Market Perspective for April 25, 2016

We are entering the second big week of earnings season. By Friday, the majority of S&P 500 companies will have reported. With widely held stocks like Apple (AAPL) and Facebook (FB) reporting earnings this week, the technology sector has a chance to bounce back from last week’s weakness.  Weaker-than-expected reports from Microsoft (MSFT) and Alphabet (GOOG) weighed on the tech sector, but the broader market shrugged off those tech misses and rode strong bank earnings to new 2016 highs. If tech can come around this week, the market may have a shot at hitting new all-time highs.

There will also be two key central bank meetings this week. On Thursday, the Bank of Japan and the Federal Reserve both have policy meetings. Everyone expects the Federal Reserve to leave rates unchanged and most believe the Fed will not signal a June rate hike. The Japanese central bank is expected to increase asset purchases and the market has already priced in some of this following last week’s yen sell-off.

March new homes sales were released on Monday and pending sales will be reported on Wednesday. New home sales fell unexpectedly by 1.5 percent, though the drop was concentrated in the western region of the U.S. March durable goods orders will be out on Tuesday and are expected to rise 1 percent. Thursday marks the release of the first estimate of first quarter GDP. The Atlanta Fed’s GDP Now Model forecasts 0.3 percent coming into the week, while the New York Fed’s model points to 0.8 percent growth. Economists are looking for 0.6 percent growth. Monthly personal income data will be available on Friday and includes the Fed’s favored measure of inflation, the core PCE. Economists forecast core PCE rose 0.1 percent in March.

In addition to Apple and Facebook, large-caps reporting earnings this week include Boeing (BA), Amazon (AMZN), Ford (F) and Exxon (XOM). Apple is expected to report earnings per share of $2.00 on top-line revenues of $51.97 billion. Analysts will be paying close attention to total iPhone sales, the company’s share buyback program and its current growth forecast when it reports Tuesday. Boeing is scheduled to report EPS of $1.83 and revenues of $21.44 billion. Strong demand for its civilian and military aircraft are expected. Facebook (FB), is expected to report an EPS of $0.62 and revenues of $5.2 billion. Analysts will focus on the company’s mobile Internet and advertising trends. Last week, Alphabet disappointed investors with higher costs for mobile advertising.

Later in the week, Ford (F) is expected to report EPS of $0.46 and revenues of $35.76 billion. Amazon (AMZN) is forecast to report EPS of $0.58 and revenues of $27.99 billion Thursday. The company’s cloud services will likely dominate as will recent changes to Amazon Prime that put it in greater competition with Netflix (NFLX). On Friday, the energy sector takes center stage when integrated giant Exxon (XOM) is scheduled to report revenues of $45.31 billion and earnings of $0.31 per share. Chevron (CVX) reports the same day and will be crucial for market cap weighted energy funds.

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