Week Ahead: Fed-speak – More Stimulus for the Economy!
Earnings – Dell, HPQ, LOW, BBY!
by Ian Harvey
August 20, 2012
Investors will be parsing Fed-speak in the week ahead for signs of more stimuli with the release of the minutes from the Federal Reserve’s July meeting. Housing data is also due in an otherwise slow week for economic reports.
Also due are earnings reports from technology bellwethers Dell (DELL) and Hewlett-Packard (HPQ), which should provide insight into whether two of the world’s largest computer makers are handling changes to the sector that have markedly changed how consumers obtain information.
Other big companies release earnings next week include home improvement retailer Lowe's (LOW) and electronics seller Best Buy (BBY).
Earnings in the Week Ahead
Just over a dozen S&P 500 companies report earnings in the week ahead, with the highlight Tuesday as Dell (DELL) and Best Buy (BBY) post their scorecards. Lowe's (LOW) reports on Monday -- Hewlett Packard (HPQ) on Wednesday.
Of the 475 companies in the S&P 500 that have reported earnings this season, 68 percent have beat analyst expectations. That is higher than the long-term average of 62 percent and matches the average over the past four quarters.
TOP OPTIONS TRADES SINCE JUNE 01, 2012
|HLF July 47.50 Calls||53%||APPL Aug 650 Calls||67%|
|DLTR Aug 110 Calls||32%||UIS Oct 17 Calls||79%|
|HSY Aug 70 Calls||56%||TSO Nov 25 Calls||54%|
|NKE Oct 92.50 Calls||49%||HLF July 47.50 Calls (again)||38%|
|FB Aug 25.00 Puts||500%||DISH Sept 30.00 Calls||100%|
|APPL Jan 13 650.00 Calls||71%||CSTR Oct 42.50 Puts||400%|
|LNKD Aug 92.50 Puts||30%||LNKD Aug 100.00 Calls||250%|
Economy in the Week Ahead
Minutes from the Federal Open Markets Committee, which sets most Fed policy, are due Tuesday and everyone will be looking for hints that the Fed is planning more stimulus to jolt the slumbering U.S. economy.
The Fed disappointed markets last month by not announcing another round of quantitative easing, in which the Fed buys U.S. government securities to provide liquidity to financial markets and promote economic growth.
But most analysts believe the Fed made it abundantly clear that another round of buying is in the works if the economy doesn’t improve markedly by the time the Fed meets again in September.
Not all members of the FOMC agree that more stimuli are needed. The debate between these so-called hawks and the activists led by Fed Chief Ben Bernanke should be on full display with the release of the minutes.
On the housing front, the Mortgage Bankers Association mortgage index is out Wednesday; July existing home sales are also out Wednesday; July new homes sales on Thursday. The housing sector, key to the health of the overall economy, has been in a historic slump for nearly four years.
A glut of housing the result of speculative building and record foreclosures have kept home prices falling in most areas of the U.S. since the housing bubble burst in 2008. That downward momentum has yet to turn around and most economists predict there will be no sustained economic recovery until the housing market hits bottom and starts to move higher.
The health of U.S. manufacturing will be gauged in the week ahead with the release Friday of a report on durable goods orders.
Earnings: Lowe’s, Urban Outfitters
• No major reports for the economy on Monday
Earnings: Dell, Best Buy, Barnes and Noble, Williams Sonoma, Wet Seal
• 8.00 am Atlanta Fed President Dennis Lockhart speaks • 2.15 pm FOMC minutes
Earnings: Hewlett-Packard, Kayak Software, American Eagle Outfitter, Chico’s FAS, Express
• 10.00 am Existing home sales • 10.30 pm China flash PMI
Earnings: 1-800-Flowers.com, Big Lots, Salesforce.com
• 8.30 am Initial claims • 8.58 am Markit U.S. PMI preliminary • 10.00 am New home sales • 10.00 am FHFA HPI
• 0830 am Durable goods
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