Aluminum company Alcoa Inc. (AA) reports earnings after the closing bell, kicking off the second-quarter earnings season.
Earnings season is one of my favorite times of the year, and investors should agree since this is the time when the wheat is separated from the chaff. Strong companies that continue to accelerate earnings are well rewarded while underperforming companies get left behind.
As far as Alcoa is concerned, the analyst community expects its sales to drop nearly 12% and its earnings to plunge over 81%, so I don’t expect this to be a particularly good earnings announcement. Regardless of how it turns out, I’ll have the details for you tomorrow.
We also received the latest consumer credit figures from the Fed, and the results were pretty shocking—in May, American consumers racked up a whopping $17.1 billion in debt, the largest surge in nearly five years!
This dwarfed the consensus estimate by a whopping 71% as consumers put an extra $8 billion on their credit cards and added $6.2 billion in student loans. The good news is that consumers are clearly spending more, but we’ll still need to watch debt carefully because it could be a sign that Americans are hard pressed to pay off their loans.
Looking ahead to the rest of the week, we have several U.S. economic reports that I’ll be keeping my eye on:
Wednesday: Balance of Trade Report. Economists expect the trade deficit to widen slightly to $50.6 billion in May. The trade deficit, particularly the imbalance with China, is becoming a hot button issue for our two Presidential candidates, so this report will be more important than ever.
Wednesday: Wholesale inventories. While not the biggest mover of the U.S. economy, inventories do play a role in how companies spend their money and their hiring practices. We’ll receive sales and inventory data from wholesalers in May.
Thursday: Jobless claims. This weekly report provides a snapshot of how the jobs market is doing; if jobless claims rise above 400,000 it’s typically a sign that employment is decelerating. Last week, jobless claims dropped 14,000 to 374,000, and economists expect it to drop another 14,000 this week.
Friday: Producer Price Index. Lately, the Fed has done a lot to manipulate the yield curve and to keep interest rates near zero—and a good portion of the economist community believes that this could create inflationary pressures later down the road. The PPI is a measure of prices at the wholesale level so it is one of our first signs of inflation. Currently, economists expect the PPI to rise 0.2%.
Make sure to stay tuned for the latest details on these reports and much, much more as we head into the second-quarter earnings season!