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Apple Inc. (AAPL), Bank of America Corp (BAC) & Six Must-Watch Trends This Earnings Season

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Expect a deluge of data points as we kick off another quarterly earnings season in a few days. There will be thousands of company releases, a bevy of government and industry statistical reports, the usual herd of overly dramatic talking heads muddling the picture, and the nano-secondly stock price reactions to it all.

To keep you sane, we’re giving you a heads-up on six areas investors and talking heads alike love to discuss. For each hot topic, we’ve tapped one of our analysts to give some background and identify the trends to pay attention to.

Before we get to the bigger picture, let’s start with the most talked-about stock in the market.

1. Apple Inc. (NASDAQ:AAPL)! Apple! Apple! (Evan Niu)

Apple Inc. (NASDAQ:AAPL) is coming off an all-time record quarter, and sequential declines are in order when it reports earnings in a few weeks.

The Mac maker’s new guidance approach is expected to be more straightforward, with revenue of $41 billion to $43 billion. Gross margin outlook is for 37.5% to 38.5%, and operating expenses should be in the range of $3.8 billion to $3.9 billion.

There has been concern on the Street that Apple Inc. (NASDAQ:AAPL) could miss consensus estimates and its own revenue guidance as consumers put off purchases in hopes of new product launches.

Another possible headwind will be how Apple Inc. (NASDAQ:AAPL) guides the June-ended quarter, since the effects of consumer purchase delays will be even stronger then, as most investors are expecting new iPhones in the third quarter. If Apple Inc. (NASDAQ:AAPL) guides below the Street’s models ($40.1 billion in sales), there could be some pain in store.

Even though the near term appears muted, there’s little doubt that the latter half of the year will be packed with product catalysts. In all likelihood, a capital allocation announcement is also imminent, and Apple Inc. (NASDAQ:AAPL) is expected to materially boost its dividend and/or buyback program.

2. What’s Driving the Economy? (Morgan Housel)

Most recoveries after recessions are quick, with employment rebounding to pre-recession levels in two years. This time around has been far different, largely because we’re in a deleveraging process where consumers and businesses are shedding debt. The deleveraging process appears to be winding down, and growth in consumer spending contributed 1.5 percentage points to fourth-quarter GDP growth. Business investment has also been strong, with capital expenditures excluding defense and aircraft spending over the last two months rising 1.8% over the same period last year. In short, despite the chaos of fiscal cliffs and Cyprus meltdowns, we are investing and spending at a pretty good clip.

One of the most powerful trends likely to impact the economy is the rebound in residential construction. Housing starts are rising at an annual rate of more than 25%, and investment in structures is now a growth tailwind after being one of the largest headwinds for years. This, combined with the end of consumer deleveraging, creates prospects for healthy, sustainable (as opposed to transitory) economic growth like we haven’t seen since before the recession began in 2007.

Analysts are terrible at forecasting, and anything from a new recession to a new bubble is possible. But I feel better about the economy’s prospects now than I have in a while.

3. The Latest Battle in Retail (Demitrios Kalogeropoulos)

The online retailing fight took an interesting turn in the most recent quarter. With Best Buy Co., Inc. (NYSE:BBY) and Target Corporation (NYSE:TGT) now matching prices against Internet juggernaut, Inc. (NASDAQ:AMZN), it looks like the showrooming wars are at a stalemate — for now. But don’t worry, there’s plenty more for retailers to fight over than just prices.

eBay Inc (NASDAQ:EBAY), for example, has slashed the listing fees it charges to sellers, making a bid for some of the 2 million marketplace vendors that powered, Inc. (NASDAQ:AMZN)’s profit surprise last quarter. Google Inc (NASDAQ:GOOG) made waves, too, by testing out a new marketplace that aims to connect sellers and buyers under the umbrella of an unlimited, same-day delivery subscription.

While retailers spent the last few years fighting over customers, it looks like sellers are getting all the attention now. I’ll be watching Amazon’s results closely, as the company counts on third-party vendors for about 40% of its product sales. It can’t afford for too many of those merchants to be wooed away to rival marketplaces.

4. The Wall Street Recovery (John Maxfield)

The name of the game for big banks this earnings season involves mortgages, expenses, and trading activity. Virtually all the data suggest that the housing market is recovering. Both new and existing home sales are higher on a year-over-year basis, and home prices are on a similar upward ascent. For this trend to continue, however, and for the big banks to continue profiting from it, the nation’s largest lenders must keep … lending.

In the fourth quarter of last year, Wells Fargo & Co (NYSE:WFC) underwrote $125 billion in home loans. That’s a lot. The runner-up was JPMorgan Chase & Co. (NYSE:JPM), which originated $51 billion worth. Given last year’s historically low mortgage rates, a large majority of these stemmed from refinancing as opposed to purchase-money activity. But as interest rates have since increased, we should start seeing a change in this composition geared toward purchase-money activity. Investors should accordingly watch how banks handle this change, as it’ll have a large impact on both their bottom lines and on the housing market more broadly.

The second thing to watch is expenses. Basically every bank and their mothers have been cutting back since the financial crisis. Last year, Bank of America Corp (NYSE:BAC) cut its payroll by more than 14,600 full-time-equivalent employees. More recently, at the end of February, JPMorgan Chase & Co. (NYSE:JPM) nnounced plans to cut 17,000 jobs by the end of 2014. With this quarter’s earnings we should start to get a feel for how significant these savings will be.

Finally, anytime there’s havoc in the global markets, the trading operations of the nation’s biggest banks are affected. The culprit this go-around is Cyprus, which is confiscating a large proportion of the island nation’s uninsured bank deposits in order to unlock a 10-billion-euro bailout package from the European Central Bank and International Monetary Fund. Because this is still so recent, it remains to be seen what, if any, impact it’ll have on capital market operations.

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