May 22, 2015 / 7:24 PM / 3 years ago

What to Watch in the Week Ahead and on Tuesday, May 26

(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

The markets weren’t really rocked by Janet Yellen’s latest speech, but her words made it clear that the Fed still has designs on raising rates this year, but in a slow fashion, which should keep the pressure on the belly of the curve and boost, however modestly, the longer-dated Treasuries. The dollar should continue to gather a bit of steam, though the market isn’t going to push the greenback to parity as quickly as it was expected a couple of months ago. Stocks? They just keep rolling along, regardless of valuations or any effort by strategists to suggest they shouldn’t be doing what they’re doing, or various scare tactics by yelling about bubbles.

The U.S. Commerce Department releases revised building permits data for April on Wednesday. On Thursday, the National Association of Realtors releases its monthly index of pending sales of existing U.S. homes which is expected to have risen 1 percent in April after gaining 1.1 percent in March. The Commerce Department on Friday releases its preliminary gross domestic product figures for the first quarter. Analysts expect the data to show the economy eased 0.7 percent in the quarter.

On Wednesday, Toll Brothers Inc, the largest U.S. luxury homebuilder, is expected to report higher revenue for the second quarter, helped by strengthening housing demand. Investors will look for an update on the company’s full-year forecast and comments on demand trends in the ongoing spring selling season. The season is to homebuilders what the holiday shopping season is to retailers.

Warehouse club operator Costco Wholesale Corp is likely to report third-quarter sales below analysts’ average estimate on Wednesday, according to Thomson Reuters StarMine. Retailers have reported mixed results for the quarter ending late April/early May, with Macy’s and Kohl’s blaming colder-than-usual February and the West Coast port disruptions for slow sales. Others, including Costco’s smaller rival Target, reported strong sales with robust online sales and strong demand for apparel, items for children, and health and wellness category.

On Wednesday, the Bank of Montreal reports second-quarter results. On Thursday, Royal Bank of Canada, Toronto Dominion Bank and Canadian Imperial Bank of Commerce, three of Canada’s five biggest lenders, will report second-quarter results. Investors look to see if there is any slowdown in profit growth amid concerns about weakness in the energy industry and a sluggish economy. Bank of Nova Scotia, Canada’s third biggest lender, reports second-quarter results on Friday.

On Wednesday, Federal Reserve Bank of Richmond President Jeffrey Lacker speaks on “From Country Banks to SIFIs: The 100-year Quest for Financial Stability” before an event hosted by the Louisiana State University Graduate School of Banking, in Baton Rouge, Louisiana. On the same day, Jacob J. Lew, U.S. Secretary of the Treasury, will participate in a moderated conversation at the London School of Economics and Political Science. The discussion will focus on the state of the global economy ahead of the Secretary’s travel to a meeting of G-7 Finance Ministers in Dresden, Germany. On Thursday, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota speaks on monetary policy before a Community Leader Lunch hosted by the Helena Branch of the Federal Reserve Bank of Minneapolis in Montana. On the same day, Federal Reserve Bank of San Francisco President John Williams speaks before the Monetary Authority of Singapore Banking Supervision and Regulation joint conference.

Mike Corbat, CEO of Citigroup Inc, the third biggest U.S. bank by assets and one of the biggest players in fixed-income markets, could give an early reading on second-quarter trading revenue on Thursday when he speaks at a conference for institutional investors in New York.

Tiffany & Co, the no. 1 U.S. jeweler, is battling a dearth of tourists as a stronger dollar leads to lower spending on luxury items such as jewelery in the country. The company reported its first fall in quarterly sales after more than one year in March and a big chunk of the blame fell on lower tourist spending, especially at the company’s flagship Fifth Avenue store. However, a pull-forward in purchases in Japan before the country’s consumption tax increase maybe a bright spot for Tiffany, analysts say. Asia-Pacific still remains a headwind due to political turmoil and lower consumer spending. When the company releases first-quarter results on Wednesday, investors will look out for any updates on full-year forecast and means to mitigate fewer tourist visits in North America.

Fashion and accessories company Michael Kors Holdings Ltd is expected to report lower-than-expected fourth-quarter profit and sales on Wednesday, as initial frenzy over Kors handbags in North America dies down. Also, higher promotions at department stores are keeping away customers from Kors’ branded stores. As margins are expected to be affected by higher costs of maintenance at Kors’ European stores, analysts feel it would be difficult for the company to maintain its plan of double-digit EPS growth in 2016. Investors will look for a forecast for the next year and any new strategies to stave off brand fatigue.

