Economic Indicators: Earnings at the Forefront

The full announcement schedule for the week of October 10th   is as follows:

  • Monday:  None, Markets Open, Banks Closed
  • Tuesday:  NFIB Small Business Optimism Index
  • Wednesday:  FOMC Minutes  
  • Thursday:  Initial Jobless Claims, International Trade, and Treasury Budget
  • Friday:  Retail Sales, Import and Export Prices, Michigan Consumer Sentiment, and Business Inventories

Though the economic calendar is light this week, says Steve Grasso, Director of Institutional Sales at Stuart Frankel & Co. and frequent commentator on CNBC, the 3Q earnings season kicks off on Tuesday, Oct. 11th with Alcoa announcing their 3Q results after the close.

Grasso expects that margins for commodity and input prices, which had been going up, have now leveled off.  Accordingly, he is expecting this to impact companies’ bottom line in a positive way. Troubles in Europe, the uncertainty of a US recession, taxes, and the political environment in America are all top of investors' minds. Grasso believes, since the financial crisis of 2008, analysts have been lowering their estimates or “sand bagging” corporate earnings. Companies have continued their focus on expense management, operating with minimum staff and no expenditures in research and development or investments, in order to help their financial results.

Other events to watch this week:

1) FOMC Minutes - On Wednesday, Oct. 12th, the FOMC will release the minutes from its last meeting on Sept. 27th & 28th.  Grasso will be watching to see what the Federal Reserve Bank’s (‘Fed’) position is since Chairman Ben Bernanke announced before Congress that the Fed stands ready to provide liquidity to the global system, if needed (this is post “Operation Twist” or exchanging $400 billion in short-term bonds for longer term securities). Several Fed officials will be speaking at various events next week, including Charles Plosser, Sandra Pianalto, and Narayana Kocherlakota.

2) NFIB Small Business Optimism Index

On Tuesday, Oct. 11th, before the market opens, the National Federation of Independent Businesses (“NFIB”) will announce its small business optimism index. According to Grasso, 70% of jobs come from members of the NFIB, as they are the job creators in America. They have the best pulse on the jobs market and what employers are thinking, what part of the country and what sectors are improving or declining. While corporate America continues to worry about the uncertainty in Washington with new regulation and taxes, small business typically have unbiased view of the economy regardless of the political situation.

3) Retail Sales

Before the open on Friday, Oct. 14th, Grasso will be watching the retail sales figures, as domestic retailers give a peek into the health of the economy - what people are buying and how well consumers are doing. Grasso notes many large investors and corporate America are sitting on the sidelines with an enormous amount of cash on hand. He expects top and lower tier retailers to do well, while the middle tier retailers, like Wal Mart and Kohl’s, to stay flat.

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