April 16, 2018

Quincy Krosby: Connecting the Dots

Fears that the targeted missile strike in Syria by the U.S. and its allies could cause a widening of the conflict in the region have not yet impacted the market, while investors will turn attention to earnings, retail sales and a parade of speakers from the Federal Reserve, Prudential’s Chief Market Strategist Quincy Krosby said Monday in her weekly “Connecting the Dots” outlook.

The targeted strike on Syrian chemical weapons facilities late Friday night remains in the headlines as Russia threatens that there will be “consequences.” For now, however, market reaction has been muted.

“We worked in conjunction with our allies which helped assuage any fears of the U.S. going it alone,” Krosby said. “The market is ready to move on, as we saw gold prices come down, suggesting the markets are less worried and not seeking out safe havens.”

While China-U.S. tariff issues continue to hover over headlines, the administration has suggested that membership in the Trans-Pacific Partnership (TPP) may be open for discussion. In addition, positive comments from the administration regarding the renegotiated NAFTA could help the market’s tone this week, Krosby said.

“There are a number of reasons the White House could go in the direction of joining the Trans-Pacific Partnership, related to geopolitical considerations for the U.S.,” Krosby said. “This has been seen as a positive for the market.”

Earnings reports this week will cover a broad range of sectors. Analysts will be focused on corporate guidance, including what companies are projecting for sales growth, their views on the economic backdrop domestically and abroad, as well as their plans for deploying tax cut–related cash.

“Last Friday, the banks did report strong, solid numbers on the top and bottom lines, but we saw a clear sell-off of bank stocks at the end of the day,” Krosby said. “There were worries going into the weekend regarding domestic politics and Syria, and many of the traders may have decided to take money off the table.”

Federal Reserve speakers are out in full force this week before they go into a blackout period preceding the next meeting, speaking on the economy, monetary policy and banking regulations.

“Market participants are interested in the Fed’s path of rate moves this year; whether or not there will be two, or even three more rate increases,” Krosby said.

Retail sales data released today should be positive following three months of weak reports. This should help assuage concerns over the strength of the U.S. consumer.

“Retail sales numbers are extremely important in the economic equation,” Krosby said. “The expectations are that today’s report will be positive, suggesting that the U.S. consumer is enjoying good health. We have a market that has been focusing on the headlines, we hope that these numbers will return the focus to fundamentals.”

 

Earnings to watch:

Bank of America, Netflix, Charles Schwab, Goldman Sachs, IBM, Johnson & Johnson, United Health, CSX, Comerica, Northern Trust, Abbott Labs, American Express, Morgan Stanley, U.S. Bancorp, Alcoa, Novartis, Blackstone, Bank of NY Mellon, KeyCorp, E-Trade, BB&T, Philip Morris, Nucor, Proctor & Gamble, Honeywell, General Electric, Baker Hughes, Sun Trust, Schlumberger, Kansas City Southern, State Street, Stanley Black & Decker, Cleveland-Cliffs, Roper Industries, United Airlines.

 

This week’s important data releases:

Monday: Retail Sales; National Association of Home Builders (NAHB) survey

Tuesday: Housing Starts; Building Permits; Industrial Production

Wednesday: Beige Book

Thursday: Leading Indicators

 

To talk to Quincy Krosby about her views of the market, contact Lisa M. Bennett or Dara Scerbo.

 

Read Quincy Krosby’s full Q2 Market Commentary: Regime Change.

The views and opinions are those of the author at the time of publication and are subject to change at any time due to market or economic conditions. This is solely for informational purposes. This is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.

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Contact(s)

Lisa M. Bennett
phone 973-802-2894

Dara Scerbo
phone 973-367-9318