By Wallace Witkowski, MarketWatch
SAN FRANCISCO (MarketWatch) -- Investors will be able to focus on corporate fundamentals as third-quarter earnings
season enters its peak week without the distractions of a government shutdown or pending U.S. debt default.
The Dow Jones Industrial Average (DJI), the S&P 500 Index (SPX), and the Nasdaq Composite Index (RIXF) all finished
with gains for the week that saw an end to the 16-day partial government shutdown. The government is funded until Jan.
15 and the debt ceiling has been raised until Feb. 7 while lawmakers try to hash out a budget deal. The Dow industrials
closed the week up 1.1%, the Nasdaq gained 3.2%, and the S&P 500 finished the week up 2.4% for another record closing
high of 1,744.50.
Now that the can has been kicked down the road into 2014 in Washington, D.C., one of the three things that will get
investors' undivided attention in the coming week will be third-quarter earnings.
"As is usually the case, earnings are in focus and next week sees the bulk of reports being released," said Dan
Greenhaus, chief global strategist at BTIG. "This will help set the tone for the remainder of the year since macro
stories have generally been pushed aside until 2014."
The coming week is considered the peak week of earnings season with about 30% of the S&P 500 reporting, and 10 Dow
components posting quarterly results.
While the big banks and financial firms have already reported earnings, Greenhaus noted this week will see the largest
number of financial sector firms reporting than any other week. More than 20 S&P 500 financial sector companies report
including several insurers such as Dow component Travelers Cos.(TRV), a number of real-estate investment trusts such as
Simon Properties Group Inc. (SPG), capital markets firms such as Franklin Resources Inc. ( BEN ) and State Street Corp.
(STT), as well as exchange operator Nasdaq OMX Group Inc. (NDAQ)
Other areas to focus on are industrials and tech, Greenhaus said. Several industrial Dow components report such as
United Technologies Corp. (UTX) on Tuesday, Boeing Co. ( BA ) and Caterpillar Inc. ( CAT ) on Wednesday, and 3M Co. (MMM)
on Thursday. Also on Thursday after the close, Microsoft Corp. (MSFT) reports results.
Probably the closest watched corporate metric coming out of earnings this week will be revenue growth, given the
quarter's generally weak sales results.
"Sales growth is doing okay versus one year ago but less so against consensus," Greenhaus said. "Next week should help
shed additional light on the sales picture."
Of the 93 S&P 500 companies that have reported so far, only 53% have topped Wall Street consensus revenue estimates,
compared with a four-year average of 59%, according to John Butters, senior earnings analyst at FactSet. But the below-
average results aren't just limited to revenue. Earnings are also running light. Of the companies that have reported so
far, 69% have topped the earnings consensus, compared with a four-year average of 73%, Butters said.
Expect corporate outlooks and commentary to trump actual third-quarter results because of the amount of uncertainty
recent political wrangling has thrown into the economy said Paul Nolte, managing director at Dearborn Partners in
"What we're looking for is some consistency in general, the consensus that the economy will continue to bump along at
2% to 2.5% GDP," Nolte said.
So far, that's not looking that great. To date, of the 18 S&P 500 companies that have provided a fourth-quarter
earnings outlook, 14 of the outlooks have been below consensus, a rate of 78% compared with the five-year average rate
of 63%, Butters said.
Other earnings highlights in the coming week include Dow components McDonald's Corp. (MCD), DuPont (DD), AT&T Inc.
(T), and Procter & Gamble Co. (PG). Notable S&P 500 companies include Halliburton Co.(HAL), Netflix Inc.(NFLX) , Amgen
Inc.( AMGN ) , TripAdvisor Inc.(TRIP) , Amazon.com Inc.( AMZN ) , Colgate-Palmolive Co.(CL) , Ford Motor Co.(F) , Dow
Chemical Co.(DOW) , and United Parcel Service Inc.(UPS)
In a recent note, Goldman Sachs highlighted 20 companies (excluding financials and utilities) it sees as top
contributors to revenue growth for the third quarter. Of those companies, Amazon.com, WellPoint Inc.(WLP) , McKesson
Corp.(MCK), Boeing, Microsoft, Freeport-McMoRan Copper & Gold Inc.(FCX) , and United Technologies report in the coming
What about the data?
With the federal government fully open, the Labor Department said it will release the delayed September jobs report on
Tuesday. Other data set to come out include September existing home sales on Monday, jobless claims on Thursday, and the
University of Michigan consumer sentiment index for October on Friday. Tentatively scheduled are September new home
sales for Thursday and September durable goods orders on Friday.
That data, however, may be treated with some skepticism due to the government shutdown. With the threatened shutdown
in September and the actual shutdown in October, "the economy wasn't functioning properly," Dearborn's Nolte said.
"I think data will get discounted," Nolte said. "We won't get clean data until December."
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