EmailIt is shaping up to be a sluggish start for the equity market, which closed Friday at its highest level since December 2007. The S&P futures are trading 0.2% below fair value.
Earnings reporting will take center stage this week as 84 S&P 500 companies are scheduled to release results for the December quarter. A handful of companies got things going this morning on the reporting front, but they didn't really get things going for the market since the results are a mixed bag.
DuPont (DD) beat by two cents despite experiencing a 55% drop in adjusted earnings from continuing operations. The chemical maker also issued FY13 EPS guidance of $3.85-4.05 that is above the Capital IQ consensus estimate of $3.80.
Verizon (VZ) missed by thirteen cents; Delta (DAL) was in line; and Johnson & Johnson (JNJ) beat by two cents, but said FY13 EPS should be $5.35-5.45, which is below the Capital IQ consensus estimate of $5.50.
Travelers (TRV) seemed to beat by a good margin, but it is unclear if its operating earnings of $0.72 per share are comparable to the Capital IQ consensus estimate of $0.12.
Last week's big beat from Goldman Sachs (GS) led to a slight upward revision to the blended fourth quarter earnings growth estimate from 1.6% to 1.9%. The blended revenue growth rate remained unchanged at 2.2%.
So, 2.0% is about the going rate for top and bottom-line growth. The good news is that we're still talking growth; however, the case for meaningful multiple expansion in the face of such lackluster growth is weak.
For the time being, though, the market continues to discount stronger growth ahead, a point of view that is evident in the outperformance of the Dow Transports (+7.3% YTD), the Philadelphia Semiconductor Index (+6.9%), and cyclical sectors in general. Separately, small-cap and mid-cap stocks are outperforming large-cap stocks.
These trends could eventually shift on the back of disappointing economic data, yet the fuel provided by the Federal Reserve and other central banks has fostered a perspective that the gas tank is always half full and never half empty.
On a related note, the Bank of Abe, er, uh, we mean the Bank of Japan, announced today that it is setting a 2.0% inflation target and that it will institute -- wait for it -- an open-ended quantitative easing program starting in 2014.
This policy course was expected, although the delayed start date for the open-ended QE program was seen as a disappointment by some market participants. The Nikkei (-0.4%) lost ground Tuesday while the yen is currently down 0.8% against the dollar.
We can't help but worry that there is an open-ended problem gestating with the open-ended approaches taken by the world's largest central banks. When and where the problem presents itself is hard to say, but history suggests there will be a problem when policy is left too loose for too long.
It will be a slow week of economic reporting. The Existing Home Sales report for December will be released at 10:00 a.m. ET. It is expected to provide some uplifting news. The Briefing.com consensus estimate is pegged at 5.10 mln versus the prior month's reading of 5.04 mln.
Google (GOOG), IBM (IBM), CSX Corp. (CSX), Texas Instruments (TXN), and Norfolk Southern (NSC) highlight the earnings calendar after today's close.
