Earnings Season: What To Watch Next
Week…
The Dynamic Wealth Report
July 8, 2011
by Justin Bennett, Editor
What a rally…
Stocks have been on an absolute tear over the past two weeks. In fact,
the broad markets haven’t seen a rally like this in over a year.
The tech heavy Nasdaq is leading the way with a 9% gain while the S&P
500 and Dow bring up the rear with a 6% return… all in the span of eight
trading days! Not bad considering many investors thought the markets
were going to fall off a cliff two weeks ago.
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In fact, that’s exactly why the markets are rallying so hard…
Many investors were expecting the worst. Some were moving into cash
while others were outright shorting the market. These bears thought it
was over for stocks…
But the Armageddon fears actually turned out to be a sweet buying
opportunity. A slew of stronger than expected economic data points sent
the bulls on a market rampage.
Now those cash-hoarding investors are chasing stocks higher. They can’t
afford to miss out on yet another market rally.
And what about the ill advised short sellers?
They’re getting steamrolled. They’re surely buying back their short
positions at a substantial loss. This combination of stock chasers and
short covering is pushing the broad markets back to 52-week highs.
But don’t let your guard down…
The markets are falling this morning after a dismal jobs report. Only
18,000 jobs were added in June and that’s a big disappointment for the
bulls. Given the recent market rally, it’s natural to see some selling
here.
What should you be watching next week?
The Federal Reserve releases minutes from their recent meeting on
Tuesday. Investors decipher these notes for clues of their next policy
move. While it’s not expected, any sign of ‘hawkish’ (raising interest
rates) language will bring out the sellers.
Highly important retail sales data hits the wires Thursday…
Investors watch this report closely due to the importance of consumer
spending. If retail sales weakened dramatically, we’ll see stocks,
especially retail stocks, hit the skids.
However, gas prices have fallen recently and consumers have more money
to spend on discretionary items. I think we’ll see slightly stronger
retail sales for June. Some names to watch in the retail space are
Abercrombie & Fitch (ANF) and TJX Companies (TJX).
But the most important aspect of next week is the start of earnings
season…
That’s right, it’s once again time for quarterly earnings reports.
Alcoa
(AA) kicks off earnings season by reporting on Monday, July 11th.
The next few weeks are littered with earnings reports, so be sure you
know when big companies are reporting. Names like Google (GOOG),
Microsoft (MSFT), and Apple (AAPL) move the markets.
What should you do?
The markets are going to need a “breather” to consolidate the recent big
gains. The disappointing jobs number this morning will temper the bulls'
optimism for a few days. So don’t be surprised to see the markets trade
a bit lower next week.
If economic news continues to disappoint investors in coming days, many
will use it as an excuse to continue selling. Those who bought stocks
two weeks ago are sitting on sweet gains, and they won’t risk losing
them.
So be ready to take some profits off the table…
Maybe you remember, I mentioned Caterpillar (CAT),
Home Depot (HD), and
Intel (INTC) were tasty buys back then. If you bought these stocks,
consider taking some well-deserved profits.
Above all… be ready for another exciting week in the markets!
*** Editor's Note*** In case you haven’t noticed,
certain ETFs have been booming since the beginning of the year.
And our top ETF analyst Corey Williams believes “the best is yet to
come!” He’s already scored gains of 40% in the PowerShares Small
Cap Energy ETF… and a 25% gain in the iShares Software ETF. To see
what else is in the portfolio and discover why he’s so bullish about
ETFs, click
here for all the details…
• Gran Tierra Energy (GTE) was
upgraded by Standpoint Research. They now have a buy rating on the stock
with a $9 price target. I would have to agree, this stock looks like a
good buy at these levels.
• General Mills (GIS) was downgraded to hold at Argus. Food inflation concerns are likely the main reason behind this weakening
outlook.
• Deutsche Bank started coverage on Marathon Petroleum
(MPC) with a buy rating. The oil refiner and marketer is a spin off of
Marathon Oil (MRO).
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