By Wallace Witkowski, MarketWatch
Also, just when you thought earnings were done: Nike, Oracle
report
SAN FRANCISCO (MarketWatch) -- Like a hospital soap opera, much
of this week will boil down to what happens to the "patient."
On Wednesday, the Federal Reserve will release the statement
from its two-day Federal Open Market Committee meeting, and
investors are keeping a sharp lookout for whether the word
"patient" still appears in the statement, a key reference to when
the Fed will begin hiking interest rates.
That one detail is crucial for how already-beaten-up stocks
(http://www.marketwatch.com/story/us-stocks-post-third-straight-weekly-loss-2015-03-13)
fare this week. Last week, the Dow Jones Industrial Average (DJI)
shed 0.6% and the S&P 500 Index (SPX) declined 0.9%, putting
both indexes into negative territory for the year to date. The
Nasdaq Composite Index (RIXF) shed 1.1% for the week but is still
up 2.9% for 2015.
"The biggest short term question with regard to the March FOMC
is whether the committee chooses to include the 'patient' term in
their policy statement or drop it," said Guy LeBas, chief fixed
income strategist at Janney Montgomery Scott, in a recent note.
"In terms of impact, retaining the word would imply a first rate
hike would be most probable after June and by September 2015," he
said.
For quite a while, the consensus estimate had been that the Fed
would start hiking rates in June, but analysts and economists are
increasingly nudging the move out to September. LeBas believes the
Fed will leave "patient" in its statement, signalling a rate hike
closer to September than June.
Another thing to look for in the statement is the Fed's newest
"dot plot," which should reflect the trajectory of tightening once
the first rate hike goes though, LeBas said. The dot plot from the
last FOMC meeting appears below:
"As for why we believe September rather than June, it really
boils down to one simple fact; the Fed's preferred measure of
inflation, the headline change in personal consumption
expenditures, has not been north of 2.0% since spring 2012,"
Greenhaus said.
"Our view is that after such a long period of missing their
target, Fed members will ultimately want/need just a few additional
months of data before being reasonably confident inflation will
return to trend," he said.
Others are not so sure. Noted Fed watcher Jon Hilsenrath
recently reported officials are telegraphing that they'll drop the
word "patient"
(http://www.marketwatch.com/story/fed-officials-grow-more-confident-they-can-drop-their-patience-2015-03-10)
from this week's statement.
One earnings season ends, another begins
And just when you thought earnings season was over, a new one is
showing green shoots this week with Dow component Nike Inc.(NKE)
and tech heavyweight Oracle Corp.(ORCL) reporting their respective
February-ended, fiscal third quarters.
This earnings season is of particular interest because the
S&P 500 may post the first quarter of year-over-year profit
declines since 2009, weighed down by a huge drop in energy company
profits.
First quarter earnings for the S&P 500 are expected to fall
4.6% from a year ago, with estimated energy sector earnings
plummeting nearly 64%, according to John Butters, senior earnings
analyst at FactSet. Given that S&P 500 earnings estimates tend
to get low-balled by an average 2 to 3 percentage points, that's
signalling a decline.
Analysts expect only four of the 10 S&P 500 sectors to see
net earnings growth this season: Health Care, Financials, Consumer
Discretionary, and Industrials.
Notable earnings this week
Report Date Company/Ticker (FactSet EPS / revenue estimate)
Mon., March 16 None scheduled.
Tues., March 17 Oracle (68 cents / $9.48 billion)Adobe Systems Inc. US:ADBE (39 cents / $1.08 billion)
Weds., March 18 FedEx Corp. US:FDX ($1.88 / $11.8 billion)General Mills Inc. US:GIS (67 cents / $4.36 billion)Cintas Corp. US:CTAS (78 cents / $1.11 billion)
Thurs., March 19 Nike (85 cents / $7.65 billion)Lennar Corp. US:LEN (45 cents / $1.51 billion)
Fri., March 20 Darden Restaurants Inc. US:DRI (84 cents / $1.72 billion)Tiffany & Co. US:TIF ($1.50 / $1.3 billion)
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