What to Watch in the Week Ahead and on Monday, April 18

Fri Apr 15, 2016 3:35pm 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 have a number of issues to focus on next week, beginning with the outcome of Sunday's meeting of oil ministers from the major oil producing nations. But nobody should get their hopes up all that much for a major change in OPEC's production levels. Earnings will drive markets after that, with reports expected from plenty of blue-ship stocks including Alphabet, Microsoft, Coca-Cola, Visa, General Electric and others. A slew of Dow 30 companies report results next week, including UnitedHealth Group Inc, Johnson & Johnson, Goldman Sachs Group Inc and the world's largest chipmaker Intel Corp on Tuesday; American Express Co, the world's largest soda maker Coca-Cola Co on Wednesday; Microsoft Corp, the No. 1 U.S. wireless phone service provider Verizon Communications Inc, and the world's largest payments network operator Visa Inc on Thursday, while General Electric Co's and McDonald's Corp's first quarter earnings are due on Friday. J&J kicks off the earnings season for large U.S. drugmakers and is expected to report moderately higher earnings, bolstered by cost cuts and growing sales of its treatments for cancer, arthritis and psoriasis. UnitedHealth will set the tone for other insurers and investors will be listening for their plans on Obamacare. American Express is expected to report a decline in profit as it continues to look beyond cutting costs to improve profit to make up for losing a lucrative contract with warehouse club retailer Costco Wholesale Corp. Goldman Sachs' profit is expected to be hurt by weak capital markets, trading revenues and investment banking fees amid uncertainty over U.S. interest rates, China's slowing economy, and low oil prices. Meanwhile, Intel is expected to report a rise in revenue beating analysts average estimates, according to Thomson Reuters StarMine data. Coca-Cola's revenue is also expected to be slightly better than expected, according to Thomson Reuters StarMine data. Separately, Verizon's profit and revenue is expected to be in line with analysts' estimates. Microsoft's expected rise in third-quarter revenue is likely to beating analysts' estimates, according to Thomson Reuters StarMine data. Visa's second-quarter profit is expected to decline as a volatile global economy and the strong dollar cut into revenue from customers outside the United States. Next week, investors will be looking mostly for housing market data, from housing starts, building permits on Tuesday to existing home sales numbers on Wednesday. Housing starts, as measured by the U.S. Commerce Department are expected to have dropped to a seasonally adjusted annual pace of 1.170 million units in March from 1.178 million units in February. Building permits are likely to have increased to a 1.2 million-unit rate last month. Meanwhile, home resales probably rose in March after a sharp fall in February. Existing home sales, as measured by the National Association of Realtors is expected to have gained 3.5 percent to an annual rate of 5.29 million units. Sales dropped 7.1 percent to an annual rate of 5.08 million units in February. The Philadelphia Federal Reserve release its business activity index on Thursday, while on Friday, Markit releases its preliminary data for U.S. manufacturing purchasing managers' index, which is expected to have advanced to 52.0 in April from 51.5 in March.

