What To Watch This Week

Last week, between major earnings, the Fed meeting, and macroeconomic data,markets were inundated with large potentially market moving events. Despite this flood of significant events and information, by and large, the markets digested it well. This resulted in each of the three major indices wrapping up the trading week by making new 52-Week Highs.

This week, there are not as many high stakes market events expected, however, it would be tough to follow up and out do last week. This week there are still indeed some significant events that investors will be keeping an eye on. This week’s key events include new macroeconomic data such as the latest Initial Jobless Claims number and the updated U.S. Consumer Credit report. There are numerous speaking engagements planned for a variety of Federal Reserve members. After last week’s meeting, the markets will be tuned in to see if any further details might be provided to clarify the FOMC’s position moving forward. Additionally, there are a handful of notable companies expected to report their fourth quarter earnings including Eli Lilly & Co., Uber Technologies, Inc., & PepsiCo, Inc.

  • Initial Jobless Claims – The Department of Labor provides a weekly report that records new Initial Jobless Claims in the U.S. Over the past month, Initial Jobless Claims have started to trend back upward as last week’s number came in a bit higher than expected. However, despite last week’s higher number, the overall long-term trend is still down, and last week’s number is well below the recent high from last November.
    • Thursday’s report is expected to show 220K new initial claims, which is slightly lower than last week’s number.  
  • U.S. Consumer Credit – Each month the Federal Reserve releases a report that tracks the total amount of credit that is extended to U.S. consumers. This report tracks both revolving and non-revolving credit being used. This report is closely watched to decipher the level at which the consumer is relying on credit in order to keep spending.
    • The expectation is that total U.S. consumer credit will have increased by $15 billion in December. This would follow November’s increase of $23.7 billion which blew through the expectation of $9 billion.

Federal Reserve Watch

Last week the Federal Reserve provided the markets clarity about where they stand when it comes to their plans for monetary policy changes this year. Once the FOMC concluded its meeting and Fed Chair Powell spoke, he delivered a message that the committee feels that it is finished with rate hikes and the current hiking cycle is completed. Additionally, Powell stated that the committee is not yet comfortable with adjusting the Fed Funds rate lower until they see more data that convinces them that inflation is surely going to continue trending lower, toward their 2% target. Powell also added that the committee’s base case is that they do not plan to cut rates at the upcoming March meeting. However, the committee does forecast lowering policy rates later in the year.

This week there are a number of Fed members expected to speak at various engagements. Expect the Fed speak to continue to re-affirm Powell’s message from this past week.

  • After Fed Chair Powell’s comments last week, this update significantly shifted Fed Funds futures and the market’s expectations about when the first rate cut will occur. The CME Group’s FedWatch Tool now projects a 79.5% probability that the Fed will maintain current policy rates at the upcoming March meeting. This is a notable change compared to last week when the probability stood at only 51.6%. Looking ahead to the next meeting that will occur in May, the CME FedWatch Tool suggests a 73.3% probability that the committee will opt to lower policy rates.

All About the Earnings

This upcoming week’s docket of earnings reports is more tame compared to the past week. However, there are still a good number of consequential reports expected this week. This week we will hear from a group of major pharmaceutical makers including Eli Lilly & Co., Amgen, Inc., Vertex Pharmaceuticals Inc., & McKesson Corp. One report that investors will surely be watching is growth stock, Uber Technologies, Inc. Additionally, investors will get the latest quarterly earnings from a few beaten down blue-chip stocks, PepsiCo, Inc. & Walt Disney Co.

  • The basket of major pharmaceutical maker reports that we are expected to get this week will kick off with Vertex Pharmaceuticals Inc. as they will post their Q4 results after the close on Monday. Following this, on Tuesday, we will hear from the two largest pharma companies expected to report this week when Eli Lilly & Co. reports prior to the market open and when Amgen Inc. posts their quarterly results after the bell. Finally, on Wednesday, once the market closes, McKesson Corp. will report their fourth quarter earnings.
    • LLY earnings are expected to come in at $2.46 EPS.
    • AMGN earnings are expected to come in at $4.65 EPS.
    • VRTX earnings are expected to come in at $3.85 EPS.
    • MCK earnings are expected to come in at $7.05 EPS.
  • On Wednesday, during the pre-market hours, relative newcomer to the S&P 500 index, Uber Technologies, Inc. will reveal their Q4 results. This report is sure to garner a good deal of attention as expectations are that this will mark UBER’s third consecutive quarter of profitability as a public company. A bar that they have yet to cross. Should UBER deliver a strong report, expect this stock’s bullish trend to extend.
    • UBER earnings are expected to come in at $0.15 EPS.
  • Wrapping up this week’s most notable earnings reports are two long-time blue chips companies that were beaten down over the last year. Up first is Walt Disney Company, who is expected to report their Q4 numbers on Wednesday after the market close. Then on Friday, before the opening bell, PepsiCo, Inc. will post their latest results. If either company can post strong results and provide inspiring guidance, this could potentially get the stocks out of their respective ruts.
    • DIS earnings are expected to come in at $1.00 EPS.
    • PEP earnings are expected to come in at $1.72 EPS.

Thank you for reading this week’s edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week’s important market events.


Blane Markham

Author, Weekly Market Periscope

Hughes Optioneering Team