Week Ahead: The Economy an Important Key to Markets!
by Ian Harvey
September 01, 2012
U.S. economic data is an important key to the stock market stimulus in the week ahead as it has been setting up a pattern of beating economist’s reduced expectations. Analysts see that as a positive catalyst for stocks.
The all-important U.S. non-farm payrolls report is due on Friday. With Bernanke citing poor improvement in the labor market as part of the reason the U.S. economy faces "daunting" challenges, Friday's data could be a game changer, according to market participants.
Economists expect to see about 120,000 nonfarm payrolls were added in August, a still sluggish pace of job growth.
The jobs report is also an important last piece of data for the Fed ahead of its Sept. 12 and 13 meeting. Fed watchers see a chance the Fed could decide on more easing at that meeting, though many expect to see an announcement later in the fall.
There are also car sales data Tuesday and the ISM manufacturing survey Thursday.
In the euro zone, following the European Central Bank policy meeting on September 6, a German Constitutional Court will rule on the euro zone's permanent bailout fund on September 12, which may affect the ECB's bond-buying plans.
The 'European Central Bank - ECB' meets on September 6, ahead of an important German court ruling on whether the ’European Stability Mechanism – ESM’, Europe’s new bailout fund, is constitutional. That ruling is Sept. 12 so the ECB may not do much ahead of the ruling though some economists say it could cut the refi rate by a quarter point and talk about bond purchases.
(note: refi is short for refinance)
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%|
|SLV Nov 30.00 Calls||114%||JCP Nov 25.00 Calls||67%|
Economy in the Week Ahead
For the next two weeks expect volatility within the stock market as the economy undertakes some critical reports.
The week ahead is all about the lead-up to the European Central Bank's interest rate meeting on Thursday and the August jobs and unemployment report in the United States on Friday.
The week following includes the Fed's meeting on Sept. 12-13 and the German court decision on the legality of its participation in European debt solution plans, also on Sept. 12.
Also on tap in the week ahead are August car and truck sales due Tuesday; payroll company ADP’s employment report on Thursday, which usually provides a fairly accurate preview for the government’s report later in the week, and data from the manufacturing sector on Tuesday with the release of the Institute of Supply Management Index, which surveys activity among 300 manufacturers.
Here is a brief list of some of the key events in the week ahead.
All earnings dates listed below are tentative and subject to change. Please check with each company's respective website for official reporting dates.
• The market is closed in observance of Labor Day.
Earnings: Campbell Soup (CPB), Finisar (FNSR), Francesca's Holdings (FRAN), Pep Boys - Manny, Moe & Jack (PBY), and Smithfield Foods (SFD).
• August vehicle sales
• 10.00 am ISM manufacturing
• 10.00 am Construction spending
Earnings:AeroVironment (AVAV), Conn's (CONN), Dollar General (DG), FuelCell Energy (FCEL), H&R Block (HRB), Harry Winston Diamond (HWD), The Men's Wearhouse (MW), Sigma Designs (SIGM), and VeriFone Systems (PAY)
• 8.30 am Productivity and costs
Earnings: Accuray (ARAY), Hovnanian Enterprises (HOV), Layne Christensen (LAYN), Mattress Firm Holding (MFRM), Quiksilver (ZQK), Smith & Wesson Holding (SWHC), Ulta Salon, Cosmetics & Fragrance (ULTA), and UTi Worldwide (UTIW).
• 8.15 am ADP employment
• 8.30 am Initial claims
• 10.00 am ISM nonmanufacturing
• President Obama nomination at Democratic National Convention
Earnings: Kroger (KR) and Lululemon Athletica (LULU).
• 8.30 am August employment report
Reports for the Economy to Watch in the Week Ahead
• Economists see the Institute for Supply Management's purchasing managers' index improving but staying just below 50, which reflects shrinking activity. The nonmanufacturing index is released Thursday, seen at 52.5 -- a bit worse off than 52.6 in July.
• The final read on second-quarter productivity is expected to get a slight upgrade, to 1.9% from the preliminary 1.6% finding. But this comes alongside an expected pullback in compensation, with unit labor costs seen up 1.5% instead of 1.7%.
Other Important Articles Relating to the Week Ahead
1. The Week Ahead in the Stock Market – September 03, 2012
2. The Major ETFs in the Week Ahead – September 03, 2012
3. The Past Week Stock Market Results – September 03, 2012
4. A Surprise September Rally, August 31, 2012
5. Stock Market Bulls and the VIX Promoting Caution – September 03, 2012
6. Calibrating Stock Charts – September 03, 2012