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WEEK AHEAD
Several weeks of tumult for markets have left investors shy of taking big positions, and next
week brings the close of earnings season with reports out of Wal-Mart, Nordstrom and other
retailers. Investors have been busy bidding up the yen and euro in an unwind of risky positions,
and so it will be key to see whether equity markets can sustain a bit of upward momentum or
sellers will materialize quickly.
Inflation data next week could help shape market expectations on whether the Federal Reserve
will raise rates at all this year. The inflation reports from the Labor Department will come on
the heels of data showing a further decline in consumers' inflation expectations in early
February. Reports on manufacturing and housing are also scheduled for release next week. The
Labor Department is expected to report on Wednesday that its producer price index fell 0.2
percent in January, reflecting lower oil prices and a strong dollar, after a similar drop in
December, according to a Reuters survey of economists. Also on Wednesday, the Commerce
Department will likely report that housing starts increased to a 1.18 million-unit rate in
January from 1.15 million units in December. A report from the Federal Reserve the same day is
expected to show industrial production increased 0.4 percent in January, the first increase in
four months, lifted by a rebound in manufacturing and utilities output. Industrial output fell
0.4 percent in December. On Thursday, the Philadelphia Federal Reserve is likely to report that
its business conditions index improved to a reading of -2.8 percent in February from -3.5
percent in January. Still, manufacturing in the mid-Atlantic regions continues to contract. Data
from the Labor Department on Friday will likely show the consumer price index slipped 0.1
percent in January after a similar dip in December. The so-called core CPI, which excludes the
volatile food and energy, is forecast rising 0.2 percent. Core CPI edged up 0.1 percent in
December.
Wal-Mart Stores Inc (N:WMT) is expected to report on Thursday fourth-quarter sales above analysts'
expectations, according to Thomson Reuters StarMine. The world's biggest retailer is cutting
costs and shutting its small format store chain Walmart Express in the United States in a bid to
shore up profits and boost sales which have been hit by intense competition from traditional
rivals and online player, Amazon (O:AMZN). Wal-Mart is also spending big on sprucing up its stores,
focusing more on grocery and food products and will hike pay for 1.2 million workers. The
company expects these moves to translate into better customer service and help lift sales.
Investors will be keen on any updates to the company's full-year forecast and other strategic
decisions.
On Wednesday, the Federal Open Market Committee will issue the minutes from its meeting of Jan.
26-27, 2016, where the U.S. Federal Reserve kept interest rates unchanged and said it was
"closely monitoring" global economic and financial developments. On the same day, Federal
Reserve Bank of St. Louis President James Bullard will give a presentation on the U.S. economy
and monetary policy before the Fed Forecast Dinner hosted by the CFA Society of St. Louis. On
Thursday, Federal Reserve Bank of San Francisco President John Williams will be speaking on the
economic outlook before a Town Hall Los Angeles event. Meanwhile on Friday, - Federal Reserve
Bank of Cleveland President Loretta Mester is scheduled to speak on the economic outlook before
the Global Interdependence Center Central Banking in Sarasota, Florida.
Oil and gas producer Noble Energy Inc (N:NBL) is expected to report on Wednesday a loss for the fourth
quarter, compared with a year-ago profit, hurt by a steep fall in crude oil prices. Investors
will be looking for the company's forecast for production and cash flows. Noble, considered one
of the most resilient U.S. shale producers, has slashed its quarterly dividend and 2016 capital
spending by nearly half to shore up its finances.
On Wednesday, the chipmaker Nvidia Corp is expected to report a bigger-than-expected rise in
fourth-quarter revenue, according to Thomson Reuters StarMine. The company has benefited from
strong demand for its chips used in gaming, fueled by new gaming releases such as "Star Wars:
Battle Front", "Need for Speed" and "Call of Duty: Black Ops III". However, analysts expect a
weak first-quarter forecast. Rival Advanced Micro Devices (O:AMD) last month forecast first-quarter
revenue below analysts' estimates, due to lower demand for its graphic chips used in consoles
and an economic slowdown in China. Intel Corp (O:INTC) has also warned of lower demand in China. On
Thursday, chipmaker Marvell Technology Group Ltd is also scheduled to release its first-quarter
results after the close of markets.
