Key Events This Busy Week: Earnings Deluge, Biden Stimulus, Fed And Forum

It’s shaping up as a very eventful week again, with the Fed’s latest monetary policy decision on Wednesday expected to be a highlight. Indeed Wednesday is a blockbuster day with Apple, Tesla and Facebook reporting to “add to the fun” as Deutsche’s Jim Reid puts it. 122 S&P 500 companies report in total over the coming 5 days in the first blockbuster week for earnings.

In terms of economic data releases, a number of countries release their Q4 GDP readings for the first time.  In politics Congress will start the high level negotiations on Biden’s proposed stimulus package. House speaker Pelosi has suggested she wants to pass something through reconciliation within two weeks. However the realities will likely extend this timeline. Nonetheless plenty of opportunities for headlines now. Staying with politics, the Italian government has a Senate vote this week (likely Wednesday or Thursday) on the annual report of its justice minister. A loss would raise the stakes for PM Conte and although fresh elections are unlikely, the uncertainty is building as to what happens next to his administration. Indeed, Italian daily Corriere della Sera has reported that Conte may quit if he loses.

Although the annual meeting of the World Economic Forum at Davos – this year titled “The Great Reset” – won’t be taking place as normal this week, a virtual event will see a number of global leaders and central bankers gather to discuss important policy issues. Attendees include Chinese President Xi Jinping, German Chancellor Merkel, French President Macron, BoJ Governor Kuroda, ECB President Lagarde and BoE Governor Bailey.

In more detail on some of the upcoming events, in terms of the Fed, economists do not anticipate any material changes to the policy settings and message from the FOMC, after they adopted outcome-based forward guidance for asset purchases in December. Furthermore, they expect the statement to be untouched, aside from acknowledging a recent softening in the data. The big question on investors’ minds will be any timetable for tapering purchases, though Powell is likely to adopt a dovish tone on this, and reiterate that it’s premature to contemplate a potential timeline given the challenging near-term outlook and remaining uncertainties.

On the data side, the main highlight will be the first look at the Q4 GDP numbers for a number of countries, including the US (Thursday), France and Germany (both Friday). Given the lockdowns that were imposed in a number of European countries late last year, DB economists are forecasting a Q4 contraction in the key European economies, including a -1.5% quarter-on-quarter decline in Germany, and a -6.2% decline for France. The US should fare relatively better however, with economists forecasting Q4 growth at an annualized rate of +4.5%.

Of the 122 companies in the S&P 500 and the 42 in the STOXX 600, the highlights are Microsoft, Johnson & Johnson, LVMH, Novartis, Verizon Communications, NextEra Energy, Texas Instruments, Starbucks, American Express, General Electric, Lockheed Martin and UBS (tomorrow). Then on Wednesday we’ll hear from Apple, Tesla, Facebook, AT&T, Abbott Laboratories and Boeing. Thursday brings Visa, Mastercard, Comcast, Danaher, McDonald’s and Samsung. And finally Friday sees reports from Eli Lilly, Chevron, SAP, Charter Communications, Honeywell and Caterpillar.

Day-by-day calendar of events courtesy of Deutsche Bank:

Monday January 25

• Data: Germany January Ifo business climate indicator, US December Chicago Fed national activity index, January Dallas Fed manufacturing index
• Central Banks: ECB President Lagarde, ECB’s Panetta, Lane, PBoC Governor Yi Gang speak

Tuesday January 26

• Data: UK November employment, US November FHFA house price index, January Conference Board consumer confidence, Richmond Fed manufacturing index
• Central Banks: ECB’s Centeno speaks
• Earnings: Microsoft, Johnson & Johnson, LVMH, Novartis, Verizon Communications, NextEra Energy, Texas Instruments, Starbucks, American Express, General Electric, Lockheed Martin, UBS
• Other: IMF releases World Economic Outlook Update

Wednesday January 27

• Data: Germany February GfK consumer confidence, US preliminary December durable goods orders, nondefence capital goods orders ex air, Japan December retail sales (23:50 UK time)
• Central Banks: Federal Reserve monetary policy decision, ECB’s Lane speaks
• Earnings: Apple, Tesla, Facebook, AT&T, Abbott Laboratories, Boeing

Thursday January 28

• Data: Italy January consumer confidence index, Euro Area final January consumer confidence, Germany preliminary January CPI, US advance Q4 GDP, personal consumption, December leading index, new home sales, January Kansas City Fed manufacturing activity, weekly initial jobless claims, Japan December jobless rate (23:30 UK time), preliminary December industrial production (23:50 UK time)
• Central Banks: ECB’s Schnabel speaks
• Earnings: Visa, Mastercard, Comcast, Danaher, McDonald’s, Samsung

Friday January 29

• Data: France preliminary Q4 GDP, Germany preliminary Q4 GDP, January unemployment change, Euro Area December M3 money supply, Canada November GDP, US December personal income, personal spending, pending home sales, January MNI Chicago PMI, final January University of Michigan consumer sentiment index, Q4 employment cost index
• Central Banks: Fed’s Kaplan speaks
• Earnings: Eli Lilly, Chevron, SAP, Charter Communications, Honeywell, Caterpillar

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Finally, looking at the US economic data, Goldman writes that the key economic data releases this week are the durable goods report on Wednesday, Q4 GDP release and jobless claims on Thursday, and PCE inflation and the employment cost index on Friday. The January FOMC meeting is this week, with the release of the statement at 2:00 PM ET on Wednesday, followed by Chair Powell’s press conference at 2:30 PM.

