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World Week Ahead: Goldman, Bank of America results up next

Monday 15th January 2018

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Investors will be looking for the latest US corporate earnings including from Goldman Sachs and Bank of America to confirm the continuing rise in stock valuations and check chatter of the need for a correction.

Other companies set to report their latest results this week include Citigroup, Morgan Stanley, IBM and American Express.

On Friday, the Dow Jones Industrial Average added 0.9 percent, the Standard & Poor’s 500 Index rose 0.7 percent, while the Nasdaq Composite Index advanced 0.8 percent. 

The three benchmarks each closed at record highs, bolstered by better-than-expected results from JPMorgan Chase, which indicated the US tax overhaul will boost corporate profits by several billions of dollars in 2018; its effective corporate tax rate will drop to 19 percent this year from 32 percent in 2017.

“The enactment of tax reform in the fourth quarter is a significant positive outcome for the country," chief executive Jamie Dimon said in a statement. "US companies will be more competitive globally, which will ultimately benefit all Americans. The cumulative effect of retained and reinvested capital in the US will help grow the economy, ultimately growing jobs and wages.”

Shares of JPMorgan climbed 1.7 percent on Friday. 

For the week, the Dow rallied 2 percent, the S&P 500 climbed 1.6 percent, while the Nasdaq added 1.7 percent. 

“The fact all the big money centre banks beat on the bottom line is a good omen for the rest of the earnings season,” William Lynch, director of investments at Hinsdale Associates, in Hinsdale, Illinois, told Reuters. 

To Walter Todd, Greenwood Capital chief investment officer, the optimism over earnings growth could continue to propel the stocks even higher, Bloomberg reported.

“The fundamentals for the rally are strong, though the higher it goes, the higher the risk of a correction, and the higher the risk that the correction will be steep,” Todd told Bloomberg. “For now, fear of missing out is prompting investors who’ve stayed on the sidelines to jump in, as people say, ‘we missed the rally last year, we’re not going to miss on it again’.”

Today, US markets are closed for Martin Luther King Jr Day.

The latest US economic reports scheduled for release this week include the Empire State manufacturing survey, due Tuesday; industrial production, housing market index, and the Fed's Beige Book, due Tuesday; housing starts, weekly jobless claims, and Philadelphia Fed business outlook survey, due Thursday; and consumer sentiment, due Friday. 

Fresh clues on the outlook for US interest rates might come from Fed officials including Charles Evans, Robert Kaplan and Loretta Mester, who are all scheduled to speak on Wednesday.

On Friday, the latest US consumer price data increased bets that the Fed will proceed with plans to lift rates higher, with futures pointing to a March hike. The Fed has signalled three potential increases this year.

The Bank of Canada is widely expected to be the first major global central bank to lift rates this year, a decision expected after it meets on Wednesday. An increase would be the third in the last six months, a sign of the unexpected strength in the local economy and oil’s rebound.

In Europe, the Stoxx 600 Index finished Friday with a 0.3 percent gain from the previous day’s close. 

Outside of the US and Europe, China is set to report fourth-quarter GDP on Thursday. While there’s some scepticism about the accuracy of the official numbers and concerns about a slower pace of expansion going forward, a major miss would hit global market sentiment.

(BusinessDesk)

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