Holiday sales, jobs report, European debt -- feh! Earnings season is upon us and now the fun really begins. After plummeting from 2007 through 2009, U.S. corporate profits came back strong by 2010. According to the Bureau of Economic Analysis, corporate profits before taxes rose to a record $1.97 trillion in the third quarter of 2011. This week, companies will reveal fourth quarter results (expected to rise 7.2 percent from a year ago) and perhaps more importantly, they will tell us what 2012 is looking like.
You might not realize it, but corporate profits as a percent of GDP are near their post-World War II high of about 10 percent. The question investors are asking is whether profits can continue to rise if the economy is only set to increase by 2-2.5 percent. Analysts, a naturally rosy bunch, expect S&P 500 profits to grow 10 percent this year.
Those profits come with a caveat: Don't expect sizzling results from the financial sector. Analysts have been slashing estimates faster than banks can slash jobs and compensation. The Occupy Wall Street crowd might relish the fact hat compensation for Wall Street employees could fall by 30 percent from a year ago.
In between Alcoa and J.P. Morgan, all eyes will be on Europe, where Italy and Spain are struggling to borrow money at reasonable rates.
-- DJIA: 12,359, up 1.1% on week
-- S&P 500: 1277, up 1.6% on week
-- NASDAQ: 2674, up 2.6% on week
-- February Crude Oil: $101.56, up 2.7% on week (Oil prices peaked at $113.93 in April 2011)
-- February Gold: $1,616.80, up 3.2% on the week
-- AAA National Average Price for Gallon of Regular Gas: $3.36
FACTOIDS OF THE WEEK: Employment edition
It's not over, but we are finding our way out of the woods. The December jobs report showed broad based gains, as 200,000 jobs were created and the unemployment rate fell to 8.5 percent. Let's not get too crazy about that 2-handle - 42,000 of the 200,000 were those nice couriers and messengers who delivered the holiday bling. Chances are most of those jobs will disappear this month. Still, take the news for what it's worth -- a good month, amid a long slog.
-- Jobs created: +200,000 (November and October revised down by 8,000. 212,000 private sector jobs added, 12,000 government jobs lost)
-- 2011 jobs created: 1.6 million (1.9 million private sector, 280,000 government jobs lost)
-- Unemployment rate: 8.5 percent (lowest rate since February 2009, down from 9.4 percent a year ago)
-- Under-employment rate (marginally-attached, part-time): 15.2 percent (from 15.6 percent last month, down from 16.1 percent a year ago. In 2007, the rate was 8 percent.)
-- Total number of unemployed: 13.1 million (from 13.3 million)
-- Total jobs lost since beginning of recession in 2007: 6 million
-- Long-term unemployed (jobless for 27 weeks and over): 5.6 million representing 42.5 percent of the total unemployed (from 5.7 million)
-- Manufacturing: +23,000 (+225,000 for year)
-- Health care: +23,000 (+315,000 for year. One in five new jobs came from the health-care sector in 2011)
-- Food/Beverage services: +24,000 (230,000 for year)
-- Retail: +28,000 (+240,000 for year)