Dish Network Corp, the No. 2 U.S. satellite TV company by revenue, is expected to report on
Thursday a marginal rise in quarterly revenue, according to Thomson Reuters I/B/E/S, helped by
higher average revenue per pay-TV user. As the pay-TV industry tackles subscriber drops, Dish
has been trying to lure young viewers to its cheaper $20-per-month Sling TV online streaming
service. Dish has also been able to consistently manage churn for both its pay-TV and broadband
businesses. In its fourth-quarter report, investors will be looking out for details on Dish's
spectrum plans, as well as any comments on the Time Warner Cable-Charter deal.
T-Mobile U.S. Inc, the No. 3 U.S. wireless carrier, is expected to report on Wednesday
fourth-quarter revenue slightly above estimates, according to Thomson Reuters StarMine. Once
confronted with looming subscriber losses, T-Mobile has since revamped its pricing plans,
launched aggressive marketing campaigns to turn its business around and entice customers away
from bigger rivals Verizon and AT&T (N:T). T-Mobile, led by outspoken chief executive, John Legere, is
expected to benefit from lower postpaid churn and postpaid net adds over the Black Friday
holiday weekend, according to analysts.
Duke Energy Corp (N:DUK), the largest U.S. power company, is expected to report a higher profit in its
fourth-quarter report on Thursday, helped by lower costs and increase exposure to rate-regulated
markets, where prices are stable. Investors will be looking for updates on the company's plan to
sell its international business. However, the focus this quarter will be on the company's plans
to retire coal-fired plants, given a recent Supreme Court ruling that put on hold President
Barack Obama's clean power plan.
On Wednesday, U.S.-based hotel chain Marriott International Inc is expected to post a rise in
both its fourth-quarter profit and revenue, boosted by higher occupancy and room rate. Investors
would be looking for comments on how travel demand is holding up and on the company's forecast.
On Thursday, Starwood Hotels & Resorts, the operator of Sheraton and St.Regis hotels, is
expected to report lower fourth-quarter profit and revenue, hurt by declining RevPAR, a key
indicator in the hotel industry, in the United States. Smaller operator Hyatt Hotels is also
expected to report fourth-quarter results on Thursday. The owner of the Park Hyatt, Grand Hyatt
and Hyatt Regency brands of hotels generates more than two-thirds of its revenue from within the
United States, and is also expected to be hurt by the RevPAR decline. Investors will be looking
for an update on the acquisition of Starwood by Marriott which was announced in November last
year and its forecast for the full year.
Chip equipment maker Applied Materials Inc (O:AMAT) is set to report first-quarter revenue marginally
above analysts' expectations, according to Thomson Reuters StarMine. Applied Materials is
expected to benefit from a slight uptick in demand from companies making smartphone and memory
chips. Investors and analysts will be looking for detail on how the economic slowdown in China
will hit the company in the future.
Nordstrom Inc (N:JWN) will be the first among department store operators to report fourth-quarter
results. The company on Thursday is likely to report sales and profit below analysts' average
estimate, according to Thomson Reuters StarMine. Nordstrom, known for selling high-end apparel,
had shocked investors last quarter with a forecast cut and sales much below expectations, citing
unseasonably warm weather. Weak holiday season results from Macy's and Kohl's indicate that the
fourth quarter was also weak for the department store sector. Analysts expect warmer-than-usual
weather and a highly promotional environment for apparel in the quarter to have hurt Nordstrom's
sales, with some warning of a drop in same-store sales. A slowdown in sales of high-end
merchandise is likely to have compounded the retailer's problems.
On Thursday, Discovery Communications Inc (O:DISCA), the owner of Discovery Channel, is expected to report
fourth-quarter revenue slightly below analysts' average estimate, according to Thomson Reuters
StarMine. The company has been hit by a strong dollar as it generates nearly half of its revenue
from outside the United States. Some analysts also say they expect international ad revenue
growth to remain under pressure. Investors will want to see if strong domestic ad revenue can
offset the weakness in its international business.
On Wednesday, Marathon Oil Corp (N:MRO) is expected to report a fourth-quarter loss as the U.S. shale
exploration and production company sees results hit by the collapse in crude prices.
