What to Watch on Wall Street This Week: Last Hurrahs, First Trades and Fresh Friday Horrors

A USDA inspector examines shell eggs at Cal-Maine Foods in Green Forest, Ark., in 2010.
U.S. Department of Agriculture/FlickrA USDA inspector examines shell eggs at Cal-Maine Foods in Green Forest, Ark., in 2010.
You can never know in advance all the news that will move the market in a given week, but some things you can see coming. From a shelled egg specialist cracking open its latest quarterly results to a successful year for stocks coming to a close, here are some of the things that will help shape the week that lies ahead on Wall Street.

Monday -- Putting All Your Eggs in the Same Basket: Cal-Maine (CALM) makes a cozy living selling shelled eggs, and that's no yolk. Analysts see Cal-Maine reporting a profit of $1.06 a share for its latest quarter when it reports on Monday, well ahead of the 60 cents a share it posted a year earlier.

Cal-Maine will be the last major company to announce fresh financials in 2013. Most companies will be avoiding making waves during the holiday-abridged trading week.

Tuesday -- Let's Send Off 2013 in Style: The final trading day of the year will give the major market exchanges one last chance to pad what has already been a great year of returns. The S&P 500 (^GPSC) has managed to gain 28.5 percent in 2013 through Dec. 25, and the tech-stacked Nasdaq Composite (^IXIC) has fared even better with its 37.6 percent return.

There won't be a lot of time to potentially pad this year's solid run. The market closes three hours earlier to give traders and investors plenty of time to head out to their New Years Eve fetes.

Wednesday -- Happy New Year: The market is closed in observance of New Years Day.

It's going to be hard for 2014 to live up to the market's spectacular returns of 2013. %VIRTUAL-article-sponsoredlinks%Stock gains have surpassed earnings growth, making stocks fundamentally more expensive than they were a year ago based on earnings multiples. There will also naturally be uncertainties as to what will happen as the Fed scales back its quantitative easing efforts that have kept interest rates in check. It also remains to be seen what kind of impact increasing health costs will have on corporate America.

This doesn't mean that 2014 will be a dud. The economy has been showing signs of life, and that could very well translate into stronger earnings than analysts have been expecting. Either way, the market will have plenty to prove in the year ahead, but that will have to wait until Thursday when the market kicks off the first trades of 2014.

Thursday -- Package Slip: When it comes to packaging, Landec (LNDC) is a leader in the food and bio-materials markets. The materials science company uses its proprietary polymer and other technologies to do everything from offering fresh-cut veggies to providing medical products to the ophthalmic, orthopedic and veterinary markets.

Landec reports Thursday afternoon. Analysts see an 8 percent increase in revenue, but those same pros see a sharp drop in profitability. Landec fell well short of expectations last time out, so it will be important for it to at least meet Wall Street's profit target.

Friday -- Ghosts at the Multiplex: The "Paranormal Activity" franchise has elevated the "found footage" genre of horror films where a movie is shot form the perspective of amateur videographers chronicling fictional disturbances.

The latest installment -- "Paranormal Activity: The Marked Ones" -- hits movie theaters Friday. January may be an odd time for Viacom's (VIA) Paramount on this release. The first four entries debuted in late September and October to cash in on the Halloween season. It will be interesting to see how the new movie fares at a time that's historically barren of horror films.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

If You Only Know 5 Things About Investing, Make It These
See Gallery
What to Watch on Wall Street This Week: Last Hurrahs, First Trades and Fresh Friday Horrors

Warren Buffett is a great investor, but what makes him rich is that he's been a great investor for two thirds of a century. Of his current $60 billion net worth, $59.7 billion was added after his 50th birthday, and $57 billion came after his 60th. If Buffett started saving in his 30s and retired in his 60s, you would have never heard of him. His secret is time.

Most people don't start saving in meaningful amounts until a decade or two before retirement, which severely limits the power of compounding. That's unfortunate, and there's no way to fix it retroactively. It's a good reminder of how important it is to teach young people to start saving as soon as possible.

Future market returns will equal the dividend yield + earnings growth +/- change in the earnings multiple (valuations). That's really all there is to it.

The dividend yield we know: It's currently 2%. A reasonable guess of future earnings growth is 5% a year. What about the change in earnings multiples? That's totally unknowable.

Earnings multiples reflect people's feelings about the future. And there's just no way to know what people are going to think about the future in the future. How could you?

If someone said, "I think most people will be in a 10% better mood in the year 2023," we'd call them delusional. When someone does the same thing by projecting 10-year market returns, we call them analysts.

Someone who bought a low-cost S&P 500 index fund in 2003 earned a 97% return by the end of 2012. That's great! And they didn't need to know a thing about portfolio management, technical analysis, or suffer through a single segment of "The Lighting Round."

Meanwhile, the average equity market neutral fancy-pants hedge fund lost 4.7% of its value over the same period, according to data from Dow Jones Credit Suisse Hedge Fund Indices. The average long-short equity hedge fund produced a 96% total return -- still short of an index fund.

Investing is not like a computer: Simple and basic can be more powerful than complex and cutting-edge. And it's not like golf: The spectators have a pretty good chance of humbling the pros.

Most investors understand that stocks produce superior long-term returns, but at the cost of higher volatility. Yet every time -- every single time -- there's even a hint of volatility, the same cry is heard from the investing public: "What is going on?!"

Nine times out of ten, the correct answer is the same: Nothing is going on. This is just what stocks do.

Since 1900 the S&P 500 (^GSPC) has returned about 6% per year, but the average difference between any year's highest close and lowest close is 23%. Remember this the next time someone tries to explain why the market is up or down by a few percentage points. They are basically trying to explain why summer came after spring.

Someone once asked J.P. Morgan what the market will do. "It will fluctuate," he allegedly said. Truer words have never been spoken.

The vast majority of financial products are sold by people whose only interest in your wealth is the amount of fees they can sucker you out of.

You need no experience, credentials, or even common sense to be a financial pundit. Sadly, the louder and more bombastic a pundit is, the more attention he'll receive, even though it makes him more likely to be wrong.

This is perhaps the most important theory in finance. Until it is understood you stand a high chance of being bamboozled and misled at every corner.

"Everything else is cream cheese."
Read Full Story
  • DJI28363.66152.840.54%
  • NIKKEI 22523516.5942.320.18%
    Hang Seng24918.78132.650.54%
  • USD (PER EUR)1.180.00180.15%
    USD (PER CHF)1.110.00270.24%
    JPY (PER USD)104.63-0.2130-0.20%
    GBP (PER USD)1.310.00100.07%

From Our Partners