Earnings Rubber Hits The Road This Week

After steadily inching its way higher over the last few weeks, we are entering the first week where we have a meaningful number of 3Q 2017 corporate earnings. While we will have additional September economic data that we’ll use to weave together our 2017 GDP tapestry and assess the Fed’s likelihood of boosting rates in December following its dovish September meeting minutes, corporate earnings will be the focus.

We’ve already seen several companies report disappointing results due to the September hurricanes — JB Hunt (JBHTand Delta Air Lines (DALto name two. Of course, even where we have seen meaningful EPS beats relative to expectations, we’ve seen concerning signs in the report internals that have weighed on share prices.

That’s the backdrop, and here’s what’s on tap this week.

On the Economic Front

Coming off of last week’s disappointing September Retail Sales report that saw the beginnings of post-September hurricane spending, this week we’ll be getting even more September data. With more data in hand, by the end of this week we’ll have a much more defined view on not only how the economy performed in September, but 3Q 2017 as a whole. For those that missed our Friday Weekly Wrap on the economy, you can find it here.

Turning to this week’s September economic items, investors will be assessing both the Housing Starts & Building Permits report, as well as Industrial Production&Capacity Utilization. Much like the September Retail Sales report, we expect to see some positive post-hurricane impact in the housing data, but we could see that same hurricane impact lead to a softer view on the manufacturing economy. The question to ponder will be what do the hurricane-related issues mean for excess manufacturing capacity? For that, we’ll look to the manufacturing capacity utilization figure coming in on Tuesday of this week as a guide.

Also this week, we’ll get the next iteration of the Fed’s Beige Book — something Tematica’s Chief Macro Strategist Lenore Hawkins looks forward to like a kid on Christmas Eve. Along the way, we’ll start to get the first indications of how the economy is fairing in October, thanks to the Empire Manufacturing Survey and the Philly Fed Index coming out on Thursday. Given the period they are addressing, it means we’ll soon begin piecing together the true vector and velocity of 4Q 2017 GDP vs. the expected 2.7% being reported by The Wall Street Journal’s Economic Forecasting Survey.

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