What to Watch in the Week Ahead and on Monday, Oct 19
(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 Stocks appear to be on the verge of breaking through the resistance that has defined the equity market since the mid-August swoon. But if that's going to happen, it's going to have to come as a result of earnings, with a number of big-name stocks such as Alphabet, AT&T, Microsoft, Caterpillar set to release results. The bond and forex markets have been a bit more muted, though the dollar has recently come off a bout of weakness as investors start to see U.S. data as possibly supportive of an increase in interest rates, while the bond market is still betting on low yields for the most part. General Motors Co, the No. 1 U.S. automaker and in the global top 3 by sales volume, tries to convince a skeptical Wall Street that it is worth well more than its $33 IPO value from 2010 as it reports its third-quarter earnings on Wednesday. A slowdown of sales in China and South America will weigh on a moderate recovery in Europe and very strong results in truck- and SUV-hungry North America. GM said on Oct. 1 that it expects earnings of $5 to $5.50 per share, before one-time items, in 2015. A slew of Dow 30 companies report results in the week: Wireless carrier Verizon Communications Inc, industrial conglomerate United Technologies Corp and property and casualty insurer Travelers Cos Inc on Tuesday; and American Express Co, Boeing Co and Coca-Cola Co on Wednesday. Investors will look for Verizon's subscriber additions in the third quarter and signs that the company's investments in "Internet of Things", the concept of connecting household devices to the Internet, will drive revenue and profit. Travelers Cos' third-quarter earnings are expected to beat analysts' expectations, with three cuts to its 2015 forecast already this year. United Technologies will be looking to shore up investor confidence in its quarterly report. Investors will be interested in American Express's growth plans and new exclusive agreements to offset the impact of its fallout with Costco Wholesale Corp. Coca Cola's third-quarter revenue is expected to come in below the average analyst estimate. With Boeing having delivered 37 of its 787 jetliners in the third quarter, well above the target of 30, investors will be looking for strong cash flow in its results and evidence that Boeing is reducing 787 production costs and catching up to Airbus's massive lead on new plane sales this year. Other Dow companies reporting results next week are: Diversified manufacturer 3M Co, McDonald's Corp, Caterpillar Inc, and Microsoft Corp on Thursday; and Procter & Gamble on Friday. 3M gets more than 60 percent of its sales from outside the United States and investors are bracing for evidence of pressure from currency fluctuations and volatility in emerging economies in its third-quarter report. Meanwhile, analysts expect Microsoft to miss profit expectations in its first-quarter results, hurt by a decline in global PC shipments. Eli Lilly and Co, the Indianapolis-based drugmaker, will announce third-quarter results on Thursday. On the same day, medical technology company Stryker Corp is expected to report third-quarter revenue in line with analysts average estimate. Robotic surgical instrument maker Intuitive Surgical Inc reports third-quarter results on Tuesday. Three healthcare companies will report third-quarter results on Wednesday. Abbott Laboratories Inc's sales are expected to beat analysts average estimate due to increased demand for its generic drugs. When biotech Biogen Inc reports, investors will be looking for any signs of a bounceback from a disappointing first half of the year. Heart device maker St. Jude Medical Inc's revenue is expected to be in line with analysts average estimate due to higher sales of its cardio and neuro products. Wall Street will find out on Thursday if Google Inc, now morphed into a holding company Alphabet Inc, will be able to beat profit estimates again. The company's profit had topped estimates last quarter, ending a streak of six quarters of missing Wall Street's targets. The company's new chief financial officer, Ruth Porat, has said she will focus on keeping expenses under control. Investors will also look out for the company's plan to boost ad revenue which has been under pressure as consumers access its services on mobile devices, where ad rates are typically lower. Starting from the company's fourth quarter in January, Alphabet will have two reporting units - Google and all other Alphabet businesses taken as a whole. E-commerce company Amazon.com Inc is expected to report third-quarter revenue above analyst's estimates on Thursday, helped by higher sales in North America and growth in its web services business. Amazon is expected to benefit from its highly-publicized Prime Day sale, where customers ordered 34.4 million items worldwide. Separately, eBay Inc is expected to report third-quarter revenue below expectations on Wednesday, according to some analysts. EBay has a number of challenges ahead after spinning off PayPal. The business has lost customers and seen sluggish growth in the past few years as retailers increasingly move their online operations in-house. Yahoo Inc, which has forecast lower-than-expected