Struggling teen apparel retailer Abercrombie & Fitch Co is expected to report a fall in revenue for the ninth straight quarter on Thursday. The company, which has been spurned by customers in favor of trendier and logo-free clothing sold by rival American Eagle Outfitters Inc and fast-fashion chains, is trying to affect a turnaround at its namesake and Hollister brands by cutting supply times and controlling inventory. However, more discounts, fashion missteps, and a stronger dollar have made it difficult for the company to return sales to growth. When the company reports first-quarter results, investors will look for updates to forecast, comments on the industry, and additional color on the search for a new CEO.

Sanderson Farms Inc reports second-quarter results on Thursday. Investors will be looking out for any comments from the third-largest U.S. poultry producer on a possible impact from the import ban on chicken imposed by several countries due to the avian flu outbreak.

Data analytics software maker Splunk Inc is expected to report first-quarter revenue marginally above estimates on Thursday, according to Thomson Reuters StarMine data. Splunk has been benefitting as businesses increasingly turn to data analytics to secure their networks from a surge in highly sophisticated cyber attacks.

GameStop Corp, the world’s largest retailer of video game products, on Thursday is expected to report first-quarter results below the analysts’ average estimate, according to Thomson Reuters StarMine data. GameStop has been hurt by lackluster demand for the new PlayStation 4 and Xbox One consoles, which have failed to make up for falling sales of earlier versions. Moreover, the company in March forecast full-year profit below Street expectations citing a strong dollar. GameStop is now betting on PS4 and Xbox One software and mobile sales to make up for weak demand for consoles. The company is looking to the Mortal Kombat game, released in April, and Batman games, slated for release in June, to drive growth.

On Wednesday, the Bank of Canada will issue its decision on interest rates and is widely expected to maintain rates at 0.75 percent. While the central bank is not due to update its economic forecasts, analysts will parse the statement for any mention of recent weak data out of the United States and how that might impact Canada’s growth prospects. Governor Stephen Poloz recently said the Canadian economy remains on track to see a partial rebound in the second quarter. The bank surprised nearly everyone with an interest rate cut in January but it has held rates steady since then.

Statistics Canada releases producer prices data for April on Thursday and gross domestic product data for the first quarter on Friday. Canada economic growth is expected to have slowed significantly in the quarter as the country absorbed the shock of the sharply lower price of oil, a major export. Economists expect the economy grew at an annualized 0.1 percent, down from the fourth-quarter’s 2.4 percent pace. That would be in line with the Bank of Canada’s forecast that there was no growth in the first quarter, though the central bank sees the economy regaining momentum as the oil impact dissiptes through the year.

On Thursday, unemployment data will be released for April, after the rate reached its lowest level in over two years in March in seasonally adjusted terms.


Mexico’s national statistics institute will release trade balance data for April, after March data showed factory exports rose and non-oil consumer imports fell. (0900/1300) Also, the central bank releases first-quarter balance of payments data, after fourth-quarter figures showed foreign investors purchased more Mexican peso debt while trimming their holdings of local stocks. (1000/1400)


The U.S. Commerce Department releases durable goods data for April which is expected to show business investment spending plans fell 0.2 percent in the month (0830/1230) and new home sales data, which is expected to show sales increased to an adjusted annual rate of 510,000 units in April from 481,000 units in March. (1000/1400) The Federal Housing Finance Agency releases its home price index for March. (0900/1300) The S&P/Case Shiller composite index of 20 metropolitan areas is expected to have gained 4.8 percent in March after it increased 5 percent in February on a year-over-year basis. (0900/1300) The Conference Board releases its index of consumer attitudes which is expected to show consumer spending fell slightly to 95.0 in May from 95.2 in April. (1000/1400)

Workday Inc, which makes software to manage employee performance, payroll and expense, is expected to report a wider-than-expected adjusted first-quarter loss per share, according to Thomson Reuters StarMine data. Analysts have said the company has been hurt by increasing competition from SAP SE and Oracle Corp. Workday is also expected to be hit by the strong dollar since it prices most of its international contracts in U.S. dollars.

Data from Mexico will show how retail sales fared in March after they rose for a second straight month in February. (0900/1300)

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(U.S. markets are closed on Monday, May 25, for Memorial Day)

Compiled by Ayesha Sruti Ahmed in Bengaluru; Edited by Don Sebastian

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