Friday Look Ahead: Intel, JPMorgan Earnings and Consumer Mood

Friday's market should feel the positive afterglow from Intel's strong earnings report.

Intel's headquarters in Santa Clara, California.
Paul Sakuma
Intel's headquarters in Santa Clara, California.

But the day could be decided by JPMorgan Chase's fourth quarter and a batch of important economic data. JPMorgan is the first major bank out with earnings this quarter, and it is expected to report $1.01 per share on revenues of $24.15 billion for the qurater. JPMorgan holds a conference call after the release at 9 a.m.

Intel , meanwhile, reported a 48 percent jump in profits. The chipmaker earned $0.59 per share, or $3.39 billion on revenues of $11.46 billion, compared to estimates of $0.53 per share, on revenues of $11.38 billion. Intel said strong sales gains would continue this quarter, and it forecast revenues of $11.1 to $11.9 billion, well above anlaysts' expectations.

"What I was really impressed by was their cap ex number...They announced a $9 billion increase in capital expenditures. We know that cap ex is the core of the story for the U.S. for the next year," said Barry Knapp, head of equities portfolio strategy at Barclays Capital.

Knapp said he'll be watching JPMorgan to see what it says about future revenue growth.

"Everybody knows the investment banking story. If the core banking business is showing encouraging signs then people will start to think there's a revenue story there," he said.

Investors have been moving money into the financial sector for the past couple of months on the prospects that the underperforming bank stocks will begin to pay dividends again. The financial sector was down about 0.4 percent Thursday, but it is the second best performing S&P sector for the week, up 1.5 percent.

Knapp also said an important element of the earnings season he watches is the number of net revisions by analysts to earnings estimates, and the direction of change.

"Net revisions have turned back higher. There are more anlaysts raising numbers relative to those cutting numbers," he said. "Tech numbers are moving back up. More analysts are raising numbers. The macro outlook has improved. It's not going to be a negative, like a year ago. There's a number of people out there though who think we'll get a correction. We think if there is one, it would be pretty shallow. Typically they start pretty early in earnings season."

Friday's data includes December retail sales and the Consumer Price Index, reported at 8:30 a.m. Industrial production is released at 9:15 and consumer sentiment is at 9:55 a.m. Business inventories are released at 10 a.m.

The Dow was down 23 Thursday to 11,731, whiile the S&P 500 was down 2 points at 1283. Treasurys saw buying, which pushed the yield on the 10-year lower to 3.307 percent.

The big action though was in the euro/dollar. The euro gained 1.6 percent against the dollar, to 1.3351.

"The euro shorts hit a perfect storm of both technical and fundamental factors that squeezed them mercilessly all day long," said Boris Schlossberg of GFT Forex. "The primary factor was (ECB President Jean Claude) Trichet's unexpected hawkishness on the inflation front, combined with weak jobless claims."

The euro was also helped by successful sovereign auctions, but it took off when Trichet said the euro zone economy faces short-term inflationary pressures, raising the prospect that the ECB could eventually hike rates. Schlossberg said the euro could continue to rise in the short term, but that it would face resistance at 1.3450.

"I kind of look at the European situation and say, 'we had a good couple of days, and then we'll have a bad couple of days,'" Knapp said.

"The European situation to me is not going to clear up until March or April. I think the catalyst for people to start to look past the European situation will be if there's growth in places like Italy, France or Spain. My view is if growth proves reasonably resilient, people will start looking past this. That's not a January event," he said.

UPDATE/Correction:An earlier version of this article misstated the amount of increase in Intel's capital expenditures, the error has been corrected.

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