blaine on Fri, Oct 7, 2011 8:50 PM

Updated: 10:48 p.m. ET Sunday

It sure was nice to see the market move higher for the week.

Even better, the gains were broad: 22 of 30 stocks in the Dow Jones Industrial Average ($INDU), 28 stocks in the 30-member Philadelphia Semiconductor Index ($SOX), 14 of 20 stocks in the Dow Jones Transportation Index ($DJT), 84 stocks in the Nasdaq-100 Index ($NDX). You get the picture.

And there was a little good news on the jobs front. While the unemployment rate was still stuck at 9.1% for September, jobs growth was a bit better than expected. More important, July and August weren't quite the disasters everyone thought they were. Make no mistake, however, the overall picture confirms what we all know: The economy continues to struggle.

Which brings us to the week ahead. This is a week where earnings and guidance matter: It's the first week of the third-quarter earnings season, and reports are due from four important companies: Alcoa (AA), JPMorgan Chase (JPM), Pepsico (PEP) and Google (GOOG).

But important as these reports are, the markets will still key on what happens in Europe this week and for some time to come. The European problem is just that complicated.
Greece has debts it can't possibly repay, given the health and growth prospects of its economy. There are worries about Italy and Spain, downgraded on Friday by Fitch Ratings, and Portugal and Ireland as well. And the big fear is that if Greece defaults on its debt (which it probably will), the result may be a global banking crisis.

That would depress business across Europe and have an even larger impact on the U.S. economy than Japan's earthquake and tsunami in March.

And miraculously, in all this worry, the stock market rallied, with the Dow up 1.7% for the week, the S&P 500 up 2.1%, and the Nasdaq up 2.7%.

One should not begrudge Apple's (AAPL) 3% loss on the week. That represents the shock of losing Steve Jobs.

The market has a chance of rallying again this week, especially if the earnings are good and nothing horrible happens in Europe.

Late Sunday, futures trading suggested the Dow could rise as many as 134 points after the open. Two catalysts were at work:

French President Nicolas Sarkozy and German Chancellor Angela Merkel said they'd agreed that European banks need to be recapitalized. But they offered no details, saying they would have those worked out by the time officials of the Group of 20 nations meet in early November.
Belgium, France and Luxembourg on Sunday agreed on a plan to rescue Dexia, the French-Belgian bank that ran into trouble after it was hit by a liquidity shortage.

But a rally may be tentative. The consequences of a slowing global economy and the urge to impose austerity on government spending around the globe will inevitably lead to slower economic activity.

Tensions will rise in November when a continuing resolution to keep the government running expires and the congressional supercommittee is supposed to present its budget proposals. And the fights will drag on through 2012.

Markets for the week
	10/7/2011	9/30/2011	% chg.	YTD chg.
Dow Industrials	11,103.12	10,913.38	1.74%	-4.10%
S&P 500	1,155.46	1,131.42	2.12%	-8.12%
Nasdaq	2,479.35	2,415.40	2.65%	-6.54%
Russell 2000	656.21	644.16	1.87%	-16.26%
Crude oil	$82.98	$79.20	4.77%	-9.19%
(per barrel)
U.S. Dollar Index	78.77	79.08	-0.39%	-0.66%
10-yr. Treasury	2.07%	1.92%	7.48%	-37.43%
Gold	$1,635.80	1,622.30	0.83%	15.08%

One quick note about the week ahead: The bond market will close Monday for the Columbus Day holiday.

Earnings could give the market a lift. Here's how the week shapes up.

Tuesday: Alcoa and WD 40 (WDFC). Alcoa is among the smallest of the 30 Dow components. But it offers a unique view of the global economy because aluminum is used in so many applications: soft-drink containers, cars and airplanes, construction. So its outlook, particularly on growth prospects in Europe and China, will be closely watched.

Wednesday: Pepsico offers a similar view of the global economy -- but from a consumer point of view. It has also had to contend with higher input costs and more intense competition. The stock is down 15% from its 2011 high in May.

Thursday: JPMorgan Chase and Google. JPMorgan has seen its stock tumble 27.6% on the year as Europe, mortgage woes in the United States and regulatory battles have made investors flee banks generally. Google has had a new boss this year, Larry Page, who has made a lot of management changes. It has agreed to buy Motorola Mobility (MMI) for $12.5 billion and there is great skepticism about whether it has the chops to manage a manufacturing business.

Friday: Mattel (MAT). What makes the maker of Barbie, Ken and Fisher-Price Toys interesting is that it already has a sense of where the economy is headed on the basis of its holiday orders. So, watch the outlook. The stock charts suggest the company will offer a cautious economic view.

A relatively quiet week on the economy
The week after the jobs report has comparatively few economic reports. A few will make headlines.

