While the bulk of earnings reports are in, there are still many to go, and next week we still have a heavy earnings calendar with a total or 462 firms scheduled to report. Some of the more noteworthy firms reporting are New York Times (NYT), Allstate (ALL), Walt Disney (DIS), Prudential (PRU) and Pepsico (PEP).
Unlike the last two weeks, the economic data calendar is relatively light.
No releases of note.
Data on wholesale inventories is released. Normally this is not a big market mover, but given the outsized contribution that slower inventory destocking had in the fourth quarter GDP, this report might take on extra importance as it will point to which way the GDP numbers end up getting revised. In December, wholesale inventories are expected to have increased by 0.6% on top of a 1.5% increase in November.
The day will be dominated by deficits. First we get the trade deficit. It is expected to fall to $35.0 billion in December from $36.4 billion in November. The trade deficit plunged in late 2008 and early 2009, but in recent months has been creeping back up. The plunge was caused by the collapse in world trade that reduced imports much more than exports. Hopefully if the deficit falls again, this time it will be for the right reason: increased exports rather than falling imports.
The afternoon brings data on the other deficit, the fiscal one. In January, it is expected that the Federal government ran $60.0 billion worth of red ink, down from $91.9 billion in December. However, the budget deficit numbers are extremely seasonal, so the more important comparison is with January 2009 when it was $63.4 billion. Still expected to be down, but not as much year over year as sequentially. If it is down, expect the number to be totally ignored on CNBC. If it is up, it will be the only thing Kudlow will be talking about.
Weekly initial claims for unemployment insurance come out. They rose 8,000 in the last week, to 480,000 — the third straight weekly increase, but prior to that they had been in a very steep downtrend. Look for the decline to resume.
Continuing claims have also been in a steep downtrend of late. However, that is in part due to people simply exhausting their regular state benefits, which run out after 26 weeks. If one factors in the extended claims paid by the Federal government as part of the Stimulus program, claims soared last week. Looking at just the regular continuing claims numbers is a serious mistake. They only include a little over half of the unemployed now given the unprecedentedly high duration of unemployment figures. Last week, regular continuing claims were 4.602 million, while extended claims (paid from Federal ARRA funds) were 5.855 million. Make sure to look at both sets of numbers!
Retail sales are expected to have risen 0.4% (seasonally adjusted) after declining 0.3% in December. Excluding auto sales, they are also expected to be up 0.4% after a 0.2% decline in December. Given what the major retail chains have already reported, the retail sales numbers seem more likely to surprise to the upside than to the downside.
Overall business inventories are expected to be up 0.4% in December matching the 0.4% increase in November. The inventory numbers might be a bit more significant this time around than they usually are.
The University of Michigan Survey of Consumer sentiment is expected to rise to a reading of 74.8 in February from 74.4 in January. If consumers feel more optimistic they are more likely to spend and thus help keep GDP growing.
Potential Positive Surprises
Historically, the best indicators of firms which are likely to report positive surprises are a recent history of positive surprises and rising estimates going into the report. The Zacks Rank is also a good indicator of potential surprises. While normally firms that report better-than-expected earnings rise in reaction, that has not been the case so far this quarter. Some of the companies that have these characteristics include:
The New York Times (NYT) is expected to report EPS of $0.04, down from $0.36 per share a year ago. Last time out, NYT posted a positive surprise of 700% (OK, it was a very low base, so take that percentage with a grain of salt) and over the last month the mean estimate for its fourth quarter earnings is up 3.80%. NYT has a Zacks Rank of 1.
Hartford Insurance (HIG) is expected to report EPS before non-recurring items of $0.62, up from a loss of $0.72 a year ago. In the 3Q, HIG posted a positive surprise of 45.8% and over the last month, the consensus estimate for its 4Q earnings is up 71.0%. HIG is a Zacks Rank #1 stock.
AutoNation (AN) is expected to earn $0.20 per share this year, up from $0.12 a year ago. In the third quarter they posted a 2.86% positive surprise. Over the last month, the mean estimate for the 4Q is up 4.3%. AN holds a Zacks #2 rank.
Potential Negative Surprises
Vulcan Materials (VMC) is expected to post EPS of $0.03 a share, down from a EPS of $0.14 a share a year ago. Last time they reported in line with expectations. For this Zacks #5 ranked stock, analysts have slashed the estimates for this quarter over the last month by 68.4%.
Electronic Arts (ERTS) is expected to earn $0.25 a share this quarter, down from $0.42 last year. They disappointed by 33.3% last time out, and analysts have cut the estimate for this quarter by 53.11% over the last month. The stock holds a Zacks Rank of 4.
Allstate (ALL) is expected to report EPS of $0.09 down from EPS of $0.97 last year. Last quarter they reported in line with expectations. Over the past month analysts have cut the estimate for this Zacks #4 ranked stock by 1.76%.