Week Ahead: Data for the Economy and Earnings Present Hurdles for the Stock Market!
by Ian Harvey
September 22, 2012
U.S. stocks could struggle to stay close to nearly five-year highs in the week ahead as worries mount about third-quarter earnings and the market appears primed for a pullback from recent stimulus-driven gains.
A bevy of economic reports, including durable goods orders, will grab attention, particularly after the Federal Reserve unveiled its plan on Sept. 13 for a third round of aggressive stimulus to help revive the flagging U.S. economy.
While the action ignited a rally in stocks, analysts have worried that it may suggest the U.S. economy is in worse shape than many had feared.
Also, among the reams of economic data due in the week ahead are several reports that will gauge consumer sentiment, an important measure of whether consumers are starting to feel more comfortable opening their wallets and pocketbooks.
There should also be more companies issuing pre-announcements on earnings, as the global slowdown holds back revenue growth and bites into profits.
Earnings in the Week Ahead
Wednesday, Sept. 26
Crude oil inventories will be released Wednesday. This will be the “most important macro number of the week.” It is possible that the price of oil will go higher in the long-term, but the inventories will indicate what direction it could go in the near-term.
Thursday, Sept. 27
Discover Financial Services (DFS) will announce its earnings results before Thursday’s opening bell. This report may provide more details on how this financial services provider has partnered with eBay’s (EBAY) PayPal unit.
There are so many new rival credit card systems being pushed by the venture capitalists and they all sound great, but the one that’s storming the retail barricades and taking it to Visa (V) and MasterCard (MA) is eBay. PayPal alone adds great worth to eBay’s stock price.
Elsewhere in the market, McCormick (MKC) is scheduled to report earnings Thursday. McCormick is not only a spice company – it is “the” spice company. So while its stock has pushed sharply higher lately, it is important to note that investors are buying into what is considered a top quality company.
After the market’s close, Nike (NKE) will deliver earnings. The sporting goods and athletic apparel maker recently announced a sizable stock buyback program, which is considered a bullish sign - a sign of confidence!
Meanwhile, Research In Motion (RIMM) will also report earnings after Thursday’s close. There may be more speculation that the technology company might put itself up for sale. The BlackBerry maker continues to lose market share to rival Apple (AAPL), which makes the popular iPhone device.
Micron Technology Inc. (MU) is expected to post its fifth-consecutive quarterly loss Thursday, as the memory-chip maker continues to struggle with weakness in the flash-memory market. Still, a future bright spot for the company could be its planned purchase of troubled Japanese rival Elpida Memory Inc. for $2.5 billion, which should boost the company's product portfolio and help it better compete against rivals in South Korea and Taiwan.
Friday, Sept. 28
Before trading gets going Friday, Walgreen (WAG) will report earnings. The pharmacy retailer’s stock had tanked after a squabble with pharmacy benefits manager Express Scripts (ESRX), as well as a $6.7 billion merger with Boots, an European pharmacy retailer, but it has since been able to post some gains. Walgreen doesn’t have much more room to run, but it all depends on what company executives say during the earnings conference call. Maybe it is worth taking profits ahead of the call.
IPOs Slated for the Week Ahead
Banco Santander S.A. (SAN, SAN.MC) fired the starting gun on what is expected to be the largest initial public offering of a Mexican company, as it seeks to boost its capital base by raising up to EUR3.4 billion ($4.28 billion) through the sale of just under a quarter of the shares of its Mexican unit.
The total amount raised could make the IPO the second-biggest new listing of the year, behind Facebook Inc. (FB), according to Dealogic.
Santander, the euro zone's largest bank by market value, said it will sell 24.9% of Grupo Financiero Santander Mexico through a stock-market listing in Mexico and on the New York Stock Exchange, with most shares trading in New York.
GlobeImmune Inc., a clinical-stage drug developer focused on treatments for cancer, had been scheduled to start trading publicly Friday but delayed the offering. It is now expected to launch its $75 million IPO early in the week ahead.
Technology security firm Qualys Inc. and natural-gas pipeline company Summit Midstream Partners L.P.are also expected to start trading in the week ahead.
TOP OPTIONS TRADES SINCE JULY 01, 2012
|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%|
|GLD Nov 165.00 Calls||72%||LVS Dec 45.00 Calls||67%|
|GLD Oct 170.00 Calls||52%||MON Jan 2013 87.50 Calls||26%|
Economy in the Week Ahead
A very busy calendar will include new readings on how consumers assess the economy and whether they are spending in the third quarter. Expectations are that consumers are feeling better in September and spent modestly in August.
