China may well be the cause of another tricky day for US markets on Tuesday after Chinese consumer prices came in at a five-year low overnight. This comes on the back of falling import and export data that together suggest all is not well in the world’s second largest economy.
US markets have been following the direction oil prices of late but not even a 2% gain in WTI crude oil could help major US stock indices close higher on Monday. As such, crude prices are falling early Tuesday but US markets look set for a higher open as lower prices attract bargain-hunters looking to buy into the strong US economy.
Tuesday should see a pickup in volatility with a number of major company earnings announcements pending release.
Fashion retailer Aeropostale Inc (NYSE:ARO) is expected to open substantially higher after it raised its fourth quarter profit forecast and named two new C-level executives.
Before the market opens on Tuesday Coca-Cola Enterprises Inc (NYSE:CCE) is expected to report earnings of 42c per share and revenue of $10.76bn. This is a drop from the 45c and $11bn reported a year earlier. Asia sales are strong, revenue in the US is still growing albeit at a slower pace but European sales are declining in line with the struggling economy.
Coca-Cola is undergoing a restructuring and announced 1,800 lay-offs in January to help the company reposition itself around slowing soda sales in its core US market. Coca-Cola now owns water, tea, energy drink and now even milk brands to help it diversity away from fizzy drinks that are increasingly being associated with unhealthy lifestyles.
After rallying off a low of $20 in 2009, Coke shares hit $43 in May 2013 but have struggled to make much headway since, twice failing to surpass $45 at the tail end of 2014.
Coca-Cola has a healthy 2.9% dividend yield at current price levels which should limit downside risk in the current low-yield environment but a bigger than expected drop in sales and signs that management don’t have a grip on the situation could see the share price fall back towards $38.
CVS Health, Reynolds American, Western Union, PG&E, Wyndham and Molson Coors all report earnings on Tuesday.
Futures suggest the:
S&P 500 will open 3 points higher at 2,049 with the
Dow expected to open 29 points higher at 17,758 and the
NASDAQ 9 points higher at 4,225.
CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.