U.S. equity futures are set to open lower ahead of a jam-packed week of data, earnings, Fed announcement on rates and the State of the Union Address.  Investors will be listening for any more rhetoric on trade, tensions in Washington and any hints toward a resolution on DACA. The USD is stabilizing Monday, however, the 10 year yield is rising once again and now has achieved 2.71 percent, creating some nerves on Wall Street.  Many expect yields to rise through 2018, but with the 10-year achieving 2.71% in just the month of January already it may create some near-term overhead for the Fed.

A host of tech companies will be issuing their respective quarterly results this week with Facebook, Alphabet, AMD and Apple headlining.  Apple is the worlds most valuable company and is set to report its results on February 1, 2018.  Analysts on average expect Apple to report adjusted net income of $19.6 billion, up from $17.9 billion a year ago, according to FactSet. The consensus estimate calls for earnings per share of $3.82, compared with $3.36 for the year-ago quarter.

Analysts are calling for revenue of $86.8 billion on average, up from $78.4 billion a year ago. Apple said on its most recent earnings call that it expected revenue of $84 billion to $87 billion for the December quarter.  On average, analysts are expecting that Apple sold 79 million iPhones during the quarter, generating $59.7 billion in revenue. The company sold 78 million iPhones a year ago. The stock is trading about $3 off its all-time high of $180.10, with shares up 40.4% over the past 12 months through Thursday’s trading session.

Below is graphic identifying the vast array of corporate earnings due out this week!

Back to politics and Janet Yellen’s farewell speech. With the State of the Union Address on Tuesday night, investors will also be listening for President Trump to discuss his promise of a major infrastructure spending plan. The President is expected to ask Congress for $200 billion. According to the White House, the speech will focus on five main policy areas: jobs and the economy, infrastructure, immigration, trade and national security.

The Fed is expected to keep interest rates steady Wednesday, in the final meeting before Janet Yellen leaves at the end of the week and Fed governor Jerome Powell moves to the chairmanship. The Fed is expected to raise rates again in March but investors will be listening and reading into any changes in the Fed’s language.

Consumer spending climbed 0.4% in December, capping off the biggest increase in household buying since 2011. Economists polled by MarketWatch had forecast a 0.5% increase.  Incomes rose 0.4% in December and advanced 3.1% for the full year.  Households drew heavily on their savings to fund their purchases. The savings rate fell to 2.4%, the lowest level since 2005.

The bottom line heading into an extremely busy trading week is fairly complex.  There are a great many moving parts and while the economic and corporate earnings outlook remains strong, rising rates may initially cause more angst than in previous weeks.  Sometimes markets have to express underlying fears before they realize “things aren’t so bad after all”.

 

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