The U.S. Week Ahead (Feb 25-Mar 1)

By Steven Levine, Senior Market Analyst, Interactive Brokers

On the Corporate Front: AMC’s Earnings Could Be Challenged By Netflix

While economic activity in the week ahead will be rife with updates, including the pace of fourth-quarter GDP growth, personal income, and spending, as well as a fresh ISM Manufacturing PMI, investors will also be keeping an eye on corporate earnings as the season winds down.

The earnings calendar will be lined with discretionary sector companies such as Shake Shack (NYSE: SHAK), Home Depot (NYSE: HD), Macy’s (NYSE: M), L Brands (NYSE: LB), TJX Companies (NYSE: TJX), J C Penney (NYSE: JCP) and AMC Entertainment Holdings (NYSE: AMC).

The retailers’ quarterly results fall against a backdrop of December’s retail sales plunge, as well as further deterioration in consumers’ confidence at the start of 2019. However, preliminary data in the University of Michigan’s Index of Consumer Sentiment showed an uptick in February, which reflected the end of the partial government shutdown, as well as a more fundamental shift in consumer expectations due to the Fed's pause in its tightening of monetary policy.

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Investors may glean further insights into the Federal Reserve’s policymaking decisions when Fed chair Jerome Powell delivers his two-day semi-annual testimony to Congress beginning Tuesday, February 26.

Furthermore, the recent resurgence of risk appetite appears to have been bolstered by reported progress in U.S.-China trade talks.

Bill Baruch, president of Blue Line Futures, noted that “the market is focused on an accommodative Fed and the headlines that exacerbate such without really caring to understand why they may want to be accommodative in the first place.

“Instead, the market is focused on an agreement to agree on what must be achieved in order to make an agreement between the U.S. and China on trade.”

Baruch highlighted that the market has “gone straight up for nearly two months, now investors and portfolio managers find it easy to cling to gains and throw caution into the wind, ‘who needs protection’. Never mind the fact that the VIX is at the lowest level since October 5th.”

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The author does not hold any positions in the financial instruments referenced in the materials provided.

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