By Margreet Dietz
Jan. 12 (BusinessDesk) – Investors await the start of the fourth-quarter US corporate reporting season, including results from Alcoa and JPMorgan Chase, as well as US retail sales, to bolster their confidence in the outlook after December’s mixed jobs data.
Reports scheduled for release in the coming days include Alcoa today, JPMorgan Chase and Wells Fargo on Wednesday, Bank of America and Intel on Thursday, and Goldman Sachs on Friday.
Brent crude has renewed its rout with producers in the Middle East, most recently the United Arab Emirates, continuing to hold firm on output in a battle for global market share. While good news for consumers, the wider impact of an extended slide is becoming far more clouded.
“Any signs of stress with oil prices turning down is causing investors to be more nervous,” Steven Rees, who helps oversee about US$ 1 trillion as global head of equity strategy at JPMorgan Chase Bank, told Bloomberg News. “There’s general anxiety. The overall tone for earnings might be a little more tempered.”
Shares of Chevron posted the biggest percentage loss in the Dow Jones Industrial Average last Friday, closing 2 percent lower from the previous day, as the price of oil slid for a seventh straight week, with US crude futures ending the week at US$ 48.36 a barrel.
“The price war continues and there’s a great deal of excess supply,” Phil Flynn, senior market analyst at the Price Futures Group in Chicago, told Bloomberg News.
Last week minutes from the US Federal Reserve December policy meeting, at which it promised patience in raising interest rates, showed the central bank won’t lift borrowing costs before April, offering a boost to equities. Oil’s tumble could further temper the need for higher rates.
The latest government labour data, released on Friday in Washington, confirmed a strengthening US economy with 252,000 jobs added in December, after an upwardly revised 353,000 increase in November, while the jobless rate declined to 5.6 percent, the lowest level since June 2008. However, investors were concerned with an unexpected drop in wages.
As a result, on Friday, the Dow Jones Industrial Average dropped 1 percent, the Standard & Poor’s 500 Index retreated 0.8 percent, and the Nasdaq Composite Index slid 0.7 percent.
“There was this tale of two cities, with very strong job gains but on the flip side a continued real moderation in wage growth,” Burt White, chief investment officer for LPL Financial in Boston, told Reuters. “I actually think it’s the best-case scenario. It showcases the US economy is continuing to grow and repair the labour market, but at the same time, the muted wage growth means the Fed’s going to stay lower for longer.”
Friday’s losses drew Wall Street in the red for the week, as the Dow fell 0.5 percent, while the S&P 500 Index lost 0.7 percent, and the Nasdaq dropped 0.5 percent.
Fed officials speaking in the coming days will be closely watched for any clues about the timing of a rate hike.
Atlanta Fed President Dennis Lockhart is set to speak today, while Philadelphia Fed President Charles Plosser and Minneapolis Fed President Narayana Kocherlakota will hold separate talks on Tuesday. The latter will speak again on Friday.
Among the key data this week are US retail sales, due Wednesday. On Friday, shares of Bed, Bath & Beyond plunged 6.8 percent after the retailer provided a disappointing outlook for sales and earnings.
Other economic reports in the days ahead include the NFIB small business index, due Tuesday; Atlanta Fed business expectations, business inventories, as well as import and export prices, due Wednesday; producer price index, Empire State manufacturing survey and Philadelphia Fed survey, due Thursday; and the consumer price index, industrial production and consumer sentiment, due Friday.
The Fed also releases its Beige Book on Wednesday
In Europe last week, the Stoxx 600 dropped 1 percent while the UK’s FTSE 100 Index slid 0.7 percent.