Monday, January 25

• 10:30 AM Dallas Fed manufacturing index, January (consensus 12.0, last 9.7)

Tuesday, January 26

• 09:00 AM FHFA house price index, November (consensus +0.6%, last +1.5%)
• 09:00 AM S&P/Case-Shiller 20-city home price index, November (GS +1.0%, consensus +0.98%, last +1.61%): We estimate the S&P/Case-Shiller 20-city home price index rose by 1.0% in November, following a 1.6% increase in October.
• 10:00 AM Conference Board consumer confidence, January (GS 88.8, consensus 89.0, last 88.6): We estimate that the Conference Board consumer confidence index increased by 0.2pt to 88.8 in January. Our below-consensus forecast reflects weaker signals from other consumer confidence measures.
• 10:00 AM Richmond Fed manufacturing index, January (consensus +17, last +19)

Wednesday, January 27

• 08:30 AM Durable goods orders, December preliminary (GS flat, consensus +1.0%, last +1.0%): Durable goods orders ex-transportation, December preliminary (GS +0.7%, consensus +0.5%, last +0.4%); Core capital goods orders, December preliminary (GS +0.7%, consensus +0.5%, last +0.5%); Core capital goods shipments, December preliminary (GS +0.7%, consensus +0.6%, last +0.5%): We estimate durable goods orders were unchanged in the preliminary December report, reflecting an increase in Boeing cancellations that more than offset higher gross orders. However, we expect strength in the core readings, with a 0.7% increase in both orders and shipments of core capital goods. This forecast reflects the further rise in business equipment production in December as well as our expectation of industrial-sector resilience during the third wave.
• 02:00 PM FOMC statement, January 26-27 meeting: As discussed in our FOMC preview, we expect the FOMC to make only modest changes to its post-meeting statement. Specifically, we expect the statement to acknowledge the recent negative growth news and worsening public health situation, but to stop short of suggesting any downgrade to the medium-term outlook.

Thursday, January 28

• 08:30 AM GDP, Q4 advance (GS +4.2%, consensus +4.2%, last +33.4%); Personal consumption, Q4 advance (GS +2.4%, consensus +3.2%, last +41.0%): We estimate +4.2% annualized GDP growth in the advance reading for Q4, following +33.4% in Q3. Our forecast reflects a modest further rise in consumption (+2.4% annualized) that embeds a worsening drag on virus-sensitive spending categories in December. We expect another large rise in housing (+39%) and equipment (+21%) investment, as well as a +1.0pp contribution from inventories (qoq ar).
• 08:30 AM Initial jobless claims, week ended January 23 (GS 870k, consensus 880k, last 900k); Continuing jobless claims, week ended January 16 (consensus 5,000k, last 5,054k): We estimate initial jobless claims declined to 870k in the week ended January 23.
• 08:30 AM Advance goods trade balance, December (GS -$84.5bn, consensus -$83.5bn, last -$86.4bn): We estimate that the goods trade deficit decreased by $1.9bn to $84.5bn in December compared to the final November report, reflecting an increase in exports and lower imports.
• 08:30 AM Wholesale inventories, December preliminary (last flat); Retail inventories, December (last +0.7%)
• 10:00 AM New home sales, December (GS +3.0%, consensus +2.3%, last -11.0%); We estimate that new home sales rose by 3.0%, reflecting higher permits and starts.
• 11:00 AM Kansas City Fed manufacturing index, January (consensus +12, last +14)

Friday, January 29

• 08:30 AM Personal income, December (GS -0.1%, consensus +0.1%, last -1.1%); Personal spending, December (GS -0.5% consensus -0.4%, last -0.4%); PCE price index, December (GS +0.38%, consensus +0.3%, last +0.01%); Core PCE price index, December (GS +0.25%, consensus +0.1%, last +0.01%); PCE price index (yoy), December (GS +1.24%, consensus +1.2%, last +1.13%); Core PCE price index (yoy), December (GS +1.41%, consensus +1.3%, last +1.38%): Based on details in the PPI, CPI, and import prices reports, we estimate that the core PCE price index rose 0.25% in December, corresponding to a year-over-year rate of +1.41%. Additionally, we expect that the headline PCE price index increased 0.38% in December, corresponding to a year-over-year rate of +1.24%. We expect a 0.1% decline in personal income and a 0.5% decline in personal spending in December.
• 08:30 AM Employment cost index, Q4 (GS +0.6%, consensus +0.5%, prior +0.5%): We estimate that the employment cost index rose 0.6% in Q4 (qoq sa), which would leave the year-on-year rate unchanged at +2.4%. Our forecast reflects a decline in labor market slack and the sequential pickup in the Atlanta Fed wage tracker. We also note scope for a possible compensation rebound in incentive-paid industries.
• 09:45 AM Chicago PMI, January (GS 59.0, consensus 58.0, last 58.7): We estimate that the Chicago PMI edged up by 0.3pt to 59.0 in January, reflecting improvement in other manufacturing surveys and scope for a boost from the supplier deliveries component.
• 10:00 AM Pending home sales, December (GS -1.0%, consensus -0.5%, last -2.6%): We estimate that pending home sales declined by 1.0% in December, reflecting a further deceleration in regional home sales data.
• 10:00 AM University of Michigan consumer sentiment, January final (GS 79.5, consensus 79.2, last 79.2): We expect University of Michigan consumer sentiment to edge 0.3pt higher from the preliminary estimate for January, in which the index declined by 1.5pt. The report’s measure of 5- to 10-year inflation expectations increased by two-tenths to 2.7% in the preliminary report.
• 01:00 PM Dallas Fed President Kaplan (FOMC non-voter) speaks: Dallas Fed President Robert Kaplan will speak at a forum hosted by the North Dallas Chamber of Commerce and Texas Oil & Gas Association.

Source: DB, Goldman, BofA