What to Watch in the Week Ahead and on Monday, June 15
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Equities could continue to drift next week as investors watch for a debt-resolving deal between Greece and the EU and wait for Federal Reserve policymakers to emerge from two days of meetings and hold a press conference on Wednesday afternoon. Even a messy Greek deal could produce a rally in equities and some relief for the euro. Traders already have priced in a Fed interest rate hike in September or December; any hints on whether it will move sooner or later could produce ripples in stock, bond and currency markets. In the bond market, longer-dated yields, which hit seven-month highs this week, will likely stay volatile on developments on Greece's debt negotiations to avoid a default, while short-dated yields will fluctuate on signals from the Fed whether it intends on raising interest rates later this year. One thing remains accepted wisdom in the market: the dollar's strengthening trend is unlikely to be significantly undermined.
Federal Open Market Committee (FOMC) begins a two-day meeting on interest rate policy on Tuesday and markets will focus on U.S. Federal Reserve's statement on Wednesday. Meanwhile, the Federal Reserve Bank of Cleveland President Loretta Mester speaks on "Community Development and the Federal Reserve" before the Federal Reserve Banks of Cleveland and Philadelphia Policy Summit in Pittsburgh, Pennsylvania on Friday. Federal Reserve Bank of San Francisco President John Williams gives policy speech before the National Bureau of Economic Research East Asian Seminar on Economics.
On Wednesday, Oracle Corp, the world's leading database company, is expected to report lower revenue and profit for its fourth-quarter as it transitions some of its business to a more investment-heavy cloud-computing model and copes with relatively weak overall technology spending by businesses in an uncertain economy.
The U.S. Commerce Department issues May data for housing starts and building permits on Tuesday. Groundbreaking is expected to have dropped to 1.100 million units from 1.135 million units in April and permits for future home constructions is expected to have fallen to 1.100 million units from 1.140 million units. On Thursday, the Commerce Department issues current account data for the first quarter. Current account gap is expected to increase to $116.8 billion from $113.5 billion deficit in the previous quarter. The Labor Department on Thursday issues May data for Consumer Price Index, which is expected to have increased 0.2 percent, slower than the 0.3 percent pace in the prior month. The department also releases weekly jobless claims data. Federal Reserve Bank of Philadelphia issues Business Outlook Survey for June. Analysts polled the index to have increased to 8.0 from 6.7 in May. Conference Board issues its Leading Economic Index for May.
Package shipping giant FedEx Corp will report fourth-quarter results on Wednesday. The company is considered an economic bellwether, with shipping activity used as a proxy for overall economic activity. While the stock has done well this year, the transportation sector has lagged significantly. Strong results could reverse that trend, though any weakness could suggest that the weakness in transports could spread to the broader market.
On Tuesday, Adobe Systems Inc is expected to report second-quarter profit above estimates, according to Thomson Reuters StarMine. The Photoshop maker has been switching from traditional box licenses to web-based subscriptions for its Creative Cloud software bundle to help attract more predictable recurring revenue. Analysts will be looking at whether the company forecasts a decline is average revenue per user, as Adobe offered more discounts for Creative Cloud, which includes its Photoshop, Illustrator and Flash software.
Red Hat Inc reports first-quarter results on Thursday. The world's largest commercial distributor of the Linux operating system is expected to report revenue marginally above analysts' estimate according to Thomson Reuters StarMine. Red Hat had forecast first-quarter profit in line with analysts' estimates despite warning on a strong dollar hurting its revenue. Continued...