January 15, 2016 / 9:03 PM / 2 years ago

What to Watch in the Week Ahead and on Tuesday, Jan 19

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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. 

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.

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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