The economic calendar and earnings reports are going to make this week very interesting. On the economic calendar side, there are numerous important reports coming out, most are indicated to be lower than last month again. On the earnings report side, the earnings season kicks off this week, which means more potential disappointment. With a week full of bad news, will the market simply become numb, and not react much on each individual piece of bad news? Or will the momentum build with every missed earnings estimate or disappointing economic report? Time will tell, but don't expect much good news this week.
The December retail sales report comes out Wednesday, and based on some reports last week, this report will probably come in even lower than expected. When almighty WalMart reports a significant slowdown in sales, the entire industry must be getting clobbered. I would expect this report to show at least a two-percent decline, possibly doubling the estimate.
The PPI and Core PPI reports for December are announced on Thursday, and the trend over the last few months continues. The PPI figure will likely show a continued decline as energy and food prices continue to drop. The Core PPI report, which excludes these items, is expected to post a very slight increase.
This scenario holds true for the CPI and Core CPI figures for December that are released on Friday. Falling food and energy prices mean a decrease in CPI, but a slight increase in the Core CPI with those figures excluded.
The Philadelphia Fed report for January is announced on Thursday, and it looks like the manufacturing sector is taking another step back. After posting a nice gain in December, the index moved from -39.3 in November to -32.9 in December. The January reading is expected to be -35, meaning a slightly worse manufacturing outlook.
The final report of note this week is the Michigan Sentiment preliminary report for January. The reading is expected to be ever-so-slightly worse than last month, which surprises me quite honestly. I thought that with the changeover in the White House, and falling food and energy prices, the reading might improve. Don't be surprised if this report is better than expected.
Earnings:
Monday: AA
Tuesday: LLTC
Wednesday: XLNX
Thursday: DNA, INTC
Friday: JCI, PPG
