Ahead of Wall Street - April 23, 2012 - Ahead of Wall Street
23 Aprile 2012 - 11:00AM
Zacks
Monday April 23, 2012
There may not be much on the domestic economic docket today, but
the market has plenty to keep it occupied. The torrid pace of first
quarter earnings releases today and the rest of this week is not
going to be the only market driver as we have a full plate of major
economic releases on deck this week, with the Fed and GDP in focus.
From across the pond, we don’t have fresh negative headlines about
Spain today, but the presidential election in France and budget
disagreements in the Netherlands are adding an element of political
uncertainty to the European story.
This morning’s positive earnings surprises from Eaton
Corp (ETN), Brinker International (EAT),
and D.R. Horton (DHI) seem to be a recurring story
this earnings season. Not only have results been better than
expected, but a much bigger proportion of the roughly one quarter
or so of the companies that have already released results been
coming out with positive surprises compared to the last few
quarters. We will have a good measure of this earnings season by
the end of this week when results from more than half of the
S&P 500 companies will be out. But I don’t envision the
releases this week to materially change the trend line established
thus far.
Earnings aside, the spotlight this week will be on the Fed’s
two-day meeting getting underway on Tuesday and the first quarter
GDP report coming out Friday morning. No major surprises are
expected from the official post-meeting statement on Wednesday, but
the market will be closely watching Ben Bernanke’s press event that
afternoon for signs of fresh Fed support. The recent run of
‘softish’ economic readings, particularly on the labor market
front, has raised hopes that he Fed will come out with a new
QE-type initiative after the end of the current Operation Twist in
June. It may be just a coincidence that the starting point for the
stock market rally coincided with the start-up of the Fed’s
Operation Twist in October last year. But handicapping what
Bernanke has up his sleeve is hardly a trivial matter for this
market.
We don’t know if Bernanke and Co will have access to the first
quarter GDP numbers when they meet mid-week, but there is no doubt
that the rest us have to wait till Friday morning to see those
numbers. The expectation is that the economy expanded at a
2.5% growth pace in the quarter, down from the preceding quarter’s
3% growth rate. The modest deceleration from the fourth quarter’s
level notwithstanding, the composition of growth is expected to
improve. Gains on the labor market and retail sales fronts have
helped raise expectations that the Friday GDP report will show an
acceleration in Personal Consumption Expenditures or consumer
spending from the fourth quarter’s 2.1% pace to around 2.3% in the
first quarter.
Sheraz Mian
Director of Research
D R HORTON INC (DHI): Free Stock Analysis Report
BRINKER INTL (EAT): Free Stock Analysis Report
EATON CORP (ETN): Free Stock Analysis Report
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