By Wallace Witkowski, MarketWatch
SAN FRANCISCO (MarketWatch) -- With the big banks out of the way, stock investors will turn their attention to tech
and consumer-driven stocks this holiday-shortened week. Microsoft Corp., IBM, Starbucks and Netflix are among the stocks
that will set the tone.
U.S. stock and bond markets will be closed for Martin Luther King Jr. Day Monday but a few electronic trading markets
will remain open.
Stocks ended last week mixed with the Dow Jones Industrial Average (DJI) rising 0.1% for the week and the Nasdaq
Composite Index (RIXF) finishing up 0.6%. The S&P 500 Index (SPX) slipped 0.2%. Year-to-date, only the Nasdaq is showing
a gain, by about 0.5%.
Bank and financial earnings figured heavily last week. Most earnings in the sector topped Wall Street expectations but
revenue expectations were surpassed less than half the time. For the week, Citigroup Inc. ( C ) was the biggest
disappointment in the sector, missing top- and bottom-line expectations, and shares finished the week down 4.5%. Then
again, Goldman Sachs Group Inc. (GS) topped expectations for earnings and revenue while shares finished the week lower
by 1.2%. Compare that to Morgan Stanley (MS), which reported lackluster results, only to see shares rise 6.7% for the
"We have a very sloppy market," said Paul Nolte, managing director at Dearborn Partners in Chicago. "It feels like
running in mud."
Hopefully, the market will get more clarity as the sector breadth of earnings reports expands beginning Tuesday. About
70 companies on the S&P 500 are scheduled to report, and eight Dow industrials components release results in the week
ahead. The focus will shift from financials to a broader basket of healthcare, tech, industrials, and consumer-driven
Investors are getting mixed signals, where the economy seems to be picking up and production numbers have been good,
but at the same time retail and unemployment figures have been less encouraging, Nolte said. Also, January consumer
On that note, the consumer discretionary sector will continue to be watched very closely, Nolte said.
Brian Belski, chief investment strategist at BMO Capital Markets, says concerns about the consumer discretionary
sector remain elevated. The sector was the best performer of 2013, rising 41% compared with the S&P 500's 30% gain,
according to FactSet.
"Performance and valuation are stretched -- well beyond historical norms -- and deteriorating fundamentals are NOT
helping," Belski wrote in a recent note.
Areas in consumer discretionary to avoid are hotels, restaurants and leisure (expensive valuations, deteriorating
operating metrics) along with textiles, apparel and luxury goods (expensive valuations, deteriorating EPS growth),
Investors will get a taste of consumer discretionary results in the coming week with Netflix Inc. (NFLX) and Coach
Inc. ( COH ) reporting Wednesday. On Thursday, Dow-component McDonald's Corp. (MCD) Starbucks Corp. (SBUX) and auto-parts
maker Johnson Controls Inc. (JCI)
Earnings, however, should still grow in the mid-single digits for the S&P 500, and whether it's on account of
financial engineering or not, bottom-line results are what matter to investors, Dan Greenhaus, chief global strategist
"What matters for stock prices is earnings," Greenhaus said. While earnings have recently come under fire as being
easily manipulated and that revenue is a truer metric of growth, Greenhaus countered that revenue growth hardly
matters if a company can't improve its costs.
But as the economy shows improvement, investors are going to expect companies to use those earnings for more than
buybacks and dividends. Capital expenditures are going to be a big focus in 2014, Greenhaus said.
"Over time, CEOs are going to have to invest in something or other, one would hope," Greenhaus said.
Other Dow components scheduled to report this week include Johnson & Johnson Inc.(JNJ), Verizon Communications
Inc.(VZ), International Business Machines Corp.(IBM), and Travelers Cos. (TRV) on Tuesday.
On Wednesday, United Technologies Corp. (UTX) reports, with Microsoft Corp. (MSFT) on Thursday, and Procter & Gamble
Co. (PG) on Friday.
Tech shares, even with a pullback in Intel Corp.'s (INTC) stock on Friday, outperformed last week. The tech sector
rose more than 1% in the week ended Friday, the best of the S&P 500's 10 sectors.
Other notable earnings reports include those from eBay Inc.( EBAY ), Abbott Laboratories( ABT ), Union Pacific Corp.(UNP),
Bristol-Myers Squibb Co.( BMY ), and Kimberly-Clark Corp. (KMB)
This week will be a light week as far as economic data goes. Other than weekly jobless claims, December existing home
sales data will be released on Thursday.
Also, the World Economic Forum will be hosting its annual meeting this week in Davos, Switzerland. Last week, the WEF
said in a report the growing disparity between the world's rich and poor has the greatest likelihood to cause serious
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