Monday, October 15, 2012
Favorable looking inflation and trade data out of China and
positive Retail Sales numbers on the home front provide the
backdrop for today's trading action. But more significant than
economic data will be earnings reports and we have a fairly busy
calendar on that count with about one-sixth of the S&P 500
companies coming out with third quarter results this week. Last
week's stock market weakness was largely due to uncertainties about
the earnings picture and it may not be much different this week
either.
The moderate Chinese inflation data will likely get seen as
indicating that the country's policy makers have more room to
implement stimulus measures without stoking inflation. The
country's international trade data over the weekend also showed
strength, with exports to the U.S. offsetting some of the
Europe-centric weakness. Today's better than expected U.S. Retail
Sales numbers for September indicates that China can continue to
rely on the decent enough consumer spending momentum. The Retail
Sales strength will also likely nudge third quarter GDP
growth estimates in the coming days. In other data releases this
morning, the October Empire State regional manufacturing survey
came in weaker than expected, though it did show improvement from
previous month's reading.
On the earnings front, we will have a much better sense of the
third quarter reporting season at the end of this week as by then
we will have seen results from more than one-fifth of the S&P
500 members. The earnings growth rate for the 40 or so companies
that have already reported third quarter results stands at close to
7%, largely due to strong growth in
J.P. Morgan
(
JPM
) and
Wells Fargo
(
WFC
) reports last week and
Citigroup
(
C
) this morning. But excluding results from these banks, the growth
rate from the other companies falls into the negative territory.
This is a trend that will likely will hold throughout this
reporting season, as total S&P 500 earnings outside of banking
(bank earnings are expected to be in double digits) are expected to
show a decline from the same period last year.
Sheraz Mian
Director of Research
CITIGROUP INC (C): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
Report
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