What to Watch in the Week Ahead and on Monday, May 4
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The market is undergoing something of a shift as bond yields rise and the dollar's strength abates in response to the unexpectedly strong data out of Germany that suggests a small pickup in the economy and a renewed expectation for modest inflation. This is in contrast to a few months ago, when deflation was the expected condition for months to come. The dollar's slump should peter out at some point, given the advantage of U.S. yields, but yields may need to back up further, particularly if U.S. economic figures are strong enough to warrant a more hawkish outlook for the Fed. Equities have swung against bonds a bit of late, and with stocks not far from all-time highs it's hard to anticipate more gains, at least in the near term; stocks will still have plenty of earnings to contend with, including Comcast, Walt Disney and others.
Dow company Walt Disney Co is expected to report higher first-quarter revenue on Tuesday after strong results at its theme parks and TV networks. Analysts on average are expecting revenue of $12.2 billion and earnings of $1.10 per share, according to Thomson Reuters I/B/E/S.
Alibaba Group Holdings Ltd will report its results for the fourth quarter and the fiscal year before the markets open on Thursday and the company will hold a conference call to discuss its results at 0730 ET (1130 GMT). These will be Alibaba's first annual results since the world's largest e-commerce company held the world's biggest ever initial public offering, raising $25 billion.
Metlife Inc, the largest U.S. life insurer, is expected to report on Wednesday a first-quarter profit below analysts' expectations, hurt by losses from investments and derivatives. With investments mainly in bonds, Metlife's returns have been hurt by lower yields due to historically low interest rates. Metlife has been scaling back on capital-intensive businesses such as annuities to focus more on traditional life insurance and pension products. Life insurer Prudential Financial Inc is expected to report a lower-than-expected first-quarter profit on Thursday, according to Thomson Reuters StarMine. The company, which earns more than half of its revenue from operations outside the United States, mainly Japan, is likely to be hurt by a strong dollar.
The U.S. Commerce Department releases data on international trade for March on Tuesday, which is expected to show the U.S. trade gap widened. Analysts expect U.S. international trade deficit to have widened to $39 billion in March from $33.6 billion in February. The same day, the Institute for Supply Management is expected to report its manufacturing index held steady at 56.5 in April. On Wednesday, private payrolls processor ADP is expected to report U.S. private employers added 198,000 jobs in April. Private payrolls increased 189,000 in March. The ADP figures come ahead of the U.S. Labor Department's more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment. Nonfarm payrolls are expected to rise 213,000 in April after posting an increase of 126,000 in March.
Federal Reserve Chair Janet Yellen and International Monetary Fund Managing Director Christine Lagarde participate in the "Finance and Society" conversation in the Institute for New Economic Thinking Conference on Finance and Society on Wednesday, hosted by the IMF in Washington. Federal Reserve Bank of Kansas City President Esther George participates in the "Credit Markets: Booms, Busts and Distortions" panel in the same event. On the day, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota speaks before a public town hall forum hosted by Southwest State University in Marshall, Minneapolis. Also, Federal Reserve Bank of Atlanta President Dennis Lockhart speaks on the economic outlook and monetary policy before a luncheon hosted by the Baton Rouge Rotary in Baton Rouge, Louisiana.
Sprint Corp will report its first-quarter results on Tuesday as it continues to step up new promotions and pricing plans to attract subscribers in the middle of its turnaround plan. Analysts say the company's cash flow has been squeezed with heavy investments in network upgrades. Investors will keep an eye out for the No.3 U.S. wireless carrier's capital spending plan as well as signs that the company may need to consider raising additional funds.
Discovery Communications Inc, the owner of Animal Planet and the Discovery Channel, is expected to report a first-quarter profit above analysts' expectations on Tuesday, according to Thomson Reuters StarMine. The company, which forecast strong growth in its networks outside the United States, said better pricing would boost its U.S. advertising revenue in 2015. Continued...