The Conference Board's confidence index will be reported Tuesday. The final reading of September consumer sentiment and the report on August income and spending are expected Friday. Other important reports on tap for next week include new-home sales and durable-goods orders.
Housing data has been surprisingly strong in recent months and homebuilder shares have experienced massive gains. The PHLX housing sector index is up 62.3 percent since Dec. 31. But that strength has been offset by worrisome data on U.S. manufacturing, which had been among the economy's strongest sectors. The stubbornly high U.S. unemployment rate also has kept a damper on Wall Street's mood.
Earnings: Lennar (LEN), Paychex (PAYX), Red Hat (RHT)
• 10:30 a.m. Dallas Fed manufacturing survey
• 12:00 p.m. IMF Director Christine Lagarde speaks at Peterson Institute
• 3:10 p.m. San Francisco Fed President John Williams on the economy
Earnings: Carnival (CCL) , FactSet, Vail Resorts, Copart, Jabil Circuits (JBL)
• 9:00 a.m. S&P/Case-Shiller home prices
• 10:00 a.m. FHFA home prices
• 10:00 a.m. Consumer confidence
• 10:00 a.m. Richmond Fed survey
• 12:00 p.m. Philadelphia Fed President Charles Plosser on economic outlook
• 1:00 p.m. $35 billion 2-year note auction
Earnings: Progress Software, Texas Industries, Worthington Industries
• 10:00 a.m. New home sales
• 1:00 p.m. $35 billion 5-year note auction
Earnings: Discover Financial (DFS), McCormick (MKC), Actuant, Nike (NKE), Accenture, Micron (MU), Research In Motion (RIMM), Global Payments
• 8:30 a.m. Initial claims
• 8:30 a.m. Durable goods
• 8:30 a.m. Real GDP Q2 (final)
• 10:00 a.m. Pending home sales
• 11:00 a.m. Kansas City Fed survey
• 1:00 p.m. $29 billion 7-year note auction
• 4:30 p.m. Fed balance sheet and money supply
Earnings: Walgreens (WAG), American Greetings, Finish Line
• 8:30 a.m. Personal income and spending
• 8:30 a.m. Consumer spending
• 8:30 a.m. Core PCE prices
• 9:45 a.m. Chicago PMI
• 9:55 a.m. Consumer sentiment
Reports for the Economy to Watch in the Week Ahead
• Due Tuesday is the Conference Board's confidence index, which measures how consumers feel broadly about the economy. Economists believe the index will rise in September over its August level.
• The S&P/Case-Shiller home price index, out Tuesday, tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S.
• Housing data will also spend time in the spotlight. Sales of new homes, out Wednesday, are expected to have increased 2.2%, not great but a sign that demand may be heating up in one of the hardest hit sectors on the U.S. economy.
• On Thursday the National Association of Realtors releases its pending home sales index, which should provide additional information on the health of that vitally significant but long-dormant sector.
The Federal Reserve last week set its sight on lifting the housing sector as a means of stimulating the overall economy.
• The manufacturing sector will also garner attention next week with the release of regional manufacturing reports from the Dallas, Richmond and Kansas City Federal Reserve Boards.
• The Thomson Reuters/University of Michigan consumer sentiment index is out Friday. It’s also expected to move modestly higher.
Consumer confidence (or sentiment) can be used to gauge the likelihood that consumers will buy more goods. If consumer confidence remains low it hurts demand for goods, which slows manufacturing and acts as an overall drag on the market. Conversely, if consumer sentiment is strong people tend to show a readiness to go out and buy stuff.
• A report on August personal income and consumer spending is also due Friday. Both figures are expected to rise slightly.
Among the significant conferences in the week ahead are:-
• The Noble Financial Markets Life Sciences Exposition in Stamford, Conn., on Monday.
• IPAA OGIS San Francisco from Monday to Wednesday in San Francisco, and
• Craig-Hallum Alpha Select Conference on Thursday in New York
Other Important Articles Relating to the Week Ahead
1. The Past Week Stock Market Results – September 24, 2012
2. The Week Ahead in the Stock Market – September 24, 2012
3. The Major ETFs in the Week Ahead – September 24, 2012
4. Quantitative Easing and Its Effect on the Stock Market - Indicator of the Week, September 24, 2012
5. The VIX Ready to Move Higher! - September 26, 2012