Community Health Systems, the second-largest for-profit U.S. hospital operator, is expected to
report on Wednesday fourth-quarter profit just above analysts' average estimates, according to
Thomson Reuters StarMine. Investors have been worried about the potential slowdown in patient
demand for healthcare services after a surge tied to increased numbers of Americans who obtained
insurance through Obamacare and will focus on patient admissions, after contrasting results from
rivals HCA Holdings and Tenet Health.
On Wednesday, web-hosting company GoDaddy Inc is expected to report fourth-quarter results
slightly above analysts' average estimate, according to Thomson Reuters StarMine. The company
said in November that it expected to be profitable in the quarter. GoDaddy has been benefiting
from strong growth in its international markets, where it been investing heavily. The company
plans to be in the greater Asia region, including China, Indonesia and Vietnam, by the end of
2016.
CF Industries Holdings Inc (N:CF) is scheduled to announce fourth-quarter results on Wednesday. The
fertilizer producer's quarterly profit is expected to tumble, hurt by weak nitrogen fertilizer
prices. Of interest to investors will be an update on the company's expansion of nitrogen plants
in Louisiana and Iowa, and an update of its plans to acquire plants from OCI NV.
Solar-panel maker SunPower Corp is expected to report on Wednesday a higher fourth-quarter
profit, helped by stronger demand from utilities and lower costs. The focus this quarter will be
the company's growth forecast, after an unexpected extension beyond 2016 of investment tax
credits for solar systems.
GPS-based gadgets maker Garmin Ltd (O:GRMN) is expected to report, on Wednesday, fourth-quarter revenue
below analysts average estimate, according to Thomson Reuters StarMine. Garmin's fitness
products have been hit by competition from Fitbit Inc and various other smartwatches. A weak
business jet environment has also hit its aviation business. Investors will look for the impact
of a strong dollar as the company gets about half its revenue from outside the United States.
Enbridge Inc, Canada's largest oil pipeline company, is expected to report on Thursday a higher
fourth-quarter profit, helped by an increase in volumes across its pipeline network. Pipeline
companies have been shielded from the oil price slump because they have fee-based contracts, but
investors will want to know if the prolonged crude price slump is likely to begin to affect the
volumes of oil they carry.
Debt-laden Canadian plane maker Bombardier Inc is expected to report on Wednesday a fall in
fourth-quarter profit, hurt by lower sales. Investors will be looking to see if the company has
managed to attract further investment for its CSeries program, which has already cost it
billions of dollars. Quebec made a $1.3 billion investment last year, and the province is
considering additional investments, according to media reports. The focus this quarter will be
on new orders for Bombardier's new 100-150 seat CSeries jets as well as business jets.
Statistics Canada is scheduled to release the closely watched inflation data on Friday. Canada's
annual inflation rate is expected to have edged up slightly in January to 1.7 percent from 1.6
percent in December. Last month's annual core inflation rate is estimated at 1.9 percent, same
as the previous month. Canadian retail sales data is expected on the same day. Retail sales in
December are predicted to have dropped by 0.7 percent from November. Statistics Canada will also
release the wholesale trade data on Thursday. The value of Canadian wholesale trade likely rose
0.2 percent in December.
Air Canada, Canada's biggest airline, is expected to report a rise in quarterly profit, helped
by lower fuel costs, when it issues fourth-quarter results on Wednesday. Airline companies have
been benefiting from a 70 percent fall in oil prices since mid-2014. But the fall in oil price
is also hurting demand in Canada, where a number of people work in oil and related industries.
Competitor WestJet reported a fall in profit, hurt by lower demand from Alberta, where it is
scaling back operations. Investors will look to see if Air Canada will take similar measures.
Barrick Gold Corp, the world's biggest bullion producer, is expected to post a smaller quarterly
profit on Wednesday, hurt by lower gold prices in the fourth quarter. The company said last
month it would have to take an impairment charge of up to $3 billion for 2015. Investors will
focus on the company's cost-cutting measures. Yamana Gold is scheduled to release its
fourth-quarter results after the close of market on Thursday.