Alphabet Inc, on Thursday, is expected to report a rise in first-quarter revenue that is likely to beat analysts average estimate, according to Thomson Reuters StarMine data. Investors will be looking for continued growth at Alphabet's Google unit, which has been driven by strong mobile advertising sales. Investors will also be keen to gather more information on the company's Other Bets business, which includes glucose-monitoring contact lenses and Internet balloons. Capital expenditures in the business are expected to increase this year, although no concrete details have been offered. Schlumberger is expected to report a fall in first-quarter profit on Thursday, hurt by weak drilling activity. The world's largest oilfield services provider, which recently closed its acquisition of Cameron International Corp, warned last month that its revenue would fall by about 15 percent from the fourth quarter. General Motors Co will announce first-quarter results on Thursday. GM said on Friday it is recalling nearly 1.04 million newer pickup trucks for a seat belt flaw. The company said the recall in the United States includes 895,232 vehicles and a stop-sale of approximately 3,000 new 2014 and 2015 model year pickups still on dealer lots. The recall includes about 142,000 vehicles outside the United States. BB&T Corp, Fifth Third Bancorp and KeyCorp are likely to report on Thursday a decline in first-quarter profit as they put aside more money for sour energy loans. Many lenders have ramped up reserves in recent months, concerned by the increasing number of energy companies that have gone bankrupt and defaulted on loans as oil prices stay stubbornly low. U.S. homebuilders including D.R. Horton Inc and PulteGroup Inc report their quarterly results on Thursday. D.R. Horton and PulteGroup are expected to report a higher profit for the second quarter and first quarter, respectively, helped by higher home sales. On Wednesday, Abbott Laboratories is expected to post first-quarter revenue that nudges past analysts' expectations, after missing estimates for the first time in four quarters in the previous quarter, largely thanks to forex headwinds. Analysts expect that passage of time and more stable forex rates will allow the underlying performance of the business to shine through this quarter, and they will be looking for any commentary on potential M&A activity. Biogen Inc is expected to report a largely in-line first quarter on Thursday, as prescriptions written for its multiple sclerosis drug remain unchanged in the United States. Management previously noted that the uptick in scripts may not be seen until the second quarter. Investors will also look for more details on the Massachusetts-based drugmaker's hemophilia assets, which the company is said to be looking to sell. Yahoo Inc's first-quarter profit is expected to have declined more than analysts average estimate, according to Thomson Reuters StarMine data. The report on Tuesday comes a day after the end of a deadline for interested bidders to submit offers for Yahoo's internet business. There is high investors scrutiny on the auction, which came about as the struggling online search and advertising company succumbed to investor pressure stemming from its inability to boost revenue from ad sales. Advertising group Omnicom Group Inc's first-quarter revenue is expected to fall more than analysts expect, according to Thomson Reuters StarMine data, due to a strong dollar. When the company posts its results on Tuesday, investors and analysts will be looking out for Omnicom's forecast for the second quarter and the full year, as well as details on possible share repurchases. Advertising company Interpublic Group of Companies Inc is expected to, on Friday, report a first-quarter profit that misses market expectations, according to Thomson Reuters StarMine data. Investors will watch out for any update on financial guidance for the remainder of 2016. Honeywell International Inc, the maker of aircraft parts and climate control systems, is expected to report a higher first-quarter profit on Friday, helped by cost controls. Investors will look for an update on its financial forecast for 2016, and comments on management-succession plans. Cessna business jet maker Textron Inc is expected to report a higher first-quarter profit on Wednesday, helped by steady demand for its planes in North America. Investors will be looking for an update on its full-year financial forecast and commentary on demand trends in emerging markets such as Brazil and China, where sales have been weak. On Thursday, Johnson Controls Inc reports second-quarter earnings amid a pending merger with Ireland-based Tyco International Plc. The merger of Johnson Controls and Tyco International would save Johnson Controls $150 million a year in taxes. Analysts on average expect American Airlines Group Inc, the world's largest airline, to report on Friday a dip in first-quarter profit due to a new profit-sharing plan with employees. Investors will zero in on management's guidance for the upcoming peak travel season, as attacks in Brussels and Paris potentially discourage U.S. vacationers from spending top dollar to visit Europe in the summer. Analysts on average expect United Continental Holdings Inc to report a dip in first-quarter profit on Wednesday, according to Thomson Reuters I/B/E/S. Investors