After rallying last Friday on positive results from several of the largest financial institutions on Wall Street, the market has seemed to shift into a wait-and-see approach as arguably one of the busiest weeks of this earning season comes into focus. On top of some of the largest global corporations announcing their second quarter results this week, traders and investors will also have to navigate the volatility that typically accompanies when Federal Reserve Chairman Ben Bernanke speaks, as he will to Congress the next two days.
In this week's interview, we asked Toni Turner of TrendStar Trading Group what names she's tracking this week, and her thoughts on the potential impact of Bernanke's statements.
EQ: Three of the largest banks--JP Morgan (JPM), Wells Fargo (WFC), and Citigroup (C)--posted strong Q2 earnings, helping to spark a rally on Friday, and hold relatively steady on Monday. Does this affect your opinions Financials for the near term?
Turner: Absolutely. JPMorgan is the number one bank in the U.S., and Wells Fargo is number four. Both of them had challenges to overcome and they did so nicely. Citigroup's results were mixed but it was still mainly positive. What was important was that Wells Fargo said that they had record mortgage applications, and both Wells Fargo and JPMorgan said the economy seems to be improving. It's important that our financial institutions remain strong because they're the backbone of our economy. I'm watching the Financial Select Sector SPDR (XLF), and we have a lot of banks--both large money centers and regional banks--reporting this week. As long as this sector can continue upward growth, it bodes well for the U.S. economy.
EQ: The S&P 500 bounced off its 50-day moving average thanks to Friday's rally. What are you hoping to see to determine that stocks can follow through?
Turner: I'm hoping to see the S&P 500 hold its 50-day moving average, which is about 1332, and to continue to make higher lows on a daily chart. It has been doing that since June 4, and if it can keep doing that or at least hold its lows to around the range of 1309 to 1332. If it can, perhaps we could keep at least a positive momentum going through the next two or three weeks of earnings.
EQ: This week seems to be pretty busy for earnings announcements as some of the largest companies in the world will be reporting. Are there any names in particular that you're tracking?
Turner: Today, we have Coca Cola (KO) coming out with earnings, and that's always good for a global picture. This week we also have Goldman Sach (GS), Bank of America (BAC) and US Bancorp. (USB) for Financials, and Charles Schwab (SCHW) and TD Ameritrade (AMTD) for brokers. After the close on Wednesday, we have American Express (AXP), which is a major Financial and a Dow component. Qualcomm (QCOM) is coming out Wednesday afternoon, and that's an important bellwether for communications equipment. Later in the week, we have UnitedHealth (UNH), which is the leader for health insurers. We also have Google (GOOG) and Microsoft (MSFT) after the close on Thursday, and obviously, those are two of the biggest Technology titans so we want to see what they say. Friday, we have General Electric (GE) before the bell. GE is like a mutual fund. So I always keep an eye on General Electric and its earnings report, since it covers such a wide swath of U.S. sectors.
EQ: Fed Chairman Bernanke will speak in front of Congress this week, and it seems the market is expecting some clues to further easing. Could Bernanke's statements--bearish or bullish--overshadow everything else this week?
Turner: It will for the moment. I suspect he will not talk specifically about easing, however, as long as he uses the phrases--and he's expected to--that he "expresses a degree of concern" and "a level of commitment” to bring down unemployment rates, that will suggest that the Fed could start a new asset program in the upcoming months.
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