What to Watch in the Week Ahead and on Tuesday, Jan 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 Markets are going to look to get back on their feet next week, but investors are coming around to the notion that we've entered a bear market, and with that comes ongoing selling pressure and re-evaluation of where stocks should be trading, based on the ongoing fears around China and other weak markets around the world. Investors continue to wait for a notable blow-off selling event that would cause many people who are trying to hold onto long positions into selling outright, dropping markets another 5 to 15 percent before the selling mostly ends. U.S. consumer prices were likely unchanged in December while core Consumer Price Index, which excludes food and energy, probably gained 0.2 percent in December. Also on Wednesday, Commerce Department will release housing starts and building permits numbers for December. Groundbreaking is expected to have increased to a seasonally adjusted annual pace of 1.20 million-units, while permits are likely to fall to a 1.20 million-unit pace from 1.282 million-unit pace in the prior month. The National Association of Realtors is estimated to report on Friday that existing home sales rose 8.5 percent in December, compared with a sharp drop of 10.5 percent in November. Also on Friday, the Conference Board will release its Leading Economic Index, which likely dipped 0.1 percent last month, compared with the 0.4 percent rise in November. Goldman Sachs is expected to report a decline in fourth-quarter profit on Wednesday, as weak debt underwriting and trading revenue fail to make up for stellar M&A activity. Goldman Sachs said on Thursday it would pay over $5 billion to settle claims it misled mortgage bond investors during the financial crisis, a move that will cut the firm's fourth-quarter earnings by about $1.5 billion. The hit to earnings comes after the bank took a $1.45 billion provision in the second quarter in anticipation of a deal. Apart from that, fixed income, currency and commodities trading are expected to take a hit as investors were on the edge during the quarter over worries about China's growth, plunging oil prices and when the U.S. Fed would raise interest rates. On Thursday, wireless company Verizon Communications is expected to report fourth-quarter revenue above Wall Street consensus. The company is likely to add more subscribers as it invests heavily in promotions. Verizon, which bought AOL in June, might also be scouting for more acquisitions after CFO Francis Shammo said in December the company could look to buy Yahoo. Investors will also be looking for any information on Verizon's capex plans for 2016. The world's biggest coffee chain operator, Starbucks Corp, is likely to report first-quarter sales slightly above analysts' average estimate when its reports earnings on Thursday. The company, which had a couple of robust quarters last year, delivered a disappointing profit forecast for the holiday quarter, citing a strong dollar. Known for starting its fiscal years with conservative estimates, the company has also locked in prices on more than 90 percent of its coffee needs for 2016. Investors would be watching out for commentary on sales forecast for the second quarter and for same-store sales growth in China. Schlumberger Ltd, the world's No.1 oilfield services provider, is expected to report on Thursday a steep fall in fourth-quarter profit as lower oil prices weigh on global drilling activity. The company had warned in October that it would incur a restructuring charge in the quarter due to additional job cuts. Schlumberger, whose comments are closely followed for a glimpse into industry trends, is expected to reiterate a sluggish forecast for North America. Higher costs and a strong dollar may push American Express to report a decline in profit for the third quarter in a row on Thursday. Markets outside the United States account for about a sixth of the company's revenue. Investors will seek updates from the world's largest credit card issuer on new co-branded deals after the termination of several co-branded relationships hurt revenue last year. Fidelity Investments became the latest to drop its agreement with the Amex. Property and casualty insurer Travelers Cos Inc is expected to report a flat fourth-quarter profit, hurt by insurance pricing, which was affected most severely in the quarter. However, lower catastrophe losses and stable underwriting income are expected to have helped when the company reports earnings on Thursday. United Continental Holdings Inc, the second-largest U.S. airline by capacity, reports its fourth-quarter results and guidance for early 2016 on Thursday. Southwest Airlines Co also reports Q4 earnings the same day. Investors will seek clarity on Southwest's plans to grow internationally and in Dallas, where a judge recently ordered that the low-cost airline must share its gates with bigger rival Delta. The airline is also expected to provide an update on its fuel hedging, which cost it hundreds of millions of dollars last year. Canada's second-largest railroad, Canadian Pacific Railway Ltd, announces last quarter results for 2015 on Thursday, as it presses ahead with plans for a hostile takeover of Norfolk Southern in the United States. Last month, Norfolk rejected Canadian Pacific's revised bid, reiterating that it was grossly inadequate and created substantial regulatory risks and uncertainties. Potash Corp Chief Executive Jochen Tilk and Agrium CFO Steve Douglas will make presentations at the CIBC conference in Whistler British Columbia on Thursday. Among other things, investors will be looking at any commentary on acquisitions by the fertilizer makers. Potash was rebuffed by Germany's K+S last year. Xilinx Inc is expected to report third-quarter revenue slightly above analysts' average estimate on Wednesday. Xilinx is now one of the few programmable chipmakers left following Intel's acquisition