The Week Ahead In The Stock Market
– Beginning 1st June, 2015 -
Some Thoughts, Possibilities and Probabilities!

by Ian Harvey

May 31, 2015

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Introduction

The week ahead in the stock market faces a barrage of potential catalysts as the month of June begins. This should provide for a wild ride considering that the stock market is still near record highs, and is trying to consolidate its gains.

There will be a slew of data, as well as a deadline for Greece to pay its creditors at the end of the week along with a scheduled OPEC meeting.

Reports on manufacturing sentiment, car sales and job growth dominate the calendar for the stock market in the week ahead. If the data presented in the week ahead is similar to recent housing numbers, then it will support the idea that the Fed may change rates in September. If Greece fails to work out an agreement or fails to pay, some activity in the dollar and the bond market should be expected.

Stocks in the past week were lower, with the DOW declining 1.21 percent for the week, to 18,010. The S&P 500 was off 0.88 percent at 2,107.39, while the Nasdaq outperformed the rest, finishing slightly lower at 5,070, off 0.38 percent.

Economic Drivers for the Week Ahead in the Stock Market

There a great deal of important economic data for the week ahead in the stock market, and this will be the main focus now that the Q1 earnings season is effectively over. The reports include ISM manufacturing Monday and auto sales Tuesday, which in addition to Friday's May jobs report, could help clarify the strength of the economy and change market perceptions about when the Fed might start to raise interest rates.

Another area of focus will be the oversea direction -- China PMI data is released Sunday, European inflation data are released Tuesday and the European Central Bank rates meeting will be followed by a presser Wednesday with ECB President Mario Draghi.

In the oil market, traders will be watching the OPEC meeting Friday. The Organization of the Petroleum Exporting Countries is not expected to take any action to alter output, or change its recent policy of letting the market determine prices.

Factory Orders Data

On Tuesday, the Commerce Department will release factory orders data for April. Analysts expect the orders to have remained unchanged, after rising 2.1 percent in March.

Trade Deficit Data

Also, the Commerce Department will release trade deficit data for April on Wednesday. Economists expect the trade deficit to have reduced to $44.0 billion from $ 51.4 billion in March.

ADP National Employment Report

U.S. private employers are expected to have added 200,000 jobs in May, compared with 169,000 jobs in April, according to the ADP National Employment Report, to be issued on Wednesday. On Thursday, the Labor Department issues weekly data for jobless claims.

Revised Labor Costs

On Thursday, the Labor Department is scheduled to issue data for revised labor costs for the first quarter, expected to have risen to 5.9 percent from 5.0 percent in the previous quarter.

Non-farm Payrolls

On Friday, the Labor Department issues jobs data for May. Non-farm payrolls are expected to have risen 225,000 from the 223,000 reported in April.

Monthly vehicle sales

May sales data is expected to come in near record levels. Meeting those forecasts could be enough to lift the sector - among the cheapest in the market – which should tamper the effects of the string of product recalls and tepid recent growth.

Estimated sales of 1.6 million new cars and trucks in May would make for a seasonally-adjusted annual rate of 17.4 million vehicles, according to Edmunds.com, a car buying platform.

Weak auto results contributed to flat overall retail sales in April, but May is expected to represent a rebound. Lower gas prices could boost demand for sports utility vehicles and trucks, which have higher price tags and better margins.

There is also pent-up demand for new vehicles as consumers have been holding on to their cars for longer since the financial crisis.

Fed Speakers and Fed Hike

New York Fed President William Dudley speaks on Friday, several hours after the employment report is released. Dudley is viewed as being close to Yellen, and his words will be important in determining some input about the expected rate hike.

Also, Federal Reserve Bank of Chicago President Charles Evans speaks before the Chicago Banking Symposium, in Chicago on Wednesday.

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Earnings for the Week Ahead in the Stock Market

On the earnings front, we will get a trickle of releases this week, with a total 49 companies coming out with first quarter reports, including 6 S&P 500 members.

The Retail Sector

As of Friday May 29th, there have been Q1 results from 39 retailers in the S&P 500 index, out of the 41 total in the index. Total earnings for these 39 retails are up +4.6% from the same period last year, on +5.3% higher revenues, with 74.4% beating EPS estimates and 51.3% coming ahead of top-line expectations.

