It should be an interesting week in the market. The ramifications from last week’s dismal monthly jobs report will impact the market and politics in the days ahead. We also start earnings season Monday. I believe earnings should be good overall, but the market will be listening more to guidance that companies give during their earnings calls. Here are the ten things I am focusing on for the week of 07/11.
1. Earnings seasons kicks off Monday with Alcoa (NYSE:AA). Both earnings and revenue growth should be impressive year over year. Given high energy costs and slowing worldwide economic growth, it will be interesting to see how conservative Alcoa’s management is on the conference call providing forward guidance. Other firms releasing earnings this week including Novellus (NASDAQ:NVLS), Infosys (NYSE:INFY), Google (NASDAQ:GOOG) and JP Morgan (NYSE:JPM).
2. The political impact from last week’s horrid jobs report will have ramifications that could affect the market. Already, the “Grand Bargain” to cut $4T from the deficit over the next decade seems to have been yanked off the table. It will be interesting to see if this quickens or delays agreement to raise the debt ceiling.
3. I will also be looking for any more data showing problems with Chinese economic growth which would have significant impacts on world markets. Chinese inflation hit a 3 year high last week and its trade growth also slowed substantially in June. China issues data on second-quarter GDP, and monthly data on PPI, retail sales and industrial production on Friday.
4. Any more clues on domestic inventory growth. Wholesale inventory rose 1.8% in May, the largest gain since October while sales declined for the only the second time in eleven months. If this continues, it could have negative impacts on GDP growth.
5. The trend in gas prices. After a temporary blip down after the announcement of the release of some strategic oil reserves, oil is back above its price before the announcement and gas prices are rising again. This will not be good for consumer spending and confidence if it continues.
6. Any more bad news from Europe. Last week Portugal was downgraded by Moody’s and credit default spreads hit record highs on Spanish and Italian debt. Europe is looking more and more like a disaster unfolding that the market is ignoring at its peril.
7. The impact from states starting their fiscal years on July 1st. Almost all states had to make deep cuts to balance their budget. This has resulted in significant job cuts and is one of the reasons the jobs number has been so punk over the past few months. It will be important to see if these new budgets accelerate state and local cuts or if they just continue at the same pace.
8. Fed Chairman Ben Bernanke delivers his semi-annual economic testimony to the House Financial Services panel on Wednesday. As usual, the market will be listening for any clues on the economy, the outlook for rates and any hints on new or modified Fed programs. Dallas Fed governor Fisher also gives an economic overview on Wednesday.
9. The CPI report comes out on Friday. The market will be looking to see if inflation is moderating in light of energy and commodity price declines over the time period measured.
10. Any confirmation or denial of the rumors Apple and China Mobile have agreed to partner to provide the iPhone to China Mobile’s hundreds of millions of customers. Apple is one of my largest holdings. Obviously, this would be a huge event for Apple’s continued sharp rise in revenues and earnings.