The Greek's Week Ahead has been engineered to prepare you for the events that could impact your portfolio this week.
Whether you are Tiger Woods, Jimmy Rollins or Benjamin Bernanke, follow through matters. Woods' discipline gets him on the green consistently, while Rollin's pure will and sweet stroke got him to first base in the clutch moments this year. The heat is on Ben now to follow through with what he does best.
When the Fed cut its target rate by 50 basis points in September, it did more than just satisfy the credit market's immediate crisis of confidence and demand for liquidity, it set expectations as well. While the Wall Street Greek has warned as early as the day of the Fed action, that the Fed move would be
one and done, we believe the market is counting on something more. After having grown accustomed to the style of the since published Alan Greenspan, the market cannot help but expect ongoing rate reductions as follow through to the initial medicine inducing sharp cut.
Expectations for further rate reduction have surely declined since Friday's revision of the August nonfarm payroll data, where job additions proved to measure 89,000, versus the initial estimate for a decline of 4,000 of the nation's employed. However, your favorite Greek still believes equity prices have a good deal of expectation built into them for
rate cut follow through. So, while the current rally may last another week, or three, it will have to meet its maker ominously on Halloween, when the Federal Open Market Committee issues its next policy decision and statement. Now, let's take a look at this week's market-moving event schedule.
The Week Ahead...
Columbus Day brings no break for the stock market, while fixed income markets are closed on
Monday
. Markets in Japan and Canada are also shut down to begin the week. However, mainland Chinese markets reopen trading for the first time in a week. In this regard, we almost named this edition "Deja Moo Shu," as this past February's Asian market turmoil also occurred after a week's hiatus. Recall, February's China market crash followed the weeklong celebration of Chinese New Year. A slew of bearish data and news reached the U.S. market during China's time off in February, and when markets reopened, though two days into that trading week, Chinese markets retreated. Back then, the Wall Street Greek presciently warned of Chinese share risk in our issue, "
The Greek's Week Ahead - Emerging Market Glam," just two days prior to the event, and then again the day before it occurred. Had the nonfarm payroll additions not presented such a favorable result, and August revision on Friday, we would have anticipated a similar impact to Chinese markets this week. As it stands now, Asian equities seem poised to make yet another great bubble building move higher.
While earnings season officially kicks off on Tuesday, Monday brings an important report from Yum! Brands (
NYSE: YUM). The rest of the day's light reporting schedule includes Aracruz Celulose S.A. (
NYSE: ARA), Merix Corp. (
Nasdaq: MERX) and Peoples Educational Holdings (
Nasdaq: PEDH).
Tuesday's
news slate begins with the 7:45 a.m. EDT Weekly Same-Store Sales Report from the International Council of Shopping Centers. Last week's data indicated no change in sales on a week-to-week basis, while transaction proceeds rose 2.7% over the prior year period. On the surface of it 2.7% seems like decent growth, but comparable results were running hotter a year ago and even earlier this year.
At 2:00 p.m., the Federal Reserve releases the minutes from its September FOMC Policy meeting. The market will likely be keen to discover the details of the meeting's discussion, as it could reveal future action or bias. We expect the Fed had already decided to wait on data before acting again, and after Friday's Employment Situation Report, we believe the Fed is highly unlikely to reduce rates further in October. The Fed will also release the minutes from its August 16 conference call, through which it initially decided to act upon the discount rate. The August notes will be missing a great deal of color, as St. Louis Fed Chief, William Poole, was not in attendance. However, all ears will be attuned to the "calamitous" Mr. Poole on Tuesday, as he is scheduled to make an economic address of his own. San Francisco Fed President Janet Yellen is also scheduled to speak publicly on Tuesday.
With lithium batteries catching fire under various circumstances and in several products and pockets, we wonder if it's a good idea to engineer them into automobiles! Barron's reported that Ener1's EnergDel unit will display its own battery for hybrid vehicles on Tuesday.
Earnings season begins with the traditional report from Alcoa (
NYSE: AA). The remainder of the day's schedule includes California Pizza Kitchen (
Nasdaq: CPKI), Cantel Medical (
NYSE: CMN), CardioDynamics International (
Nasdaq: CDIC), Century Bancorp A (
Nasdaq: CNBKA), Innovo Group (
Nasdaq: INNO), Oxford Industries (
NYSE: OXM), Mosaic (
NYSE: MOS), Vasogen (
Nasdaq: VSGN) and a handful of others.
Wednesday's
economic calendar is highlighted by the Mortgage Bankers' Association morning reporting of Purchase Applications. In coming weeks, this regular report might provide insight into just how well homebuilder price slashing is working to incentivize purchases and impact the saturated inventory situation. Refinancing results, on the other hand, have and should continue to benefit from the
government and banks' goal to help some subprime borrowers out of bad situations.
August Wholesale Trade data will be reported at 10:00 AM, and Barron's reports an economist consensus forecasts for a 0.3% increase. Investors should note changes to wholesale sales versus inventory. Based on recent consumer sentiment and spending trends, factory orders, domestic auto sales, and an abundance of incentive providing advertising programs we noticed toward the end of the third quarter, we expect wholesale inventories to show a build on unmet sales expectations. July's data showed a modest 0.2% month-to-month increase in inventories, and June posted a 0.5% rise. Again, we direct your focus to changes in the future ratio of wholesale inventories to sales as the best metric in this data bit to measure material economic softening.
