Elections, Earnings and Economic Numbers, from David Kelly, chief market strategist, JPMorgan Funds
The week will bring a blizzard of earnings numbers, with 61 of the S&P500 companies slated to report fourth quarter profits. Of the 36 firms that have reported so far, almost 80% have beaten estimates. This pattern is likely to continue. Of particular interest this week will be the performance of financial companies with Bank of America, Goldman Sachs, Wells Fargo, Morgan Stanley and American Express all due to report. Economic numbers will be less important. December housing starts could be hampered by a very wet December in the South while producer prices should have remained subdued. On a more positive note, unemployment claims may well have stayed below 450,000 for the fourth consecutive week, while leading economic indicators should have risen by a robust 0.7% in December, a 9th consecutive monthly increase. These data tend to confirm a more general strengthening of the economic expansion with 4th quarter real GDP potentially rising at a faster than 5.0% annual rate. However, the most important event of the week will be reported in in Massachusetts. In a special election to fill the Senate seat left vacant by Ted Kennedy, polls now favor the Republican, Scott Brown over the Democrat, Martha Coakley. Brown is shown leading in five of six polls released in the last week with an average lead of over five percentage points. If Brown wins he would be the 41st Republican in the Senate, and as such would represent a major roadblock to the President’s agenda.
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