Earnings With a Splash of Central Bank Speakers

Investors will continue to watch earnings as roughly 1/3 of the S&P 500 is scheduled to release earnings. We also have Central Bankers making the rounds at special events. On the economic calendar, we have the Durable Orders, Consumer Confidence and Advance GDP.

Earnings: Earnings season revs into overdrive with 179 S&P 500 companies expected to report Q3 earnings. Traders can see individual stocks have huge price swings if a company’s earnings outpace or fall short of what the street expected. According to Thomson Reuters I/B/E/S, of the 116 S&P 500 companies that have so far reported, 65% reported revenue above expectations while 79% have reported earnings above expectations. With the earnings long term average being 64% and the past four quarters being 70%, analysts are looking very conservative regarding their estimates this quarter.

Fed Members Speak: This week, we continue to have multiple FOMC members give speeches across the country including James Bullard, Chris Dudley and Jerome Powell.  Investors will continue to listen to potential hints as to the timing of a potential interest rate hike. We will also listen to see if they have any plans to mimic what the Bank of Japan is doing in trying to get the yield higher for longer dated Treasuries. Expect to see Treasury prices fall if this happens.

Central Banks Speak Again: Similar to last week, multiple central banks will be making policy statements including the ECB, Bank of Canada, and this week the Bank of England. Last week, ECB President Mario Draghi disappointed markets by saying that QE wouldn’t last forever. The European markets thanked him for the statement by heading lower and sending the Euro lower. Traders will be listening to BOE Governor Jay Carney for any additional accommodative monetary policy announcements or what they plan to do while the negotiations for Brexit start.

China: In the last few weeks, China’s currency has been collapsing as the Yuan crumbled last Friday to a six year low. Chinese exports have also fallen sharply on concerns over demand. This week, sees limited Chinese data being released. However, investors will continue to monitor the Yuan as downward pressure on the currency also shows global markets slowing, lowering markets.

Manufacturing PMI: PMI readings from across the globe are due out this week. Traders will watch these readings as potential weak readings could cause central banks to take further steps to stimulate their respective nation’s economies.

Oil: Last week, the US oil rig count increased for the 17th straight week to 443. As the price of oil goes higher, US oil rigs will continue to go back online that had been idle for oil prices too low. However, if we see a significant amount of rigs go back online, we could see a drop from over supply. The tightening market also has had to deal with the Dollar rising since oil is priced in dollars and should have the reverse affect. That does not seem to be case of late and investors will continue to watch to see if that holds.  

US Dollar: The US Dollar is now at a seven month high against a basket of currencies. This will continue to hurt exporters bottom lines so investors will be monitoring the greenback’s climb. Statements by FOMC members will additionally be closely monitored to see if they are still mora than likely to raise interest rates later this year. However, if you are looking to book that holiday travel in December priced in Dollars, now is the time.

Natural Gas: With the unseasonable warmth in the US and high stockpile levels, Natgas was down 9% last week. Investors will be watching the weather forecast as warmer than normal temperatures are on the horizon and will watch to see how much further Natural gas could fall.