What the Market Wants: Keep Your Eye on Earnings This Week

First and foremost, the week will be filled with important earning reports, along with forward guidance from most reporting companies. Google (GOOG), Texas Instruments (TXN), and Advanced Micro Devices (AMD) kick off the week for the Technology sector after today’s market. Delta Airlines (DAL) met its projected numbers and is being rewarded as we write with a 3.3% gain. The Materials Sector (XLB) is doing well following strong earnings reports by Freeport-McMoran Copper & Gold Inc. (FCX) and DuPont (DFT) this morning.

On the economic news front, Existing Home Sales were a tad below this month’s expectations as well as last month’s reading, but not by much. Otherwise, it’s is a relatively quiet weak for economic reports with Initial Jobless Claims, LEI, and New Home Sales on Friday, making up the most highly anticipated reports.

There are reports of a three-month extension of the national debt ceiling limits that would kick that explosive can down the road. Undoubtedly, reports of progress on the multitude of congressional decisions related to the economy will move the market and further continue to raise volatility from its historically low levels. Of course, major earnings surprises from major companies have the same potential, as yearend figures begin to really roll in.

Last week the markets had a generally favorable tone led by Mid-cap Value, while Large-cap Growth was the least positive of the style/caps. Mid- and Small-cap Value were the leaders in five of the past six periods on our performance charts over the past year (see market stats). The strongest sectors were Consumer Cyclicals and Non-Cyclicals followed by Industrials and Energy, all up well over 1%. Only Technology (-0.45%) and Telecomm (-0.60%) were negative.

On a forward basis, Healthcare, Financials and Telecom look the most attractive over the next 30 days while Industrials, Consumer Cyclicals, and Utilities look the least favorable. Hedging with options on the VIX or VXX related indices seems prudent due to the historically low levels of those indices.

Here are the Market Stats.

3 Stock Ideas for this Market

This week, I selected three highly ranked stocks from a custom search in MyStockFinder. I only searched for small- and mid-cap stocks--since the market seems to be favoring those caps--with great value and exciting growth or dividend prospects for you to consider.

Republic Airways Holdings Inc. (RJET) — Industrials

Nearly all analysts revised earnings upward in the last 30 days
200% projected earnings growth next quarter (up to $0.15 from $0.10, five days ago)
Forward P/E of 5
2013 EPS Growth Rate of 41%

Calumet Specialty Energy Partners LP (CLMT)—Energy

8% dividend yield
Trading for less than 10 times earnings
2012 projected EPS growth rate of over 250%
2013 projected EPS growth rate of 5%
Current quarter projected EPS growth rate of 38%

Salix Pharmaceuticals Ltd (SLXP)—Healthcare

Recent upward analyst revisions
20% 5-year growth rate
Healthcare is the highest ranked sector in our forward-looking SectorCast (see market stats)