Earnings Smorgasbord Continues - Analyst Blog
23 Aprile 2012 - 11:12AM
Zacks
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.
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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