NEW YORK ( TheStreet) -- The market did a good job of digesting Monday's mammoth rally on Tuesday, despite the latest round of uncertainty about the particulars of what's going on with Europe, namely the hang-up with Slovakia. The sentiment seems to be this won't be a big stumbling block but we'll all have to stay tuned to find out for sure, and futures did take a hit when the news that Slovakia's parliament had voted against expansion of the eurozone rescue fund. As always, nothing's a done deal until it's a done deal, so a degree of trepidation about the righting of the ship across the pond is warranted. Meanwhile, back stateside, recession fears seem to have given way to recession yawns. The recent hand wringing about whether we were in for a double dip or not when the data took a turn for the worse late in the summer has prompted some to ask whether it even matters. Citigroup analyst Steven Wieting isn't in that camp. Wieting is skeptical the U.S. even has the wherewithal to sink into another recession at the moment -- we haven't really recovered enough -- but he theorizes that it would be look out below if that scenario did come to pass, wondering out loud "how investors would process an affirmative answer?" in commentary on Tuesday. "A new downturn driven by sovereign debt strains would suggest a continuation of the 2008 credit shock instead of a simple recession/recovery pattern," he wrote. "Market pressures now suggest a lack of sufficient steps to restore the financial system to health, at least outside the U.S. (where long-term fiscal sustainability is the question). The all-too apparent risk is that U.S. financial conditions follow indiscriminately." Wieting said financial conditions suggest the chance of recession is around 25%, noting that the plunges in employment and production that accompany recessions would be difficult to muster under current conditions. "We have difficulty seeing how that will unfold with 6.7 million fewer working, no housing recovery to date and a small inventory rebound, among other dissatisfying recovery statistics," he said. So we're kind of protected from another recession because things are still pretty awful. Silver linings ain't what they used to be.
As for Wednesday, Wal-Mart ( WMT) is holding its annual investor day, kicking off the festivities in Bentonville at 9 am ET. Shares of the world's largest retailer have held their own, rising 1% in the past year, but real appreciation is being held back by the company's difficulties in getting domestic same-store sales growth back into positive territory. The bears slightly outnumber the bulls on the stock these days with 15 analysts at either hold (14) or underperform (1) vs. 13 at strong buy (9) or buy (4), and the 12-month median price target of $59 implies modest potential upside of 7.3% from Tuesday's closing price of $54.72. The shares have a forward annual dividend yield of 2.7% at current levels, which is one reason investors may want to consider building a position ahead of a rebound in U.S. sales. It's possible Wal-Mart will provide some color on its outlook but not all that likely. The company doesn't close its fiscal third quarter until the end of October, and it's grown increasingly tight-lipped in recent years since it stopped reporting monthly same-store sales numbers in the summer of 2009. The other Dow component in the news will be Alcoa ( AA), which disappointed with its quarterly report after the closing bell, missing Wall Street's profit view by more than 30% despite beating on the top line. The implications for the stock likely won't be that dramatic as nothing special was kind of priced in. The shares hit their 52-week low of $8.45 on Oct. 4, and wasn't able to enjoy the build back above $10 for very long, dropping 55 cents, or 5.3%, to $9.75 in after-hours action. The market may ultimately end up being more spooked by what the company's comments about weakness in its Europe markets means for the rest of third-quarter earnings season, which was looking just okay to begin with. PepsiCo ( PEP) is the headline quarterly report before the opening bell. The average estimate of analysts polled by Thomson Reuters is for a profit of $1.30 a share in the soda and snack maker's fiscal third quarter ended in September on revenue of $17.18 billion. The company noted rising commodity costs when it reported its second-quarter results in July, and said it was implementing some price increases, so investors will be looking to see what impact that had on demand.
Purchase, N.Y.-based PepsiCo is typically right around the consensus view, reporting in-line results in three of the last eight quarters and coming in a penny ahead three other times during that span. The stock is down roughly 7% so far in 2011, but has surrendered more than 15% since hitting a 52-week high of $71.89 on May 19. Gabelli & Co. issued a buy recommendation for PepsiCo shares on Sept. 30, highlighting growth expectations for the $102 billion global savory snacks market, of which it estimates the company has a 35% market share. "The global savory snacks market is projected to grow around 4.5% per year to $127 billion by 2015," the firm said. "PepsiCo's global snacks business should grow faster (+5.5% per year) benefiting from growth in emerging markets with relatively low per capita consumption rates and projected formation of 285 million new middle-class households by 2015." Gabelli also said it expects the company to be returning cash to shareholders over the next few years. "We estimated PEP will generate about $37 billion of free cash flow through 2015 (after $18 billion in total capital expenditures), and believe excess cash will continue to be returned to shareholders via share buybacks and dividends," the firm said. "We do not anticipate any major acquisitions." The majority of Wall Street is bullish on PepsiCo with 10 of the 17 analysts covering the stock at either strong buy (2) or buy (8), and the 12-month median price target sitting at $72. Insurance company Progressive ( PGR) also reports on Wednesday morning with the average analysts' view calling for third-quarter earnings of 28 cents a share on revenue of $3.9 billion. The stock is down 11% in the past year as net income has fallen and revenue has leveled off with the company lowering policy prices in an effort to chase growth. Another report that may get some attention is Host Hotels ( HST), which is expected to post a quarterly loss of 4 cents a share. Apologies for jumping the gun on this yesterday but it turns out Wednesday will see the release (we hope!) of the minutes of the most recent meeting of the Federal Open Market Committee on Sept. 20-21, which are bound to shake up trading when the headlines start to hit the wires at 2 p.m. ET.
The inside dope on how the central bank members arrived at Operation Twist will be dragged into the light, and we'll here a bit more detail about the objections of the three dissenters -- Fisher, Plosser and Kocherlakota -- as well as get a clearer picture on Federal Reserve Chairman Ben Bernanke's view of the economy's health. In his recent congressional testimony, Bernanke said the recovery is faltering, and the market handled it in stride, but sometimes having the same sentiment spelled out in the FOMC minutes can be jarring for stocks. -- Written by Michael Baron in New York.