What to Watch in the Week Ahead and on Monday, Oct 12
(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) WEEKAHEAD The stock market goes into next week with bank earnings starting to trickle out, having gained about 7 percent over eight days despite uncertainty about China and no clarity from whatever the Fed is doing. It's also believed that perhaps earnings estimates have already been ratcheted down dramatically, increasing the possibility of positive surprises. The economic calendar is dominated by inflation figures, along with retail sales and Philadelphia-area manufacturing figures, and markets will start to see if that data matches weak jobs figures or goes against that. The drop in bond yields may also be driving equities, which look a bit more attractive as yields fall, overvalued as they may be. A number of Dow 30 companies report results in the week: JP Morgan Chase & Co, Johnson & Johnson and Intel Corp on Tuesday; Goldman Sachs and UnitedHealth Group Inc on Thursday, and General Electric on Friday. Intel Corp is expected to report third-quarter revenue slightly below analysts' average estimate. JPMorgan Chase & Co is expected to report a fall in trading revenue, but lower expenses could offset that. Goldman Sachs Group Inc is also expected to report a decline in its third-quarter profit as investor jitters over the Fed's decision to raise rates hit bond trading and capital markets revenue. General Electric will report third-quarter earnings, reporting results for the first time since activist investor Nelson Peltz took a $2.5 billion stake in the U.S. conglomerate. Wells Fargo & Co, the largest U.S. mortgage lender, is expected to report a slight rise in its third-quarter earnings on Wednesday, helped by a large capital loan book it bought from General Electric. The bank said in July that it expected to make lower mortgage loans in the third quarter due to slower refinancing activity ahead of the U.S. Fed's expected rate hike in September. Analysts say, however, that Wells Fargo should benefit from shifting some of its high liquid assets into securities during the second quarter, when it bet correctly that interest rates would be kept lower for longer. Bank of America reports it third-quarter results on Wednesday. The No. 2 U.S. bank by assets is expected to be hurt by recent market volatility and the U.S. Federal Reserve's decision to keep interest rates unchanged in its September meeting. CEO Moynihan has already said that trading revenue may end up down at least 5 percent, but analysts expect a bigger fall. Investors will be keen to see what impact this could have on future earnings and also if a tight control on expenses could help the bank offset a fall in revenue. Like its peers, Citigroup Inc, the third biggest U.S. bank by assets, is expected to be hurt by market volatility and low interest rate environment. Chief Financial Officer John Gerspach has already said third-quarter trading revenue, to be released on Thursday, will decline from a year earlier due to increased volatility. Investors will be keen to know more about the impact of increased volatility on the bank's outlook for the fourth quarter. Retail sales numbers for September on Wednesday ahead of industrial production and Michigan consumer sentiment on Friday will indicate any chance of a rate rise this year. Retail sales excluding automobiles, gasoline, building materials and food services are expected to have increased 0.3 percent after a 0.4 percent gain in August. The industrial output is likely to have dropped 0.2 percent in September. Meanwhile, analysts forecast the University of Michigan's preliminary index for October on overall consumer sentiment will rise to 88.7, a bit higher than September's final reading of 87.2. However, inflation data is due on Thursday. Consumer Price Index is likely to have continued its decline by 0.2 percent in September after the index slipped 0.1 percent in August, the first decline since January. Investors will be looking for any hints on rate hike, when the Fed officials will speak next week. On Tuesday, the Federal Reserve Bank of New York President William Dudley presides over an Economic Club of New York luncheon meeting. He will also participate on Thursday in conversation on how the Federal Reserve should decide on the appropriate level of interest rates at an event hosted by the Brookings Institution. On Tuesday, the Federal Reserve Bank of St. Louis President James Bullard speaks on the U.S. economy and monetary policy before the National Association for Business Economics 57th annual meeting, "North America's Place in a Changing World Economy." On Thursday, the Federal Reserve Bank of Cleveland President Loretta Mester speaks on "Determinants of Long-Run Growth and Future Growth Prospects" before the New York University Stern School of Business Center for Global Economy and Business. BlackRock Inc, the world's largest asset manager, will report third-quarter earnings before the opening of markets on Wednesday. Meanwhile, private equity firm Blackstone Group LP is scheduled to announce its third-quarter results on Thursday. After the close of market on Thursday, Schlumberger Ltd, the world's No.1 oilfield services provider, is expected to report a steep fall in third-quarter profit as lower oil prices weigh on global drilling activity. Investors will be looking out for any updates on its deal to buy equipment maker