revenue for the third quarter, is also expected to report profit well below analysts average estimate on Tuesday. The company is planning a major shakeup in its media unit as it struggles to revive its core advertising business. Yahoo has been developing content for its mobile platform to drive user engagement and ad sales as its core online advertising business struggles in the face of stiff competition from Alphabet Inc and Facebook Inc. Investors will look for details on Yahoo's plan to proceed with the spinoff of its stake in Chinese e-commerce company Alibaba Group Holding Ltd, despite running into hurdles with the U.S. Internal Revenue Service (IRS). AT&T Inc, the No. 2 U.S. wireless carrier, had said it expects to report more than 2 million net subscriber additions for the third quarter, with gains in every category including postpaid and prepaid. The company, which will reports results on Thursday, also expects to report positive U.S. net subscriber additions for the recently acquired satellite TV provider DirecTV. AT&T expects revenue, earnings and free cash flow to grow through 2018 following the DirecTV purchase and investments in Mexico, though it also sees higher capital expenditure. As the U.S. wireless market reaches saturation, AT&T hopes to tap into DirecTV's video assets and has been expanding its wireless operations in Mexico to grow revenue. Oilfield services provider Baker-Hughes Inc on Wednesday is expected to post a third-quarter loss, compared with a year-ago profit, hurt by a decline in drilling activity due to weak commodity prices. Baker Hughes, which is to be bought by rival Halliburton for $35 billion, has seen its revenue benefit from oil producers returning to complete wells they had abandoned when oil prices had slumped. Investors will mainly focus on comments around planned divestitures and the timeline for regulatory approval in connection with Halliburton's pending acquisition. On the same day, Kinder Morgan Inc is expected to report a lower third-quarter profit, again due to weak oil prices. The U.S. pipeline company bought out Shell's stake in a natural gas joint venture and acquired a pipeline company this year. Investors will be interested in any comments about possible mergers or acquisitions. Texas Instruments Inc releases third-quarter results on Wednesday. The company had forecast revenue below analysts average expectations due to weak demand for its chips used in PCs and industrial and communications equipment. Worldwide shipments of PCs fell 7.7 percent in the third quarter, according to research firm Gartner. Texas Instruments, however, could benefit from the use of its chips in Apple Inc's latest iPhones. Virtualization software maker VMware Inc is likely to report third-quarter profit above analysts average estimate on Tuesday. VMware reported preliminary results on Oct. 12, but the primary focus will on any commentary on the Dell-EMC acquisition. VMware is majority-owned by EMC Corp. Dell's offer for EMC is structured in a peculiar way that will give EMC shareholders a special stock that tracks the share price in VMware, which will continue to remain publicly traded. Analysts have said Dell's plan to create a VMware tracking stock will likely hit the virtualization software company's price as the size of the float increases. EMC reports results on Wednesday, a day after VMware, and again its report will be parsed for commentary on Dell's offer, especially since EMC has already reported preliminary results on Oct. 12. Next week's U.S. economic calendar will mostly be dominated by housing figures, along with data on manufacturing sector growth. On Tuesday, housing starts and building permits for September are expected to show a gain from the previous readings. Groundbreaking is expected to have increased to a seasonally adjusted annual pace of 1.15 million units from 1.13 million units in August, and building permits are expected to have advanced to a 1.17 million-unit pace from a 1.16 million-unit pace in August. On Thursday, data is expected to show existing home sales increased to an annual rate of 5.37 million units in September. Meanwhile, financial data firm Markit will release its preliminary Manufacturing Purchasing Managers' Index on Friday, which is expected to decline to 52.8 in October from 53.1 in September. The Mortgage Bankers Association is also due to release its index on mortgage application on Wednesday. BNY Mellon will report its third-quarter results before the market opens on Tuesday. Analysts will be looking for the impact of a software glitch that kept the bank from properly producing fund valuations to clients over summer. Dow Chemical Co on Thursday is expected to report a fall in third-quarter revenue and profit as weak crude prices weigh on the plastics and chemicals sales. Investors will be keen on current quarter and 2016 commentary as concerns rise about a lull in industrial activity in China. Low demand and prices for agricultural products are also expected to squeeze results. There will be interest in Dow's comments on potential M&A activity in the agriculture sector, as the departure of DuPont Chief Executive Ellen Kullman presents new possibilities. Diversified miner and energy producer Freeport-McMoRan Inc is also scheduled