The week ahead is going to be a busy week. There are many traditional events to watch, but by now the market participants and investors have learned that they have to pay close attention to many other things than just the earnings headlines. A rally of just under 400 points on the DJIA (NYSEMKT: DIA) and a 48 point rally in the S&P 500 Index (NYSEMKT: SPY) combined will keep traders and investors more than just interested in the developments of the coming week.
PIIGS on Alert!
Greece’s Troika oversight (or overlords) are reportedly 90% of the way to getting another 11.5 billion or so in budget cuts from the Greeks ahead of a key debt payment in August. Do not forget about Spain, Portugal and Italy because whatever happens in Greece means that the rest of the PIIGS are next.
The Big Brother of Europe
A fresh poll shows more and more Germans believe that Germany would be better off by leaving the euro. What happens to the step-children in a divorce? They tend to get left in the shadows. If this feeling grows more and more, the weaker links in Europe will be up an unnamed creek without a paddle.
Ben Bernanke & QE3 or QEWTF
The FOMC is set to start a 2-day Fed meeting on Tuesday, July 31 which will let the markets know if the FOMC is really going to provide more stimulus measures or not. Rates are at nearly zero and Operation Twist has been extended. While the markets rose on Draghi’s comments, the markets want more stimulus. Does Bernanke agree with the White House on stronger GDP in the second half?
European Rate Cuts? Finally? Duh!
Mario Draghi single-handedly rescued the equity markets on Thursday and Friday. First was the “we will do whatever it takes (within our mandate) to keep the Euro together” on Thursday and then it was the planned meeting between the ECB and the Bundesbank that rekindled another rally after preliminary second-quarter U.S. GDP was not as low as economists expected. On Thursday, August 2, at roughly 6:45 AM EST, the markets will find out if the ECB is lowering interest rates. Honestly, can you really expect the ECB at this point to that it is worried about inflation?
LIBOR Scandal Widening
If one bank is in the center of a storm over LIBOR rate-fixing and manipulation, it is Barclays PLC (NYSE: BCS). The problem is that it takes more than one firm to collude. Doesn’t it? The Royal Bank of Scotland Group plc (NYSE: RBS) and UBS AG (NYSE: UBS) are the most recently reported to be included in the scandal. This is still a long work in progress.
The Big Jobs Data
U.S. Unemployment and Non-Farm Payrolls is expected to hit Friday morning at 8:30 sharp. While the market will have had previews from ADP, Challenger, Weekly Claims, Help Wanted data, ISM data and more, the payrolls creation is going to be a key metric. Just keep in mind that when Ben Bernanke and friends make their decision on the interest rates (actually on stimulus measures) ahead of the report they may already have good idea of what the payrolls situation is set to look like. Bloomberg is calling for a mere 100,000 jobs created and for unemployment to remain flat at 8.2%.
Social Media: Death, Defense, & Defiance!
It seems impossible to think that Zynga, Inc. (NASDAQ: ZNGA) could be more watched and more important than Facebook, Inc. (NASDAQ: FB), but Zynga’s low share price and its implosion to new lows was actually much worse than the blowup in Facebook shares after its earnings. Andrew Bary actually defended Zynga, Inc. (NASDAQ: ZNGA) over the weekend in Barron’s noting that the implosion has left the company attractive. While we cannot stand this company’s business model, Barron’s wrote a story called “Beaten-Down Zynga Is Worth a Look” in the weekend publication. Keep in mind that the prior Friday’s close of $4.80 was a loss of 36% for the whole week while Facebook shares fell by “only” 19% for the week. As a reminder, Put Options volume was strong down to the $19 strike price on Friday.
U.S. Auto Sales
On Wednesday, July 1, Ford Motor Co. (NYSE: F), General Motors Company (NYSE: GM) and all of the other car manufacturers are set to release their July auto sales data. If these figures are going to positive it would be close to a 180-degree turn since the car companies have been guiding down numbers for 2012. Bloomberg had a consensus of about 11 million annualized domestic sales. If there is upside surprise in North American auto sales, that would be even more good news for SIRIUS XM Radio Inc. (NASDAQ: SIRI).
The Olympics… All Week Long
Earnings Season Continues, 11 Key Earnings To Watch:
- Electronic Arts Inc. (NASDAQ: EA) on Tuesday, -$0.42 EPS expected
- Pfizer Inc. (NYSE: PFE) on Tuesday, $0.54 EPS expected
- Comcast Corporation (NASDAQ: CMCSA) on Wednesday, $0.48 EPS expected
- First Solar Inc. (NASDAQ: FSLR) on Wednesday, 0.91 EPS expected
- Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) on Wednesday, $0.50 EPS expected
- Yelp Inc. (NYSE: YELP) expected Wednesday, -$0.06 EPS expected (first public earnings report)
- American International Group Inc. (NYSE: AIG) on Thursday, $0.58 EPS expected
- American Water Works Company Inc. (NYSE: AWK) on Thursday, $0.49 EPS expected
- Activision Blizzard Inc. (NASDAQ: ATVI) on Thursday, $0.12 EPS expected
- Kraft Foods Inc. (NYSE: KFT) on Thursday, $0.66 expected (watch breakup news)
- Procter & Gamble (NYSE: PG) due on Friday, $0.77 expected (watch activist news too)
JON C. OGG