Market Perspective for December 19, 2016

Stocks have historically rallied during the holiday season, with an average gain of more than 1 percent. This year’s so-called “Santa Claus” rally may be less apparent considering the strong post-election rally, but strong sentiment and data could lead markets higher into 2017.

The Bank of Japan (BoJ) will announce interest rate and monetary policy decisions on Tuesday. The yen has plunged about 13 percent over the past six weeks. U.K. Prime Minister Theresa May will face a Parliamentary panel on Tuesday regarding Brexit.

November existing home sales and the weekly oil inventory report will be available on Wednesday. Consensus estimates call for a very slight dip in home sales, though Friday’s new home sales data is expected to reflect an increase from October. Analysts are predicting a decline in U.S. oil inventory. The third and final estimate of third-quarter GDP will be released on Thursday.  Economists expect a 0.1- to 3.3-percent uptick in growth. Durable Goods Orders and Personal Income and Outlay reports for November are also due out this week. Durable goods orders are expected to fall 4.5 percent from last year. Personal income and spending are both expected to rise 0.3 percent for the month.

Several closely watched companies will report earnings this week. Miami-based Lennar (LEN) has posted positive earnings surprises for the past four quarters. iShares US Home Construction (ITB) is near its post-2008 high, but has yet to break out due to rising interest rates. Nike (NKE) will report later in the week.  While the sports apparel company was a growth leader for many years, increased North American competition has brought shares down approximately 18 percent for 2016.

On Wednesday, Micron Technology (MU) and Bed, Bath & Beyond (BBBY) deliver their earnings after the bell. Shares of Micron Technology (MU) rallied with the semiconductor industry this year, and with the overall market since the election. Analysts are looking for 28 cents per share in earnings. Bed, Bath & Beyond (BBBY) faces declining sales, though the company’s recent acquisition of online retailer Personalization Mall may boost shares. Rite Aid (RAD) is expected to report better than expected results before the markets open Friday.

FedEx (FDX) will take center stage when it reports on Tuesday. Analysts forecast earnings of $2.89 per share for FDX, but the guidance will garner more attention. Economic optimism is rising, and shipping goods and services are key indicators of market health. FDX is also a top component in the Dow Jones Transportation Index. Both FDX and the Transports recently hit all-time highs before pulling back last week.

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