Cameron International. North American onshore drilling results are expected to be weaker for Schlumberger in the quarter, but deep cost cuts are expected to have cushioned the impact and helped sustain margins. Declining drilling activity is expected to dampen onshore pricing in the quarter and oil investors will be looking for comments on pricing, and expectations for industry spending for the year end and next year. As U.S. drilling costs are seen as approaching levels where they cannot be reduced any further, a key focus will be on how oil production will be affected from major shale plays. Honeywell International Inc, the maker of aircraft parts and climate control systems, is expected to report a higher third-quarter profit on Friday, helped by cost controls. The company, which counts Boeing Co and Bombardier Inc among its customers, has cut jobs and sold or merged businesses to reduce costs. However, Honeywell is expected to report lower third-quarter revenue, partly hurt by a strong dollar. Investors will look for comments on fourth-quarter and full-year financial forecast. Netflix Inc, the video streaming pioneer, is expected to report third-quarter results a little below analysts' average estimates on Wednesday. Netflix may report a fall in profit, hurt by costs associated with overseas expansion and production of original content, despite strong growth in subscriber base. Its net income more than halved in the last quarter. Netflix recently increased the subscription rate for new members who subscribe to its "standard" plan by $1.00 a month. The changes are applicable to customers in the United States, Canada and Latin America. On Thursday, chipmaker Advanced Micro Devices Inc is expected to report third-quarter profit and revenue below average analysts' estimate. The company, which announced 500 job cuts earlier this month, has been struggling with weak demand for its chips used in personal computers as well as intense competition. AMD has been shifting to gaming consoles and low-power servers, but progress has lagged Wall Street expectations due to intense competition from Intel Corp and newer companies. Investors will be looking for impact of restructuring on the company' results. Toymaker Mattel Inc is expected to report a third-quarter profit below analysts' average estimate. Mattel is in the middle of a turnaround as its Barbie dolls have fallen out of favor with young girls. The company, which is working to streamline its toys portfolio, is likely to increase spending on marketing and other promotions ahead of the holiday season, which could have weighed on profit in the quarter. In its report on Thursday, investors will also be looking for news on any new deals Mattel is looking to sign with popular movie franchises, as it looks to compensate for losing its contract for Disney Princess toys, which includes dolls based on the blockbuster Frozen franchise. Winnebago Industries Inc, the largest U.S. motorhome maker, is expected to report a lower fourth-quarter profit on Thursday due to a drop in average selling prices. The company has been selling more of its lower priced recreational vehicles, while facing lower demand for its top-end motorhomes. The company has also seen an increase in capital expenditure as it tries to cope with worker shortage at a key plant in rural Iowa and rectify problems related to sourcing key components from suppliers. Investors will be looking to see if the company is able to contain its expenses, and comments on 2016 financial forecast. Canadian manufacturing sales for August are due to be released on Friday. Factory sales rose 1.7 percent in July. Separately, the Statistics Canada will release the data on foreign investment in Canadian securities on the same day. A clutch of economic data is due from Latin America, including Brazil's August retail sales figures on Wednesday, Chile's interest rate data for October, Argentina's September inflation number and Peru's August gross domestic product on Thursday. ON MONDAY, OCTOBER 12 Federal Reserve Bank of Atlanta President Dennis Lockhart speaks before the AUBER Fall Conference, in Orlando, Florida. (0810/1210) Meanwhile, Federal Reserve Bank of Chicago President Charles Evans will speak on current economic conditions and monetary policy before the World Steel Association 49th Annual Conference, in Chicago. (1030/1430) Later in the day, Federal Reserve Board Governor Lael Brainard will be speaking on the economic outlook and monetary policy before the National Association for Business Economics 57th annual meeting, "North America's Place in a Changing World Economy," in Washington. (1630/2030) Mexican industrial output is expected to have risen 0.2 percent in August from July. Compared with August 2014, industrial output is predicted to have risen 1.06 percent. (0900/1300) LIVECHAT - FX Week Ahead with Reuters FX analyst Jeremy Boulton Join Reuters FX analyst Jeremy Boulton at 0600/1000 for a look at the week's top topics and implications for the FX market. To join the Global Markets Forum, click here bit.ly/1kTxdKD (All references to a company's results expected to beat or miss analysts average estimates are according to Thomson Reuters StarMine, unless mentioned otherwise.) (Canada markets are closed on Monday, Oct. 12, for Thanksgiving Day) (Compiled By Nayyar Rasheed in Bengaluru; Edited by Don Sebastian)
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