Sunday, July 18, 2010

Earnings. What’s In Store For Next Week?

First off I’m pretty disappointed with the stock market action for the week. The majority of the companies that reported earnings exceeded the analyst’s estimates. I was very pleased with the results. Obviously the market felt otherwise. Friday’s release of a poor consumer sentiment reading of 65 came with some surprise. The consensus estimate was to be 74.5 according to Briefing.com. The consumer sentiment is very important for the market as this determines the confidence of people.  By this I mean confidence in the current and future outlook of the economy. A higher # is better and seeing it drop so low is definitely not reassuring for Wall Street and investors.

When there is a possibility of a slow down investors and traders shoot first and ask questions later. That’s why Friday was such a disaster even though General Electric (GE) and Citigroup (C) all reported good numbers. The market was dragged down by an onslaught of selling pressure and the DJIA closed down 2.52% S&P 500 down 2.88% and the NASDAQ off a whopping 3.11%. On the bright side at least the DJIA managed to stay above 10,000. I think Friday was an overreaction to the economy slowing down. I personally have become more optimistic about the future of the economy. I expect some good earnings next week so hopefully the stock market will sweep the negativity under the rug, pull up their pants and quit crying every time some piece of data is negative. Earnings season is here for a reason to gauge the current and future results of companies. The results so far are positive and I feel we were short changed this week with the markets lackluster action. I’m sticking with the fundamentals of an individual company! The economic data has been negative for so long and I’m sick of hearing about it! Referring to an old joke from high school I say “Throw it in the trash” (Dan B you know what I’m talking about)

Enough of the negativity! Next week is my favorite week of earnings. The week the oil service companies report. I’m talking about the largest of the oil service companies. We'll see the likes of Halliburton (HAL) Weatherford International (WFT My favorite) and the largest of them all Schlumberger (SLB) report next week. (HAL) will report tomorrow, (WFT) on Tuesday and (SLB) on Friday. I have confidence that what they have to say will be good. The earnings of these companies will be a toss up since oil prices weakened after the BP oil spill and could have negatively affected earnings for this quarter, but we invest for the future and over the weeks the rig count has increased almost every week for the past 3 months. It may not seem like oil is being drilled but the increased rig count is an indicator that the drilling business is picking up and the earnings of all of these companies will benefit in the near future. The one to watch and pay attention to this week will be Schlumberger. Fund managers always pay attention to the industry leader. Good things out of Schlumberger means higher stock prices for all the oil service companies. I’m going to go out on a limb and say positive news will come from SLB on Friday. I just have a feeling! I have been waiting patiently for the energy sector to come back into favor and I think this may be the quarter that does it!

Lastly, a few other great names are set to report next week, including Apple (AAPL) on Tuesday, Goldman Sachs (GS) on Tuesday, and a family favorite Caterpillar (CAT) on Thursday. This is a very exciting week since many of my recommendations from my stock prediction game will report. I think I’m going to win!

Well that’s it for me. Enjoy the rest of this fine Sunday. I know I will! My wife is making barbecue cheddar bacon burgers for dinner tonight! YEAH BUDDY!!!

(All research was done @ http://finance.yahoo.com/)

Clay-

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