will look for guidance on how the No.3 U.S. airline will stop its unit revenue decline and improve its industry-lagging reputation - a concern that activist shareholders raised in a brawl over the company's board of directors, whom they accuse of poor oversight. Qualcomm Inc is expected to report a fall in second-quarter revenue on Wednesday, according to Thomson Reuters StarMine data. The company said in February that its Snapdragon 820 processor was powering Samsung Galaxy S7 and S7 edge smartphones. Investors will be looking for the impact of the sales of the Galaxy series on the chipmaker's results. Data storage products maker EMC Corp is expected to report first-quarter profit below market expectations on Wednesday, according to Thomson Reuters StarMine data. The focus this quarter will be on commentary surrounding the Dell Inc deal and outlook for the remainder of 2016. Advanced Micro Devices Inc is expected to report first-quarter revenue below analysts average estimate on Thursday, according to Thomson Reuters StarMine data. Investors will be looking for an update on its Polaris graphic processing units, which it plans to ship in the middle of this year. Network equipment maker F5 Networks Inc is expected to report second-quarter profit and revenue slightly above analysts average estimate on Wednesday, according to Thomson Reuters StarMine data. Investors will be looking to see if there has been a marked decrease in the number of deals greater than $1 million, a factor that has the potential to affect the company's results. Software maker VMware Inc is expected to, on Tuesday, report first-quarter profit below analysts average estimate, according to Thomson Reuters StarMine data. Investors will be looking for growth in new businesses, such as NSX, which makes networking more efficient. Mattel Inc, on Wednesday, is expected to post a first-quarter profit that tops analysts' estimates, according to Thomson Reuters StarMine data. The toymaker is in the middle of a turnaround as its Barbie dolls have fallen out of favor with young girls. The 56-year-old brand posted a rise in sales in the holiday quarter after eight straight quarters of declining sales. But analysts expect sales to fall this quarter. Investors will look for forecast and commentary on sales for the second quarter. AutoNation Inc, the biggest publicly traded auto dealer group, reports first-quarter results on Friday. CEO Mike Jackson is likely to speak on the auto industry in general and whether automakers are hurting themselves by increasing profit-eating incentives in order to top last year's record for U.S. auto sales. AutoNation has also long been aggressive in share buybacks, so investors will look for an update on its share repurchase program. Sportswear maker Under Armour Inc is expected to report first-quarter profit below analysts' estimates on Thursday, according to Thomson Reuters StarMine data. Under Armour's gross margin in the quarter is expected to have been hit by higher promotions to clear excess inventory and slowing apparel sales growth, the company's largest source of revenue. A fall in the average price of its running footwear and a shift in sales mix towards lower-margin footwear are also expected to hurt margins. Investors will look for an update to the forecast, inventories, and comments on the Sports Authority bankruptcy. Mexican cement company Cemex SAB de CV reports first-quarter results on Thursday. Investors will be looking at the impact of the peso depreciation on its debt load as well as any recovery in its U.S. business. Canadian Pacific Railway Ltd is expected to report a first-quarter profit on Wednesday, as Canada's second-largest railroad continues to streamline operations despite pressure on volumes from falling prices for commodities such as oil and coal. Chief Executive Hunter Harrison is expected to face questions from shareholders on the company's decision to abandon its $28 billion bid for U.S. railroad Norfolk Southern. Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins come before the House of Commons Standing Committee on Finance on Tuesday and before the Senate Standing Committee on Banking, Trade and Commerce on Wednesday. Lawmakers are likely to press them on the strength of the Canadian economy and the appropriate level for the Canadian currency. The two main economic reports in Canada next week will be inflation and retail sales, both due on Friday. The annual inflation rate is expected to have cooled to 1.2 percent in March, drifting further away from the Bank of Canada's target of 2 percent. Core inflation, which strips out volatile items and is more closely watched by the bank, is forecast to be a more robust 1.7 percent. Retail sales are expected to have fallen by 0.8 percent in February after strong gains last month. Analysts are expecting to see a pullback after the economy got off to a robust start at the beginning of the year and will be looking at the retail figures to see how the economy is faring. Canadian Infrastructure Minister Amarjeet Sohi will speak on Tuesday about the role public-private partnerships will play in the government's C$120 billion 10-year infrastructure plan. Government officials say they are talking to the country's largest pension funds about investing in billions of dollars worth of infrastructure projects to help