What to Expect From Earnings
Did you catch René on the Closing Bell this week? If not, we have the recap of her outlook and other guests' on this year's earning season and how the European markets are going to affect us.
René Nourse: We have the energy sector that’s really been hit pretty bad and of course the weather is still playing a major role in here, but I do think that the consumer is really going to rise to the occasion. We’ve actually seen the consumer discretionary sector be very strong, for example, auto units are up a million year over year and the retail sector has been pretty strong in some areas. Where we are going to have an offset in one area, I think the consumer is going to pick up in the other.
Kelly Evans: That would necessarily be coming from gasoline I would think, right?
René Nourse: Absolutely, but some of that actually is still coming from some wage growth. We’ve been seeing that across all sectors as well. There’s a lot of different dynamics here. This quarter is messy, it’s going to be very uneven, but I think the consumer is going to rise to the occasion.
Kelly Evans: Stephen Wood, what’s your assessment of the market right now as we see this hesitancy as it gets to this big number like 5,000 in the NASDAQ?
Stephen Wood, Russell Investments: The action is coming out of Europe right now. We see what’s happening with European Central Bank negative yields in Europe so I think everyone’s on dollar watch right now with earnings down below the federal reserve so I think that’s going to be a factor.
Kelly Evans: Why Stephen? We saw the German tenure go negative today. That’s just an incredibly and crazy, historic thing. Why does this matter to the American markets?
Stephen Wood: Well what we are looking at here is a pull into European liquidity, so the European Central Bank is trying to reproduce the success the American Federal has had with their quantitative easing, and they’re getting it without doing anything so far, so we are seeing a global quantitative easing coming from the Europeans trying to stimulate and create liquidity, drive the Euro down, and goose up their economies. The Japanese are doing it as well. So what we are seeing is the Federal Reserve as the last person out of this. But I think right now the Fed is still on dollar watch and they’ll probably wait until September. My take is that they’re not data dependent until they get positive, so starting with the September meeting, they’ll start looking at data and the dollar drive really announces that.
Bill Griffeth: Speaking with Anthony, we’re also getting some inflation reports as well. I know the Fed will be watching that very carefully. What are your expectations there?
Anthony Chan, Chase Chief Economist: I think we will start to see a little bit of life on the inflation front. I think energy is not going to be as much of a factor. We know the economy will get better after the cold weather. We saw that last year. In fact a decline in the first quarter will not be as great as it was last year in the first quarter’s yields, so we’ll start to get that bounce back in retails sales, and maybe even in industrial production and as that starts to occur, I think a lot of the anxiety that’s out there is going to go away. Remember, the dollar has been declining for quite some time so companies are learning to maneuver. It will be fascinating to hear on the guidance of how companies are dealing with the stronger dollar and how much they are benefitting from those lower energy prices. That’s all going to come out in the guidance. That’s going to shape how the markets handle and digest all of this information as it comes out.
Kelly Evans: René, I want to ask you about something that Stephen Wood brought up which we’ve heard from a lot of guests on CNBC. The European Central Bank is going to do what the US Federal Reserve did, right? They’re going to do quantitative easing and that gave wind to the back of US stocks for years now, right? And the same thing is going to happen over in Europe. Are you telling your clients to put money over in Europe because of that or are you telling them to stay domestic because of that?
René Nourse: Absolutely. And actually, as far back as last year we definitely have lent our playbook I think to the European marketplace and Japan for that matter, but Europe I think offers some fantastic valuations and if you are early to the party or late to party, it doesn’t really matter because I think that run is going to take place for quite some time. Europe is very attractive and Japan as well.