JPMorgan's David Kelly: What to look for in the week ahead

The following is a weekly commentary written by David Kelly, chief market strategist at JPMorgan Funds. Time for a breather. The week ahead should be relatively quiet across a number of fronts. Economic releases include international trade and inventory data for December. As usual, the Commerce Department had to use placeholders for these numbers in calculating their first estimate of fourth quarter GDP and their assumptions appear to have been fairly conservative, opening up the possibility of an upward revision from the already strong 5.7% rate initially reported. Thursday's report on retail sales will include revisions which could also impact 4th quarter GDP numbers, although presumably market participants will be more interested in the January data. And consumer sentiment on Friday will be interesting to see if the cheering effects of a recent accumulation of relatively positive economic news can overcome the depressing effects of persistently negative media coverage of it. On the earnings front, there will another thick batch of 4th quarter earnings reports including numbers from Disney, Prudential and Allstate, although it is hard to see any of these changing the impression of a surprisingly strong earnings season, with S&P500 operating earnings likely crossing the $17 mark for the quarter – well ahead of pre-season estimates. Elsewhere, the mid-Atlantic states will be digging out from some monster snows. These weather events can have a significant effect on economic numbers both by depressing retail sales and slowing hiring in what will be the “survey week” for the February jobs report. Presumably, there will also be further rumbling about budget troubles in Europe and stock market losses of the last three weeks. However, revisions, weather effects and sour attitudes don't change the general trend of a U.S. economy moving inexorably forward from recovery to expansion, a trend which should still push stock prices and Treasury interest rates higher as the year proceeds.