stimulate the economy. Canadian province Manitoba holds its 41st general election on Tuesday. The long-ruling New Democrat government led by Greg Selinger is expected to lose power in the Western Canadian province known for crop production and manufacturing. The progressive Conservatives are leading the polls and will likely put greater emphasis on curbing the province's deficits. Mexico releases inflation data for the first half of April on Friday. The country's inflation rate cooled in March to an annual rate of 2.60 percent, but the central bank has said that it expects the pace of consumer prices to rise slightly above its 3 percent target during the second and third quarters. Still, there has been little sign of widespread pressures on consumer prices despite a steep devaluation of the peso since late 2014. European Central Bank (ECB) holds interest rate decision on Thursday. In the euro zone, economists said lacklustre demand, not inadequate credit, is holding the euro zone economy back. They say the ECB is unlikely to cut its deposit rate further from the current -0.40 percent. That too underscores the diminishing returns from monetary policy, especially since the ECB is well over a year into its trillion-plus euro stimulus programme, has cut rates several times and pledged long-term loans to banks, with little pick-up in inflation so far. ON MONDAY, APRIL 18 Morgan Stanley's first-quarter profit is expected to have plunged during what is widely being considered the worst start to the year for global banks since the financial crisis in 2007-09. Revenue from both investment banking and trading are likely to have taken a hit amid worries about economic growth in China, stubbornly low oil prices and uncertainty surrounding the pace of U.S. interest rate hikes. Shares in Morgan Stanley will be sensitive to details on the bank's exposure to energy loans, outlook on deals, IPOs and trading for the rest of 2016. PepsiCo Inc is expected to report first-quarter revenue above the average analyst estimate, according to Thomson Reuters StarMine data. Demand for Pepsi's snacks and non-carbonated drinks have boosted sales in the United States, but a strong dollar has reduced the value of sales from overseas markets, which account for 40 percent of the company's total revenue. Investors will look out for any updates to forecast, comments on acquisitions and any reaction to a potential law in the United States to tax some sugar-based products. International Business Machines Corp is expected to report a fall in its first-quarter revenue below analysts' estimates, according to Thomson Reuters StarMine data. It would represent the 16th straight quarter of declining revenue as a stronger U.S. dollar continues to hurt the the technology services company. The Dow Jones component, popularly known as Big Blue, has enjoyed a quiet recovery in 2016, with shares rising nearly 10 percent. Netflix Inc's first-quarter profit is expected to fall more than analysts' estimates, according to Thomson Reuters StarMine data, as the video streaming company continues to aggressively spend on international expansion and original content. Subscriber additions, perhaps one of the most scrutinized Netflix metrics, is likely to get a boost due to the March release of the new season of popular shows "House of Cards" and "Daredevil". However, investors will be looking out for Netflix's subscriber forecast for the next quarter, as users paying $7.99 per month for their subscriptions will see a $2 hike in May, which analysts expect will drive up churn. National Association of Home Builders releases data on homebuilder sentiment. The NAHB Housing Market index is likely to have risen to 59 from 58 in April. (1000/1400) Boston Federal Reserve Bank President Eric Rosengren gives a lecture in New Britain, Connecticut. Rosengren surprised many investors a couple of weeks ago when the dovish central banker said that even he expected more aggressive rate hikes than did skeptical investors. He's expected to elaborate on his policy leanings as he speaks at the Central Connecticut State University American Savings Foundation Distinguished Lecture Series. (1900/2300) Separately, Federal Reserve Bank of Minneapolis President Neel Kashkari speaks before the Minnesota Chamber of Commerce. (1230/1630) Toymaker Hasbro Inc is expected to report first-quarter profit above analysts' estimates, according to Thomson Reuters StarMine data. Hasbro's sales are expected to be driven by toys, based on Star Wars' "The Force Awakens" movie. Investors will look for forecast, mainly on projected sales from the newly acquired license to sell Disney Princess dolls, and from toys related to the new Star Wars movie titled "Rogue One." LIVECHAT - PANAMA PAPERS with "Wachovia Whistleblower" Martin Woods on the broader implications for money laundering and financial security Martin Woods, known as the "Wachovia Whistleblower" because of his uncovering of dirty dealings at Wachovia Bank, currently works at Thomson Reuters as the Money Laundering Reporting Officer for the FSA regulated businesses. He joins the forum to discuss the implications of the recently released Panama Papers on money-laundering and financial security. (0930/1330) To join the Global Markets Forum, click here bit.ly/1kTxdKD (Compiled by Sourav Bose in Bengaluru; Editing by Savio D'Souza)