News And Earnings That Can Move Wall Street This Week

The key issue that everyone will be watching is the value of the U.S. dollar. For the last several months, the value of the dollar has been dropping, while the stock market has, for the most part, been rallying. The dollar hit lows last week that actually scared some analysts on Wall Street, but it seems the government is supporting a weak dollar in order to boost sales for those companies that do business internationally. The U.S. dollar did manage to struggle back a bit on Friday, and surprisingly, Wall Street rallied yet again to close out the week with record setting gains on the year.

In fact, the DOW closed at the highest level it has seen for 2009, 2 years to the day since the DOW hit its all time high.

Last week, we saw commodities surging ahead, gold topped $1,060 per ounce, while oil is close to the top of the trading range ($65 - $75 per barrel) it has been in for the last 10 weeks.

When the dollar gained ground on Friday, gold dropped back to $1050 per ounce, but oil continued to climb. Analysts think oil might break out above that $75 per barrel price shortly, perhaps as early as this week, regardless of the direction the dollar goes. Gold is expected to take a bit of a breather, though some economists are predicting gold to hit $1,100 an ounce at some point this year.

The momentum of the rally that we have seen on Wall Street since the March low is dependent on good earnings reports this week. It is critical that we start to see businesses posting actual profits, rather than just beating very low analyst’s expectations.

Six companies in the DOW and many of the megabanks are scheduled to report earnings this week. We are watching for earnings from:

Intel (INTC) and Johnson & Johnson JNJ on Tuesday, JPMorgan Chase (JPM) on Wednesday, Goldman Sachs (GS)and IBM (IBM)on Thursday and Bank of America (BAC)and General Electric (GE)on Friday.

Investors will be watching to see if companies like Intel and IBM, that do a lot of business internationally, will be showing the benefits of the low dollar value when they report earnings. And, of course, bank earnings are always important. While banks have been showing great revenue numbers from increased fees, and increased credit card rates, everyone will be watching for write downs on losses on credit cards, and of course, housing.

For all businesses reporting, it will be important to see if increases in earnings numbers are from increased business revenues, or from cost cutting.

Other key reports this week include:

Retail sales on Wednesday – Expectations are for a 2.1% drop, but since some retailers have already reported better than expected earnings, Wall Street could go for a joy ride if that type of news continues from more retailers.

Minutes from the September meeting of the Federal Open Market Committee will be released on Wednesday at 2 pm.

The overall Consumer Price Index for September (which includes food and energy) is expected to show a 0.2% rise month over month, while the Core CPI (excluding food and energy) is expected to show a 0.1% rise month over month for September.

Initial jobless claims are due on Thursday. The expectation is the number will be about the same as for last week at 525,000, while continuing claims are hoped to drop slightly.

Finally on Friday, the initial report for the Reuters/University of Michigan Consumer Confidence index will be released.

Last week we saw the yield on the 10 year bond fall dramatically at the beginning of the week, but rose more than 20 basis points by the close of bond trading on Friday. In conjunction with the drop in the yield, we saw the 30 year fixed rate mortgage hit a low of 4.87%. If this yield continues to rise this week, mortgage rates could head back up above 5% as well.

We’ll also be watching for more news about the possible extension of the first time home buyers tax credit this week. For those home buyers who have not yet submitted a loan application, they are about out of time to close by the deadline of November 30, 2009.

Written by Shelby Bateson