of Altera. Investors will look for updates on sales to the high-growth automotive markets and to data center customers. The Bank of Canada will make its eagerly anticipated decision on Wednesday on whether to cut interest rates to confront the continued slide in the price of oil and the rippling economic effect this has had beyond the resource sector. It is in a similar position to last January, when it surprised markets by cutting rates for the same reasons, but this time the markets are much more prepared for the possibility, with an increasing consensus that the central bank will or should make a cut. Accompanying the decision will be the quarterly Monetary Policy Report, giving the bank's considered view of the economic outlook. Following the release, Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins will hold a news conference. World Economic Forum 2016 Annual Meeting begins in Davos on Wednesday. Migrant crisis, economic fears, particularly for Chinese growth, and increasingly frequent extreme weather events are among key concerns to dominate the event. The summit will bring together players from geopolitical hot spots such as the foreign ministers of arch-rivals Iran and Saudi Arabia, as well as the biggest ever U.S. delegation, including Vice President Joe Biden. On Friday, the National Statistics Institute of Mexico will release inflation for the first half month of January after it hit a fresh record low of 2 percent in December. ON TUESDAY Morgan Stanley is expected to report a decline in fourth-quarter profit amid weak trading revenue and a drop in the Wall Street bank's typically stable wealth management business. Despite a record year for deal-making, revenue from investment banking is also expected to fall due to lower debt underwriting and choppy capital markets. Morgan Stanley, which is in the midst of shrinking its fixed-income business and reshuffling its management team, may disclose a compensation charge from letting go of a quarter of its bond traders, about 1,200 people. UnitedHealth, the largest U.S. health insurer, reports fourth-quarter earnings that are expected to rise a bit from last year. The company, which sells employer-based insurance as well as Medicare, Medicaid and Obamacare health plans, is the only large insurer not involved in any one of the major consolidation deals under review by antitrust regulators. Investors will look out for commentary on the company's possible exit from Obamacare health insurance exchanges after it said in December that its losses on the exchanges were unsustainable. The world's largest technology services company, IBM Corp, is expected to report fourth-quarter revenue slightly below analysts' average estimate. IBM has been hit by a strong U.S. dollar and weakness in demand from China and emerging markets. The company has been getting rid of low-margin businesses, but that has so far failed to make up the shortfall with newer initiatives in the more lucrative area of cloud computing. Bank of America is expected to report a rise in fourth-quarter profit as lower expenses are expected to mitigate sluggish revenue growth. Like all other banks, BofA is also being pressured by near-zero interest rates, a slump in oil prices and investor cautiousness due to worries about slowing growth in China. Investors will be interested in knowing what the bank has to say about its energy loan portfolio and further Fed rate hikes. Video-streaming company Netflix is expected to report fourth-quarter profit below consensus, according to Thomson Reuters StarMine data. Earlier this month, Netflix flipped the switch on its global expansion plan, going live in more than 130 countries. The company has been spending on its international expansion, which has so far hurt profits. Investors will be closely tracking commentary on the company's plans for the recently entered markets. Delta Air Lines Inc, the third-largest U.S. airline by capacity, reports fourth-quarter results and guidance for early 2016. The top U.S. airlines kicked off the year with a $6 fare hike on domestic round-trips to help claw back extra dollars after a year of less revenue per seat-mile, or flight capacity. Investors will seek clarity on Delta's capacity plans and whether it sees additional turbulence in 2016 from low-cost rivals, the strong dollar and traveler jitters since the November Paris attacks. The airline's CEO may also bring into focus what he says is a bubble in the market for used jetliners, similar to his past comments that pushed down Boeing's shares. Advanced Micro Devices Inc's fourth-quarter profit is expected to miss analysts' average expectations. The chipmaker is in the process of selling its assembly and testing operations in two Asian cities, as it looks to cut spending amid weak demand for its processors for personal computer. Global personal computer shipments fell 10.6 percent in the quarter ended in December compared to a year earlier, according to research firm IDC. The International Monetary Fund issues its semi-annual World Economic Outlook. The outlook comes at a risky time for the global economy, with China's growth outlook and policies under close scrutiny and many developing economies budgets being holed by weak oil and commodity prices. (0500/1000) LIVECHAT-DAVOS PREVIEW with Nicholas Davis, Head of Society and Innovation, Executive Committee Member, World Economic Forum Join us live from the World Economic Forum in Davos for a preview of the week's events and a look at the main themes dominating this year's meeting, including a look at the "Fourth Industrial Revolution" with Nicholas Davis, Head of Society and Innovation and an Executive Committee Member at the WEF (0830/1330). To join the Global Markets Forum, click here bit.ly/1kTxdKD (U.S. markets are closed on Monday, Jan. 18, for Martin Luther King, Jr. Day) (Compiled by Astha Rawat in Bengaluru; Editing by Sriraj Kalluvila)
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