The first full week of 2015 was tumultuous for Wall Street: Stocks fell sharply Monday and Tuesday, followed by a powerful two-day rally, just to cap the week in the red on Friday. Low oil prices will certainly remain on traders' minds next week, but a whole crop of earnings reports and retail sales numbers could shift the focus.
Yahoo Finance Editor-in-Chief Aaron Task partnered with Yahoo Finance’s Jeff Macke, Jennifer Rogers and Senior Columnist Michael Santoli to discuss what investors need to know about the week ahead.
The Commerce Department is set to release the closely-watched December retail sales report on Wednesday, January 14.
“We’re expecting a standard uptick on a seasonal basis which matters for two reasons,” says Macke. “One: it means that the customers are still shopping on that seasonal level and two: it matters because once we get to January and February it is the abyss of nothingness out in those shopping malls. This is the last chance that retailers are going to have to show growth.” Macke is looking for 5% year-over-year growth.
“I really want to know what people are buying,” says Rogers. “[Is growth] all just (at) discount retailers? I want to see something else (other) than just cheap and promotion.”
Santoli believes that the increase in retail is from gadgets. “Clothes have been this kind of morass for a long time, you have your winners and losers: value and the high-end and everything else is just phones.”
How low can oil go? That’s the question traders are asking themselves as they try to decide whether we’re approaching a bottom in crude prices or if things are still heading downhill. Oil closed out Friday with its seventh-straight weekly loss, slumping 8% for the week. The benchmark U.S. crude contract has collapsed 47.4% over the past 12 months, while Brent, the European standard, has plummeted 52.7%.
“You’ve seen evidence that the velocity of this liquidation that we had in oil has eased up a little bit,” says Santoli. “So who knows if it’s a matter of picking a bottom right now. I don’t think it actually matters that much for the energy stocks if it just kind of knocks around and forms some kind of a sideways move.”
Schlumberger (SLB), the world’s largest oilfield services company, reports earnings next Friday and analysts expect earnings per share to be $1.47, a gain over the same quarter last year.
Still, Santoli doesn’t believe that this will be a good thing. “I don’t think this will be about good, it will be about how bad,” he says. “It’s about how many rigs do we actually expect to be closed down and what are we talking about for cap backs in 2015 for the industry and Schlumberger specifically.”
Macke believes that currency and oil will be a big issue for a lot of companies that report next week. He’ll be watching closely to see how the stock market takes it.
Still lower oil comes with cheaper gasoline prices, which is leaving many Americans with extra pocket cash. The extra cash, however, may not make up for the tepid wage growth facing many consumers. “I don’t think that getting gas at $2.50 is going to make that big of a difference overall,” says Rogers.
Intel (INTC) is seen posting quarterly earnings of 66 cents a share when it unveils its fourth-quarter figures on Thursday, January 15. The chipmaker has logged a stellar 12-month run, soaring more than 45%.
“Old tech really did have a good year,” in 2014, says Santoli. “The stocks were very cheap, you had this kind of under-appreciated upgrade cycle of the PC side of things and people wanted yield stocks.” All of those things worked in Intel’s favor, but can they bring that upward momentum into 2015?
Maybe not. Santoli believes that while Intel is a company that innovates spectacularly and spends billions on research and development, their findings tend to benefit other companies more than themselves. The company struggles to create in-demand gadgets that utilize its research, he says.
“I’m not interested in Intel as anything more than just a tell,” says Macke. “Another company that has to come out and say ‘internationally things aren’t that great, the dollar is a headwind for us.’ I want to see how silicon prices off of this and I want to see what that stock does when it becomes apparent that EPS might become an issue.”
Intel made a splash at CES this week when CEO Brian Krzanich pledged to spend $300 million to increase diversity within the company.
“It’s not a small price tag,” says Rogers. “I think it’s definitely something that people in Silicon Valley have been talking about for a long time. They are coming to the forefront and making a big swing but I think this is something that [other companies] will follow. Intel is a leader in The Valley and this will be something big.”
Next week is a huge week for banks and brokerages. JP Morgan Chase (JPM), Wells Fargo (WFC), Bank of America (BAC), BlackRock (BLK), Charles Schwab (SCHW), Citigroup (C), First Republic (FRC), M&T Bank (MTB), Goldman Sachs (GS), PNC Financial (PNC) and SunTrust Banks (STI) are all reporting.
“Everyone of these banks has a grand strategic plan and they may break up or they may not. They’re going to talk about how the consumer is stronger ... but what really matters is the yield curve,” says Santoli. The curve has been flattening for some time and stocks have sold off. “They keep having some false dawns…and so it really is going to be dictated by what happens to long rates right now.”
This is Yahoo Finance’s first extended weekly roundtable and we’d like to know what you think. Is there you want to see next week? Reach out to us on Twitter @YahooFinance and let us know!
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