The Week Ahead: Back to Work, Jobs Report
After a sluggish week of market activity, the first few days of 2013 might bring life back to the markets.
Most Western exchanges will be closed on Tuesday for New Year's Day. A fair amount will also be closed on Monday, for New Year's Eve, while others will close early. U.S. markets will function normally on Monday, but be closed for all of Tuesday.
Japan, Switzerland and China will be closed Wednesday; Japan and China will remain closed Thursday.
After a week of no earnings releases, there will be handful of companies posting earnings reports. Notably, Family Dollar (NYSE: FDO) will release their earnings on Thursday. Mosaic (NYSE: MOS) is expected to report Friday morning.
Analysts at Goldman Sachs are fans of Mosaic. They recommend that investors buy shares if they show any weakness following the company's report.
Goldman notes, “We would be buyers of any weakness around FY2Q results, as we believe challenging near-term P&K market fundamentals are well understood by the street and capital allocation catalysts remain visible in mid-2013.”
The firm has a Buy rating on Mosaic and a price target of $68. Shares are currently trading around $55.
Avondale Partners likes Family Dollar ahead of its earnings release. Analysts at Avondale have a Market Outperform rating on the dollar store, with a $77 price target. Shares are currently trading near $63.
Avondale cites the company's recent move to offer cigarettes in its stores as a driver of earnings, noting “Dollar General already acknowledged FDO took market share in the past quarter due to FDO's rollout of cigarettes.”
On the economics front, there will be a fair number of releases, culminating in the Friday morning nonfarm payroll report. Currently, economists believe the report will show that the U.S. economy added about 150,000 jobs in December, although that number could be revised ahead of the report.
The Federal Reserve said in December it would keep interest rates exceptionally low until the unemployment rate dropped to 6.5 percent -- something that it did not anticipate happening until at least 2015.
Beyond the jobs numbers, U.S. investors will also see data on construction spending and manufacturing.
On the international front, China will release manufacturing data late Monday. Investors will also get Brazilian industrial production and reports on German inflation and unemployment.
Yet, above all, continuing negotiations on the fiscal cliff could dominate all market activity next week.
Failure on the part of lawmakers to reach a deal before Tuesday will ensure that the U.S. goes over the fiscal cliff -- a legally mandated set of spending cuts and tax increases. Many economists believe that the U.S. could slip back into recession if the fiscal cliff is not avoided.
If lawmakers cannot reach a deal, markets could see a rapid move to the downside. On Friday, following reports that President Obama did not plan to offer House Republicans a reworked fiscal cliff deal, the Dow Jones Industrial Average fell roughly 60 points in a matter of minutes.
However, analysts at ISI group aren't nearly as concerned about the fiscal cliff. They believe that recent easing actions may be able offset the negative effects of the cliff.
ISI group notes, “The 325 stimulative policy initiatives that have been announced around the world over the past 16 months may be offsetting Fiscal-Cliff concerns.”
At any rate, the triple digit loss the markets saw on Friday could intensify next week. On the other hand, a deal that alleviates fears of the fiscal cliff could send markets right back up.
- Markets Closed: Japan, Italy, Switzerland, Germany, Brazil, Norway, Indonesia and South Korea
- Markets Close Early: U.K., Hong Kong, Australia, France and Spain
- Dallas Fed Manufacturing Activity (Prior -2.8), Chinese Manufacturing PMI (Expected 51)
- Markets Closed: Brazil, U.S., Australia, Norway, Canada, South Africa, Hong Kong, Japan, U.K., Germany, Switzerland, Italy, France, Spain, Singapore and China
- German CPI Month-over-Month (Expected 0.7 percent), German CPI Year-over-Year (Expected 1.9 percent)
- Markets Closed: Japan, China and Switzerland
- Construction Spending MoM (Expected 0.6 percent); ISM Manufacturing (Expected 50.3); ISM prices Paid (Expected 50.2)
- Markets Closed: Japan and China
- MBA Mortgage Applications (Prior -12.3 percent); ADP Employment Change (Expected 140,000); Initial Jobless Claims (Expected 360,000); Continuing Claims (Expected 3.223 million); German Unemployment Change (Expected 10k); German Unemployment Rate (Expected 6.9 percent)
- Earnings From: Family Dollar
- Change in Nonfarm Payroll (Expected 150,000); Change in Manufacturing Payroll (Expected 4,000); Unemployment Rate (Expected 7.7 percent); Factory Orders (Expected 0.4 percent); ISM Non-Manufacturing (Expected 54.3); Brazilian Industrial Production (Prior 2.3 percent); Canadian Unemployment Rate (Expected 7.0 percent)
- Earnings From: Mosaic, Finish Line (NASDAQ: FINL)
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