to report third-quarter results on Thursday. On Thursday, PulteGroup Inc, the third largest U.S. homebuilder, is expected to post higher revenue and profit for the third quarter, helped by higher home sales. Investors will want to know if declining oil prices during the quarter have further hurt demand at higher price points in Texas, which accounts for about 15 percent of the company's revenue, and they will look for an update on PulteGroup's 2015 financial forecast. Omnicom Group Inc, the biggest U.S. advertising company, will report its third-quarter results on Tuesday. On Wednesday, Interpublic Group of Cos Inc is expected to report third-quarter revenue above the average analyst estimate. The advertising firm, whose clients include General Motors Co, Johnson & Johnson and L'Oreal, has been benefiting from higher advertising spending by U.S. businesses. Dunkin' Brands Group, the owner of Dunkin' Donuts and Baskin Robbins chains, is expected to report third-quarter revenue and profit below analysts' expectations on Thursday. The company estimated that comparable sales growth at its U.S. Dunkin' outlets slowed in the quarter. It also said that the raise in minimum wage was higher than expected and led some franchisees to raise prices more than the company liked, hurting sales. Dunkin' Brands is also expected to have lost some breakfast sales as it did not run a breakfast sandwich promotion due to egg shortages amid avian flu fears. Investors will be looking for details on how the company plans to mitigate the impact of higher wages and whether it plans to introduce more breakfast items as all-day breakfast menus. Chipotle Mexican Grill Inc, the fast-growing burrito chain, will be reporting its third-quarter results on Tuesday. Sports apparel and accessories maker Under Armour Inc is expected to report third-quarter profit and sales in line with analysts' expectations on Thursday. Investors will be looking out for any changes to the company's full-year forecast and any updates on getting a new chief financial officer after Brad Dickerson left to join delivery service Blue Apron this month. On Wednesday, Kimberly Clark Corp is expected to report third-quarter revenue below estimates. Analysts expect the quarter to be the worst hit from the strong dollar this year for the personal care products company. Data storage products maker SanDisk Corp had forecast third-quarter revenue largely below analysts' average estimate as it grapples with falling sales of solid-state drives (SSDs). The company, around which takeover talks have been swirling recently, has been grappling with a delay in sales of certain embedded parts used in SSDs. Lower pricing and lean inventory levels have also weighed on results. In October Bloomberg reported that chipmaker Micron Technology Inc and hard disk drive maker Western Digital Corp are in talks with the company about a possible acquisition. When SanDisk releases its third-quarter results on Wednesday, investors will look for any deal-related details. Network gear maker Juniper Networks Inc is expected to report third-quarter revenue above analysts average estimate on Thursday. The company, which gets about two-thirds of its revenue from telecom companies, has benefited from growth in its ethernet and services business. The company has reportedly hired a bank to assist it in handling go-private offers and investors will be looking for some commentary on a potential deal. United Continental Holdings Inc, the second largest U.S. airline, reports third-quarter earnings on Thursday about a month after its chief executive resigned because of internal and federal probes into the carrier's relationship with the Port Authority of New York and New Jersey. Investors will listen carefully for the plans and vision laid out by United's new CEO, Oscar Munoz. They also are looking for detail on United's capacity plans for the rest of 2015 and for 2016. On the same day, Southwest Airlines Co reports third-quarter results. The budget airline is nearing the end of its rapid expansion that has seen flight additions from Dallas Love Field Airport and new international service from Houston Hobby. Investors will look for detail on Southwest's capacity plans for 2016, wary of more growth outpacing travel demand. Separately, American Airlines Group Inc reports third-quarter earnings on Friday amid a steep decline in unit revenue. Wall Street analysts have pushed U.S. airlines to slow down their expansion of flight service so fewer discount fares are necessary to fill up planes. Raytheon, maker of the Patriot missile system, reports third-quarter results on Thursday. Separately, Lockheed Martin Corp, the Pentagon's largest arms supplier, also reports its earnings for the third quarter on Tuesday. Federal Reserve Chair Janet Yellen will be giving welcome remarks at a Labor Hall of Honor induction ceremony on Tuesday. On Wednesday, Fed Board Governor Jerome Powell moderates "Repo Markets, Liquidity, and the U.S. Treasury Market" panel before a conference on "The Evolving Structure of the U.S. Treasury Market" hosted by the New York Fed. On Friday, San Francisco Fed President John Williams will participate in a discussion on "Where Interest Rates Will Be When the Economy is (Finally) Healthy and Why It