Finance Sector

Total earnings for the Finance sector are up +16.5% on +2.0% higher revenues, with 63.9% beating EPS estimates and 50.6% coming ahead of top-line expectations. This is better growth performance than previously from this group of Finance sector companies in other recent quarters and plays a material role in holding up the aggregate growth picture for the S&P 500. Excluding the Finance sector, total earnings for the remaining index members would be down -1.2%.

Energy Sector

The Energy sector results have come in better than expected – the growth rates are all negative, but they aren’t as bad as initially feared, even though total earnings for the sector are down -54.2% on -34.7% lower revenues, with 70.7% beating EPS estimates and 46.3% coming ahead of top-line estimates.

Now that Q1 earnings season is effectively completed, attention is shifting to the current period, and especially to trends in Q2 earnings estimates.

Companies Reporting in the Week Ahead in the Stock Market

Monday: NGL Partners, PVH, Humana

Tuesday: Medtronic, Dollar General, Cracker Barrel

Wednesday: Vera Bradley, Five Below, Brown Forman

Thursday: JM Smuckers, Lands End, Joy Global, Ciena, Diamond Foods, Cooper Cos, Verifone

Friday: N/A

For the Q1, results from 492 S&P 500 members when combined account for 98.9% of the index’s total market capitalization. Total earnings for these companies are up +2.2% on -3.4% lower revenues, with 65.4% beating EPS estimates and 44.5% coming ahead of revenue expectations. With only 6 index members to report results during the week ahead in the stock market, this will mean a total result from 498 S&P 500 members will be completed.

For a full list of companies reporting in the week ahead for the stock market …..CLICK HERE…..

Stocks to Consider for the Week Ahead in the Stock Market

Companies to consider for Trading for the week ahead in the stock market, such as “Options Trades” – calls or puts -- this week are:-

Raytheon, a missile defense system -- only trades at 14.5 times next year's earnings with a solid yield -- makes the company attractive for a buy.

Lockheed Martin at current levels is also inexpensive and the stock could get a boost when the F-35 Joint Strike Fighter is likely to be declared ready for combat by the Marines this summer, and the Air Force is expected to follow up next year.

Medical device maker Medtronic Plc is likely to beat Wall Street expectations. When the company reports fourth-quarter results on Tuesday, it is expected to have performed strongly in various segments including the surgical solutions business from its recent acquisition - Covidien.

JM Smucker Co, the maker of Folgers coffee and Jif peanut butter, is likely to report fourth-quarter sales on Thursday, above analysts' average estimate. The company said in February it expects a modest decrease in net sales in the fourth quarter as demand for its coffee products is likely to stay low due to price increases in the United States. But the coffee business is likely to get back on track later this year as bean prices stabilize and the company introduces smaller Folgers coffee cans to win back customers it lost after raising prices.

Verifone Systems Inc is expected to report second-quarter profit and revenue above the average analyst estimate on Thursday. Verifone expects its European business to get more clients as the industry continues to upgrade to near field communication technology.

Chinese company Yingli Green Energy Holding Co Ltd reports first-quarter results on Friday. It is expected to report a smaller loss for the eighth straight quarter, helped by strong global demand for solar panels. Yingli, which flagged this month its inability to continue as a "going concern" due to substantial indebtedness, has been hurt by rising expenses as it moved manufacturing globally to bypass trade tariffs.

Conclusion for the Week Ahead in the Stock Market

Many traders expect the negative mood that was set last Friday to continue on Monday. However, for the past six months, the market has closed out the final trading day of the month with a loss, but the S&P 500 on the first day of the following month was higher three out of six times.

The major indexes ended May with gains in defiance of the old stock market adage—to sell in May and go away -- with the S&P 500 up slightly more than 1 percent.

Historically, according to market data and analysis firm Kensho, all three indexes have turned in negative performances on average for the month of June – with the DOW, for instance, being down eight of the last 10 Junes and it has averaged a 1.6 percent decline. According to Bespoke, the month of June is the second-worst performer for the Dow over the past 20 years. The trend set in May might offset this downside.

The roller-coaster ride is expected to continue during the week ahead in the stock market, and probably for the next couple of weeks until the next earnings season gets closer.

Keywords: The Week Ahead In The Stock Market, List of Companies Reporting Earnings for the Week Beginning 1st June, 2015


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