Shopify Inc, a Canadian company which helps customers set up online stores, will report
fourth-quarter results for the first time on Wednesday. The company is expected to report a
wider loss due to high start-up costs. The company went public in May last year and has been
expanding its platform to Facebook (O:FB) and Twitter (N:TWTR). Shopify has also tied-up with Uber to ensure
same-day delivery to its customers. Investors will want how the company will cut costs and when
it will turn profitable.
Fairfax Financial Holdings, an investment management and insurance company, is expected to
report a higher fourth-quarter profit on Thursday. The firm, led by well-known contrarian
investor Prem Watsa, uses funds generated by its profitable insurance business to invest in
undervalued stocks. Watsa, who outlined his concerns about the U.S. economy in a letter to
shareholders last March, is betting on deflation. He has invested in a number of derivatives
that he will gain from if the consumer price index in certain countries breaches a particular
level.
Brazil's national unemployment rate is expected to have remained unchanged at 9.0 percent in the
three months through January, from the previous three months, in data scheduled to be released
on Friday.
ON TUESDAY, FEBRUARY 16
In his first comprehensive address on the economy and monetary policy, the Philadelphia Federal
Reserve Bank President Patrick Harker will address the 2016 Economic Forecast panel sponsored by
Lyons Companies and the University of Delaware Center for Economic Education & Entrepreneurship,
in Newark, Delaware. (0900/1400) Federal Reserve Bank of Minneapolis President Neel Kashkari
will also provide a first peek into his thinking on the economy and monetary policy when he
speaks on lessons from the financial crisis before the Brookings Institution in Washington.
(1030/1530) Meanwhile, Federal Reserve Bank of Boston President Eric Rosengren is also scheduled
to speak on the economic outlook at Colby College in Waterville, Maine. (1930/0030)
Express Scripts Holding Co, the largest manager of U.S. prescription drug plans, is expected to
report fourth-quarter results after the close of market.
Contract driller Nabors Industries Ltd (N:NBR) is expected to report a fourth-quarter loss, compared
with a year-ago profit, hurt by weak drilling activity and a fall in rates to hire rigs.
Investors will focus on the company's measures to cut costs, as well as its capital spending
forecast for the year.
Dean Foods Co, the largest U.S. milk processor, is likely to report fourth-quarter sales and
profit above analysts' average estimate, according to Thomson Reuters StarMine. Dean's launch of
its Dairy Pure national brand last May has helped reverse market share losses in the
higher-margin branded milk business, analysts say. A revival in demand for fresh milk is also
expected to help boost volume sales following a drop in milk prices from their peaks in 2014.
Restaurant Brands International Inc, the owner of Burger King and Tim Hortons, is expected to
post a higher fourth-quarter profit as lower costs help offset a fall in revenue due to
increased competition from rivals such as McDonald's and Wendy's. Burger King's breakfast items
and Tim Horton's coffee have enjoyed strong demand, but they are now in competition with
McDonald's all-day breakfast menu. Burger King said last week it would add hot dogs to its menu,
a move that elicited mixed reviews from customers. Investors will want to know how the company
plans to stay ahead of competition.
Canadian factory sales in December are expected to have risen 0.8 percent from November.
(0830/1330)
The Canadian province of British Columbia is set to unveil its fourth-consecutive balanced
budget when it releases the data for fiscal 2016-17. While the Pacific Coast province's
neighbors Alberta and Saskatchewan have slipped into deficits on the energy sector slump,
British Columbia has yet to feel the full impact of the lower oil and gas prices - though a long
promised LNG boom appears to be slipping further and further away. The province is also expected
to announce new measures geared at tempering runaway housing prices, particularly in Metro
Vancouver.
Mexico's biggest retailer Walmart de Mexico will report fourth-quarter results. The retailer has
been growing fast, with same-store sales growth of 9 percent in December, which some take as an
indicator of the good health of Mexico's domestic economy. The company also recently brought in
a new CEO from the Brazil unit and said it is looking to sell its Suburbia clothing chain, so
investors will be looking for any details on its broader strategy.
Retail sales in Brazil are likely to have dropped a seasonally adjusted 2.5 percent in December
from November. Overall December sales volumes are expected to have dropped 6.8 percent from a
year ago.
(Markets are closed on Monday, Feb.15, for U.S. Presidents' Day and Canada Family Day.)
(Compiled By Nayyar Rasheed in Bengaluru; Editing by Savio D'Souza)