Two giants of modern financial history, Alan Greenspan and Jack Welch will be in the same room at the same time on Wednesday, as they address the audience at the World Business Forum in New York.
Wednesday's earnings slate is headlined by Costco (
Nasdaq: COST), LAM Research (
Nasdaq: LCRX) and Monsanto (
NYSE: MON). It should be interesting to see how Costco views its upcoming fiscal first quarter, which ends in November, considering recent guidance cuts by rivals Wal-Mart (
NYSE: WMT) and Target (
NYSE: TGT). A
weakening consumer confidence trend and developing consumer spending softness has hit the discounters hardest of all retailers thus far. The rest of Wednesday's earnings news will emanate from Acergy S.A. (
Nasdaq: ACGY), Audiovox (
Nasdaq: VOXX), E-Z-EM Inc. (
Nasdaq: EZEM), Helen of Troy (
Nasdaq: HELE), Host Hotels & Resorts (
NYSE: HST), Infosys Technologies (
Nasdaq: INFY), Lindsay Corp. (
NYSE: LNN), Material Sciences (
NYSE: MSC), Mercantile Bank (
Nasdaq: MBWM), Northfield Labs (
Nasdaq: NFLD), Premier Exhibitions (
Nasdaq: PRXI), Richardson Electronics (
Nasdaq: RELL), Ruby Tuesday (
NYSE: RT) and Banco Santander, S.A. (
NYSE: STD).
The last two days of the week bring its most intensive of economic data. On
Thursday
, Weekly Initial Jobless Claims are scheduled for their regular report at 8:30. Last week's count of new benefits claimants measured 317,000, which was hotter than the four-week average of 312,750. Bloomberg's consensus of economists is looking for a measure of 315,000 this time around.
The International Trade Balance is due for release, with Bloomberg's consensus expecting the trade deficit to show it widened in August by $600 million, to $59.8 billion. With time, we believe the deficit should narrow, as increasing pork exportation, reduced general import demand and the impact of product safety recalls outweigh the impact of lost beef exports due to U.S. contamination.
September import prices are seen increasing 0.8% by Bloomberg's consensus, and surely this has been impacted by dollar weakness and oil and commodity price increase. We believe rising import prices provide yet another reason for the Fed to show restraint in October.
U.S. retailers report chain-store sales for September, and we anticipate it could get ugly. Without the "back to school" support, withstanding minor benefit from the tail end of it, we expect retailers to post poor results. There's enough evidence to believe so anyway after Wal-Mart (
NYSE: WMT), the nation's most important retailer, lowered its guidance. Also, we've read that the relatively warm period from September through October should play havoc on the sales of sweaters. In comparison to last year's temperatures, the end of summer and beginning of fall have provided relatively significant warmth. Shelves stocked full of sweaters are going to pile up dust in that scenario, and same-store sales suffer as a result. Add to that the added pressure to consumers' pocket books this year, and we are fairly confident Thursday's data will be clearly negative.
The Energy Information Administration will make its regular Petroleum Status Report on Thursday, but potential storm development in the Gulf of Mexico remains the most important driver of energy prices this week, in our view. In international news, the Bank of Japan is expected to keep rates steady when it convenes on Thursday.
PepsiCo's (
NYSE: PEP) earnings come into focus on Thursday, as the foods giant seeks to back up its 19.8% year-to-date total return with its operational results. The rest of the earnings parade includes the likes of Bank of the Ozarks (
Nasdaq: OZRK), CalAmp Corp. (
Nasdaq: CAMP), Fastenal (
Nasdaq: FAST), Herley Industries (
Nasdaq: HRLY), IDT Corp. (
NYSE: IDT), Independent Bank Corp. (
Nasdaq: INDB), Lakeland Bancorp (
Nasdaq: LBAI), M&T Bank (
NYSE: MTB), Safeway (
NYSE: SWY), SLM Corp. (
NYSE: SLM), Votorantim Celulose e Papel S.A. (
NYSE: VCP) and Winnebago (
NYSE: WGO).
The Retail Sales Report for the month of September could provide a rude awakening to the jobs data happy market on
Friday
. Bloomberg's consensus sees a 0.3% sales rise, both including and excluding autos. August showed a 0.3% increase, excluding autos. September's Producer Price Index is expected to show 0.4% headline growth, and a 0.2% increase excluding food and energy. Producers may be caught in a quandary, with commodity prices rising and end consumer demand waning. That ugliest of economic slogans, though surely second to depression, stagflation could soon make its way to your doorstep.
At 10:00 AM, Business Inventories could add to the impact of the week's earlier report of wholesale inventories, raising further economic concern. Bloomberg's consensus sees inventories rising 0.2% in August. It's September we have to worry about. Back in July, businesses were still high on the Q2 GDP report, and ordering away. The University of Michigan's Consumer Sentiment reading for October is seen benefiting from Fed action. Bloomberg's consensus forecasts a sentiment improvement to 84.0, from 83.8 in September. That's not really much improvement is it...
The first week of the Q3 earning season should wrap up quietly with the report from HDFC Bank (
NYSE: HDB), but labeling any bank's report as a nonevent is an oxymoron nowadays. We hope you found value in this week's market-moving event planner and look forward to updating you all week long.
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