What to Watch in the Week Ahead and on Monday, July 27

Fri Jul 24, 2015 3:59pm EDT
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(The Day Ahead is an email and PDF publication that includes the day's major stories and events, analyses and other features. To receive The Day Ahead, Eikon users can register at . Thomson One users can register at RT/DAY/US. All times in ET/GMT) WEEK AHEAD

Markets next week will be dominated by earnings, as big oil, healthcare and several notable social media names lead the pack in what has so far been a middling earnings season, save for some giants that have far exceeded expectations. Facebook, Exxon Mobil and Pfizer are all on the docket. The market will also gravitate to the Federal Reserve's two-day meeting, the last before September, which still looms as the first possibility for an interest-rate increase from the Fed.

Facebook Inc is expected to grow revenue, excluding the impact of a strong dollar, according to Wall Street analysts. Analysts expect the company's ongoing traction with various segments of advertisers to help Facebook capturing a growing share of digital advertising budgets. When it posts its second-quarter results on Wednesday, investors will keep a close watch on costs and whether the company can keep up growth in monthly active users. Twitter Inc, which has been struggling with slowing user growth, is expected to report second-quarter revenue on Tuesday, below analysts' expectations, according to Thomson Reuters StarMine. Investors will look for commentary on the progress in the direct response ads. They will also be on the lookout for updates on the ongoing CEO search and the impact of a strong dollar. On Thursday, professional social network LinkedIn Corp is expected to report second-quarter revenue slightly above average analyst estimate, according to Thomson Reuters StarMine. Investors will keep a close watch on the company's hiring business, in which revenue growth slowed to 36 percent in the first quarter.

Exxon Mobil Corp, the world's biggest listed oil company, and its U.S. peer, Chevron Corp, are scheduled to post second-quarter earnings on Friday. The world's top oil companies are set to report yet another sharp drop in quarterly profits that could force more spending cuts due to a dim outlook for oil prices.

Procter & Gamble Co and Colgate-Palmolive Co, the two U.S. personal care products companies with big operations outside the United States, have been working to reduce the impact of a stronger dollar on sales. While Colgate has raised prices in emerging markets, P&G is setting up manufacturing plants there to localize supply chain activities. When Colgate reports its second-quarter results and P&G its fourth quarter on Thursday, they are expected to beat analysts' estimates on revenue, but miss on profit, according to Thomson Reuters StarMine. Investors will be keen on any forecast updates and changes in strategy.

Thursday's data will show the U.S. economy is likely to have expanded at a much faster pace in the second quarter. The gross domestic product is projected to have risen at a 2.6 percent annual rate in the April-June quarter, compared to a contraction of 0.2 percent annual rate in the January-March quarter. Separately, the Labor Department issues Employment Cost Index on Friday. On the same day, the University of Michigan's final July reading on the overall index on consumer sentiment is expected to come in at 94.0, a bit higher from a preliminary reading of 93.3. On Tuesday, financial firm Markit will release its preliminary reading of Purchasing Managers Index for the services sector, which is expected to increase to 55.0 from 54.8 in June. Pending Home Sales Index on Wednesday forecast to have risen 1.0 percent, compared to June's 0.9 percent increase.

Mastercard Inc is scheduled to post second-quarter results on Wednesday. A strong dollar is expected to hurt the world's No.2 debit and credit card company, which gets 60 percent of its payment volumes from outside the United States. About 10 percent of transactions made using the company's plastic are on gasoline, according to analysts, and the low oil prices remain a drag on Mastercard's earnings. Arch rival Visa is in talks to buy Visa Europe, which could mean a more powerful threat in Europe, where Mastercard has a strong presence. The company is expected to report second-quarter earnings in line with analysts' expectations, according to Thomson Reuters StarMine.

On Tuesday, Merck & Co, the No. 2 U.S. drugmaker, is expected to report lower sales for the second quarter, hurt by the stronger dollar and divestiture of its consumer care business. On the same day, Pfizer Inc, which captures 60 percent of its revenue from abroad, is expected to report lower second-quarter earnings as the stronger dollar hurts sales outside the United States.

Amgen Inc is expected to report higher second-quarter sales and profit and may revise its full-year forecasts on Thursday. Investors will be looking for details on the company's plans for the launch of its just approved injectable cholesterol treatment in Europe, as well as its expectations for likely U.S. approval and launch in the coming weeks. Biotechnology company Vertex Pharmaceuticals Inc is expected to report lower-than-expected second-quarter earnings, according to Thomson Reuters StarMine. Vertex was the first to develop a drug to treat the underlying cause of a rare lung scarring disorder called cystic fibrosis (CF). On Wednesday, investors will be looking to see how well the company is faring following the approval of Vertex's latest CF drug, which allows the drugmaker to address a population of 8,500 patients, up from 2,000.   Continued...