Matters" at an event hosted by the Brookings Institution. On Wednesday, the Bank of Canada is expected to keep its key interest rate at 0.5 percent. The bank had cut rates in January and July because of the sharp drop in oil prices, which was causing serious reductions in business investment, especially in the oil patch. On Friday, data is expected to show Canada's annual inflation rate dropped to 1.1 percent in September. Separately, wholesale trade data is scheduled for release on Tuesday and retail sales numbers are due on Thursday. Data from Mexico's statistics institute on Wednesday will show if retail sales rose for a fourth month in a row in August. On Thursday, Mexico's inflation data for the first half of October will be released, after consumer prices hit a fresh record low in September. On Friday, September's jobless rate will be published after it held steady at 4.3 percent in August. ON MONDAY, OCTOBER 19 IBM Corp, which is in deep transition, is expected to report third-quarter results marginally below analysts' average estimate, hurt by a strong dollar and ongoing business transition. This could force the company to report a fall in revenue for the 14th consecutive quarter. IBM, which gets more than half its revenue from overseas, has been selling businesses such as low-end servers, cash registers, and semiconductors to focus on high-growth areas like security software, cloud services and data analytics. Investors will look at revenue from high-growth areas such as cloud and mobile computing, data analytics, social and security software. The growth in these areas has so far failed to make up for revenue lost to divestitures. Morgan Stanley, the last of the big U.S. banks to release earnings, is expected to report a sharp decline in third-quarter profit as stormy markets and uncertainty around a U.S. interest rate hike battered trading revenue. So far, Citigroup, Bank of America JPMorgan and arch rival Goldman Sachs have all reported lower revenue from bond trading. Morgan Stanley, the second largest U.S. standalone bank will have benefited from a surge in M&A activity, however. The bank, which is shifting its focus towards more stable businesses with less regulatory scrutiny like wealth management and away from more volatile areas like bond trading, is also expected to report a rise in client activity at its wealth business. Halliburton Co is expected to report a fall in third-quarter profit due to weak drilling activity, as oil producers scale back on spending. The company's North American business is expected to be the weak spot. The world's No.2 oilfield services provider is looking to complete its $35 billion-acquisition of smaller rival Baker Hughes. Both the companies are now planning to divest more assets to overcome regulatory hurdles, in addition to the three drilling businesses Halliburton initially planned to sell. Investors will be keen on any commentary on when to expect a rebound in drilling activity and updates on the proposed asset sales and the pending merger. Toymaker Hasbro Inc is expected to report third-quarter profit and sales below analysts' average estimates. Sales are likely to be hurt by a strong dollar and a fall in demand in its girls toys category, which has declined for three straight quarters. Investors will be looking to see if the company has signed any new licenses with movie franchises. Hasbro will from January start selling toys under its contract for Disney Princess toys, which larger rival Mattel is losing. The Federal Reserve Bank of Chicago President Charles Evans will give welcome remarks and then the Fed Board Governor Lael Brainard will be speaking on "Removing Unnecessary Regulatory Burden" before Board of the Governors of the Federal Reserve System/Office of the Comptroller of the Currency/Federal Deposit Insurance Corporation joint meeting on the Economic Growth and Paperwork Reduction Act of 1996 regulations, in Chicago. (1000/1400) Later, Federal Reserve Bank of Richmond President Jeffrey Lacker speaks on "Early Childhood Education in the Context of Lifetime Human Capital Investment" before an event hosted by the Virginia Chamber of Commerce and the Virginia Early Childhood Foundation, in Richmond, Virginia. (1200/1600) Valeant Pharmaceuticals Inc is expected to report third-quarter profit below analysts' average estimate. Investors will be focused, however, on Valeant's comments about a steep selloff in its stock amid concerns about the company hiking certain drug prices dramatically. The Canadian drugmaker has been subpoenaed by U.S. prosecutors on its pricing, drug distribution and patient assistance programs. U.S. homebuilder sentiment is expected to remain steady in October. The NAHB/Wells Fargo Housing Market index is expected to come in at 62, similar to the previous month's reading, which was the highest reading since October 2005. (1000/1400) LIVECHAT - FX WEEK AHEAD with Reuters FX analyst Jeremy Boulton Join Reuters FX analyst Jeremy Boulton at 0600 ET/1000 GMT for a look at the week's top topics and its implications for the forex market. To join the Global Markets Forum, click here bit.ly/1kTxdKD (Compiled by Nayyar Rasheed in Bengaluru; Editing by Kirti Pandey and Savio D'Souza)
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