The busy economic and earnings calendar this week will give
stocks a clear directional nudge after they reached milestone
levels late last week. Rampant optimism, stemming from positive
economic data and a decent Q4 earnings season, has pushed the
S&P 500 to above 1500 and the Dow Jones Industrial Average
within a few hundred points of its all-time high.
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This morning's strong December Durable Goods Orders report will
likely help sustain the momentum of the last few days, though the
earnings report from Dow component
) appears to be on the weak side. But irrespective of today's
market action, there is no shortage of catalysts this week,
including the January nonfarm payroll report on Friday and
Wednesday's Q4 GDP report to potentially the market to new
The December Durable Goods report was particularly strong, with
the headline gain of +4.6% coming in better than the expected
+1.6% gain, while the prior month's +0.7% change was left
unrevised. Excluding transportation orders, which tend to be
'lumpy' from month to month, order increased +1.3% compared
expectations of +0.4% gain and the +1.2% increase in November
(revised down from +1.6%).
Non-defense capital goods orders excluding transportation, which
is considered a proxy for capital spending in the economy, also
increased at a better-than-expected +0.2% pace. Corporate
spending had been softening lately after staying fairly strong
earlier in the economic recovery, but today's durable goods
report shows that it may not be that bad.
Other key economic data this week include the first read on Q4
GDP on Wednesday, which is expected to show a sub-1% growth rate
due largely to temporary factors related to government spending
and Sandy related disruptions. The January non-farm payroll
report coming out on Friday is expected to show job gains of
about 160K, though the sharp drop in weekly initial Jobless
Claims data increases the odds of a positive surprise.
We also have the FOMC meeting on Wednesday, though the only point
of interest in the post-meeting statement will relate to how the
central bank characterizes the current state of the economy.
The earnings calendar is extremely crowded this week, with 105
S&P 500 companies reporting Q4 results, pushing us beyond the
halfway mark by the end of the week. This morning's major
earnings reports are a bit on the weak side, with Caterpillar and
) missing expectations, while
) beating on earnings but missing on revenues.
) is the major earnings report after the close today.
Total earnings for the 150 S&P 500 companies that have
already reported Q4 results as of this morning are up +0.3% from
the same period last year, with 63.3% of the companies beating
earnings expectations with a median surprise of +2.4%.
Revenues are up +4.9%, with a much stronger 62% of companies
beating top-line expectations with a median surprise of +0.6%.
This is a better performance than what this same group of
companies reported in the preceding quarter, but broadly in-line
with the past year.
The composite Q4 earnings and revenue growth rates, where we
combine the results of the 150 companies that have come out with
those of the 350 still to come, is showing positive +0.3% and
negative -0.6%, respectively. This means that earnings growth
rate has effectively flat-lined.