Minutes from the September Federal Open Market Committee meeting, due Tuesday. This will offer some insight into the central bank's decision to start a program to sell short-term securities and buy longer-term securities.

Weekly jobless claims, due Thursday from the Labor Department. The key question: Will the number drop below 400,000?

U.S. trade balance, due Thursday from the Commerce Department. Look for a decline in exports but little change in imports.

U.S. retail sales, due Friday from the Commerce Department. Look for a small gain, keyed by strong auto sales.

University of Michigan Consumer Sentiment Index, due Friday. Look for a small gain, but the index has shown consumers are very cautious about economic prospects.

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81Comments

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3 hours ago

sir loin======You are right on about being obama's fault but the rest of the sarcastic comment is your own opinion not all of the country's===for he has done more damage to this country in such a short time than anyone else has done since 1776.

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sir loin (joyrock33180)

3 hours ago

this is all obama's fault: for health care, and tax breaks, and taxing the rich, and oil, and starting the iraq war, and cancer, and being black - most importantly for being black, i bet if an asteroid were heading for earth it's be obama's fault...

still waiting on the zombie apokolypse

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sir loin (joyrock33180)

3 hours ago

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Nailer45

4 hours ago

more Profit equals more jobs lost as big corporations are all about the numbers and will lay off more people to make more profit.

The Fraud Market will die soon enough..

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Active RIA

4 hours ago

sadly it will come crashing down because the conservative republicans and TP want to "starve the beast" and oust obama at any cost .... of course there is the boehner jobs bill!

http://whenarethejobs.com

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Active RIA

4 hours ago

it can be done using a fee-only independent investment advisor weld - our returns have been in the ten percent annual range since 2000 - we do sell high and buy low based on economic market cycles using both fundamental and technical research for the timing.

just be sure to locate an advisor who is reasonable (less then $200 per hour) then create a total annual budget and also be sure they have a successful DOCUMENTED track record of success. for more info some people visit the NAAIM site for referrals

it can, and is being done successfully .... good luck

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Active RIA

4 hours ago

lol ..... they used to love my schtick on the west coast ... this must be Alaska and Hawaii ........

..... hey, at least we are starting to communicate!!

sleep tight ..

p.s. or maybe its because they shut down the pot clinics? grumpy .. grumpy ..

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Robinson North

5 hours ago

Sadly, it is all artificial prosperity and it will come crashing down.

Probably the best thing to happen for this country so we can reorganize and start over again.

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weld387

7 hours ago

The smoke it's about to stop. The mirrors are all just about broken. This must be some last ditch effort to recruit the last suckers standing? For the whole year of 2011, my 401K Vanguard Savings fund has lost $2.52 Some of my co-workers have lost tens of thousands of dollars. The 08-09 years taught me well. The fat cats on Wall Street will not be getting much if anything from me. When the EU gets there can of worms sealed back up. I might think about the shell game in New York once again? The whole idea of buy low sell hi seems to make my stomach start to bubble.

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Active RIA

8 hours ago

thanks for that ray of sunshine doug ... you guys needed to make up some ground after unleashing palin on an unsuspecting world ..

we'll see ... at least i can tell from my

's that i rack up when i rant that the right voters are at least reading and comprehending the anger and frustration that they have created with centrist America - but will they ever learn to actually care about the impact of their actions/votes?

in the end, still

lovin' America and the diversity that true freedom brings ..... democracy is messy after all .....

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Doug (Out in the cold)

10 hours ago

Active RIA .. independents teamed up with RINO's and moderate Democrats to turn around the election of a tea party back Republican candidate, up here in Alaska in 2010 .. otherwise America would have had Senator Joe Miller (TP/R) instead Senator Lisa Murkowski (R-moderate). Sometimes the wake-up call comes a little early in the land of the mid-night sun. Hope you got your alarm clock set for 2012 general election down in America.

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Active RIA

11 hours ago

wow doug .. that's a tough call there ....

"extremists are going to get a back lash of voter rejection in 2012."

remember they have these guys all wrapped up with pro-life, the "socialists will tax away your beer money," homophobia against gay marriage, they will take away your hunting rifle, we must make everyone on welfare and food stamps homeless and starving since they are all leeches, they are not Christians and thus to be feared, and so on and on and on and on ....

murdoch and fox news and all of these other media drumbeats will feed them - just like hank williams whose song was pulled from Monday night football after these media sources drove him bonkers to make the horrific comment that he made ... i mean look at this "fascist" post and all of the spin, inaccuracies and out and out falsehoods on this blog ...

i am pessimistic in that regard ... i think that turnaround may take decades until more and more get older and join the TP and then maybe we can set them all up in montana cabins in there own country-state .... hmmmmm ......

