US Earnings Preview

Five S&P 500 companies are confirmed to report: Constellation Brands (STZ), Darden Restaurants (DRI), Jabil Circuit (JBL), Nike (NKE) and Walgreen (WAG). A total of 27 companies are on the calendar.

We are still a week away from the “official” start of third-quarter earnings season. Alcoa (AA) will release its results on Oct 7. The majority of companies will not start reporting until the latter half of October, however.

The economic calendar is most active towards the second half of the week with the release of the ISM manufacturing survey and the monthly employment surveys.

• Tuesday: September Conference Board consumer confidence survey, July Case-Schiller home price index
• Wednesday: September Chicago PMI, September ADP employment survey, final Q2 GDP, weekly crude inventories, weekly mortgage applications
• Thursday: September ISM manufacturing survey, August personal income and spending, August pending home sales, September auto sales, September Monster employment index, September Challenger employment survey, August construction spending, weekly initial jobless claims, weekly natural gas inventories
• Friday: September unemployment and nonfarm payrolls, August factory orders

Fed Chairman Ben Bernanke will appear before the Congressional Black Caucus Foundation on Tuesday morning. Also on Tuesday, Fed General Counsel Scott Alvarez will testify before the House financial services committee, Fed Governor Kevin Warsh will participate in a panel discussion about economic policy at the Chicago Fed Bank and Philadelphia Fed Bank President Charles Plosser will speak about the economy at the Lehigh Valley Economic Outlook.

On Wednesday, Vice Chairman Donald Kohn will discuss the Fed’s exit strategy at the Cato Institute. Cleveland Fed President Sandra Pianalto will speak in New York on Thursday evening.

Monday is Yom Kippur, the holiest day on the Jewish calendar. Therefore, volume should be lighter than usual.

Given the calendar, I expect most of the market’s action to occur during the latter part of the week. Though the Dow failed to get much above 9,900, I continue to think there is enough short-term bullish sentiment to get the average above the 10,000 mark. This said, investors should realize that getting above 10K amounts to a group hug for the markets rather than signaling any significant change.

Companies That Could Issue Positive Earnings Surprises

Earlier this month, Xyratex (XRTX) preannounced fiscal third-quarter revenues of approximately $247 million. CEO Steve Barber credited a rebound in the economy and the storage market for helping sales. All 3 brokerage analysts raised their profit projections in response, pushing the Zacks Consensus Estimate 13 cents higher to a profit of 10 cents per share. XRTX topped expectations last quarter by 8 cents, ending a streak of 3 consecutive disappointments. Xyratex is scheduled to report on Wednesday, Sep 30, at the close of trading.

Companies That Could Issue Negative Earnings Surprises

Walgreen (WAG) has missed expectations for 3 consecutive quarters. Ahead of the company’s fiscal fourth-quarter report, nearly a third of the covering brokerage analysts have cut their profit projections. The revisions have resulted in the Zacks Consensus Estimate falling by a penny to 39 cents per share. The most accurate estimate is more bearish at 37 cents per share. Walgreen is scheduled to report on Sep 29, before the start of trading.

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