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Active RIA

11 hours ago

actually bigone the french and germans have agreed this weekend to recapitalize the banks, and dexia is being dismantled in an orderly fashion (in lieu of eurozone tarp). while i agree with your overall thesis (we are 100% out of foreign exposure), you could be a bit premature here .... futures looking ok and ftse 100 is positive. good post .... this bears close watch .....

on your other observations, i am quite sure you were trying to out-facetious tumble. hahahah. obama a fascist .. hahahahhhohohoh .. you are a hoot ... bush bailed out the banks .. quit foolin' around ... obama got elected on getting out of iraq and did so, caught OBL with no invasion of pakistan and took down gadaffi with nary a boatload of soldiers involved .... hooo hawww ... the repubs forced the continuation of bush tax cuts in order to allow federal unemployment to continue ... obama was squeezed to where he had no options .. hahahahah ... you are kiliin' me here .... follow the bi-partisan report to cut mr and ss that everyone with half a brain knows must happen to reduce the debt ---- fascist ... hoooooo boyo .... hhehehhhehehehhh ..... shut down American trade and exports for no good reason since corporations outsource the jobs not trade agreements and tariffs ..... hehehehehh man you are good... that was truly facetiousness at its pinnacle there boy!!! excellent !!! bwahhahahahhhhhahhaahhhahhahhahh .....

killin me .........

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Active RIA

11 hours ago

ok tumble, my bad. there is a lot of confusion on that one, and then of course the poster "noble socialist" really confuses things as he is the antithesis of socialism.

party on.

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Doug (Out in the cold)

12 hours ago

Active RIA .. I suspect the anger and frustration, for those members of Congress that would bring down America with default and economic collapse, is going to get a little stronger, as soon as the super committee fails to produce a recommendation for Congress on deficit reduction. Or one more threat of government shut-down because they can't put a budget together.

Non-partisan moderate .. that makes two of us .. that put America before party politics. But if we are representative of the moderate voters, it might do well for political prognosticators to take notice that extremists are going to get a back lash of voter rejection in 2012.

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thebigone

12 hours ago

Tumbleweed,

The definition of Fascism is the merger of state and corporate powers, this unfortunately is what we have in America today. I have to chuckle when people call Obama a socialist, this guy out Bushed Bush. Bailed out the banks and Wall Street, expanded the war in the Middle East, extended the Bush tax cuts and is open to cutting Medicare and Social Security. He refuses to do the only thing that will turn around the economy, tariff overseas goods pouring into our country, effectively ending outsourcing.

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thebigone

12 hours ago

Tomorrow could be a very interesting day in the market, Dexia has collapsed, and Greek default is about to happen. With Dexia collapsing there will be unbelievable pressure on ALL European banks. The EU is trying to shore up the banks, however, the debt losses are astronomical and beyond the scope of a bailout. Once this fact sinks in to the market look out.

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Tumbleweed 1946

13 hours ago

Actually socialism allows for plenty of private business ownership . Its just the things that we all use in common that become nationally owned. The socialists in Mexico and Canada own their country's oil reserves. Education and health care are provided for free via tax dollars in Socialist France and Germany so that any gifted kid can go as far as he wants to with his education without the obsticle of tuition cost. Then HIS taxes help out the next gifted kid
You are confusing Socialism with Communism where the govt owns all enterprise. and property. As for Fascism, that is when tax dollars are funneled to the Upper Class' banks and industries as necessary to keep them afloat. TARP could be considered a Fascist act. It sure as hell wasn't a Capitalist one since taxpayer dollars were involved

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Tumbleweed 1946

13 hours ago

Um acrive RIA I was being facetious. i know full well when Socialism was "invented'

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Active RIA

14 hours ago

ummm, no tumbles ....

"Thomas Jefferson was a dyed in the wool Socialist."

you are confusing enlightened capitalism with the state ownership of the means of production (socialism). in addition:

1. The concept of socialism was not developed until the 19th century. Therefore, it would be difficult for Jefferson to be one.

2. When did Jefferson ever advocate the government takeover of private businesses and property? That was anathema to him and he repeatedly warned about being wary of this happening. Just because one is not a free trader, advocates for the common masses, or some other slant does not make one a socialist.

breathe deeply ...............

p.s. i did enjoy your earlier posts and do agree with some of those points, particularly with civil disobedience, but NOT with student loan forgiveness as people make stupid decisions with their money all of the time - you probably won't advocate for the government giving me back my poker or stock-investment losses etc. etc. etc.

p.p.s. are those troubles for romney or the awakening of a modern republican party ready to break away from conservative extremism and fundamental evangelicals who think mormons are not christians? imho he needs to define his centrist views and hone them to have a chance against obama.

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Monday, 10 October 2011

Market dispatches / Get ready for earnings season

Get ready for earnings season

Alcoa, JPMorgan Chase and Google start the parade of companies reporting third-quarter results. While gains for this past week were welcome, Europe's debt-and-banking crisis may dominate markets. Futures trading suggests a big US open Monday.

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