The Greek's Week Ahead - Dec 11

The Greek's Week Ahead provides market participants with a market-moving event planner for the week. We have designed it to prepare you for important news, information and happenings that are likely to impact your portfolio this week. The week will be marked by the last Federal Reserve meeting of 2006, and most experts believe that the Fed, OPEC or consumer price index data will be the most significant market-moving factors of the week. However, we think that a much less anticipated economic metric could also prove influential, and that metric is business inventories. Our research indicates that inventories may have grown ahead of expectations. In our view, this could raise market concern that the economy is weakening worse than expectations and that America's corporations may be less than prepared.

Monday brings a bit of early economic data, with the release of October wholesale inventories at 10:00 AM. Wholesale inventory growth is expected to slow to an increase of 0.6% from a rise of 0.9% in September, according to Bloomberg News' survey. Recent data indicated that a good portion of manufacturing growth fed to build inventories, so wholesale and business inventories should be closely watched this period for indications of sell through efficiency.

Treasury Secretary Henry Paulson will address a housing forum at the Office of Thrift Supervision. Housing weakness is the key threatening force to the economy at the moment, and the market is tuned in to every bit of data. Housing is seen as the consumer's base, from which his confidence and spending power has grown in recent years. The penetration of home ownership has improved substantially, benefiting from low interest rates and government programs that assist buyers to purchase a home with lower down payments. These things combined with low unemployment, a competitive lending environment and liquidity within secondary markets have created a higher level of willingness among lenders to make riskier loans, rather than lose a potential lifetime customer to a competitor. However, now it's time to pay the piper and some banks are facing rising bad debt issues and declining EPS estimates. This is a key reason why we are recommending an underweighting of the banking and financial services industries and the financial sector as a whole.

Internationally, markets in Venezuela and Thailand are closed Monday, while China is being watched closely for an easing of restrictions on financial services, lest it face a World Trade Organization case against it by the U.S. In bizarro world, Iran's foreign minister is on his second day of analysis of evidence of the Holocaust, where it is assumed he will make a finding on whether the world's most horrific human tragedy was real or myth. I apologize to those who may be offended that I even gave this topic any attention, but it's existence is evidence enough to me that Iran's government must be dealt with aggressively and immediately.

Analogic Corporation reports earnings on Monday and Emerson Electric splits 2-for-1 at the close of the day. Now that Pfizer's product lineup looks weaker than it did a week ago, the company may boost dividends this week. However, Pfizer also indicated that it may use capital in the near-term to boost its product outlook by acquiring drug companies with new drug prospects. Finally, Hartford Financial and AES both plan investor conferences for Monday.

The Federal Reserve takes the headline Tuesday, as it meets for the last time in 2006. It is widely anticipated that the Fed will leave interest rates unchanged, but the markets will be closely tuned to the coinciding official statement release by the Fed. In light of recent, less than inflationary wage and Core CPI data, we believe the market is hopeful the Fed might diverge a bit from its hawkish inflationary stance. Any sign or implicit language indicating the Fed might cut rates in early 2007 would likely start a Santa Claus rally for the rest of the year and begin 2007 on a positive push.

At 8:30 AM EST, October international trade data will be released, and a survey taken by Bloomberg News indicates consensus expectations for a narrowing of the gap by $1 billion, to $63.0 billion.

Internationally, Mexico's markets are closed. The European Court of Justice will consider a challenge against a German law that prevents investors from holding more than a 20% voting interest in companies.

On the conference scene, General Electric, Hewlett-Packard, Merck, Safeway and Wellpoint will meet with investors and/or analysts. A slew of companies will report earnings on Tuesday, including Goldman Sachs, Best Buy, Dollar General, ADC Telecomm, Cooper Co. Inc., Martek Biosciences and ABM Industries.

November retail sales will be announced at 8:30 AM EST Wednesday, and the consensus view is for a 0.1% rise in sales, compared to a 0.4% decrease in October. Once again, auto sales are expected to negatively impact the result. Any slippage in retail sales results poses serious threat to the stock market, as it would be viewed as a sign that the consumer is losing his ability to buy, and thus drive the economy.

October business inventories are seen equaling the 0.4% increase of September, according to Bloomberg News' survey of economists. We believe indications of greater inventory growth poses threat to markets as well, as it might suggest corporate ill-preparedness for an economic slowdown. Finally, at its open meeting, the SEC is scheduled to review several issues, including changes to audit standards.

OPEC comes to the limelight Thursday, as it meets to discuss several issues, including production quotas. Several OPEC members have recently voiced views for further production cuts, mainly due to the decline of the dollar. Oil is generally traded in dollars. Venezuela's interests are suspect, however, as it cannot even meet its current quota. Another pusher for cuts, Iran, sells its oil in euros. It seems clear to us that the Iranian and Venezuelan views are strategically driven. We believe that Iran seeks to pressure the U.S. economy through oil prices, as it likely hopes a stressed American economy might be limited in its ability to launch a military offensive against Iranian nuclear facilities.

Perhaps more importantly, the Saudis are voicing an opinion that current supply exceeds demand. We believe a recent meeting between Vice President Cheney and Saudi officials, likely led to a cooperative agreement. In the event of war with Iran, oil supply from Iran may be disrupted. It's our expectation that Cheney has encouraged the Saudis to use this opportunity to stockpile oil reserves for later distribution should Iranian pipes stop flowing. The Saudis are seeking to cut supply to Asia by 8%, and we believe this is a U.S. attempt to sway the Chinese view that an Iranian strike is in their interests as well. Currently most of Iran's oil is sold to China and India. If China begins to fall short on energy, due to Saudi pressure, it might see things differently. However, Russian oil could ease that stress on China. In any event, we believe OPEC will decide to cut production on Thursday, and we believe the market has not fully priced this option in as yet.

A high powered U.S. contingent, led by Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson is scheduled to meet with Chinese officials in Beijing on Thursday. Paulson is expected to push the Chinese to move more quickly on economic reforms. European leaders will discuss the EU candidacy of Turkey, in light of Turkey's resistance to open its ports to commerce from Cyprus. Last week, Turkey made a gesture to ease some restrictions, but the EU is tiring of Turkey's vague offers and deceitful tactics, and it is believed Turkey's candidacy could be frozen.

The FDA will confer on Sanofi-Aventis' antibiotic Ketek Thursday, while Proctor & Gamble, AMD and Citigroup are scheduled to meet with analysts. Bear Stearns will report earnings after the market open, and reports are scheduled for Ciena Corp., Costco Wholesale, Multimedia Games, Pier 1 Imports, Quiksilver and Adobe Systems Inc..

Friday keys up a powerhouse of economic data, with the November consumer price index release. Economist consensus sees November CPI rising 0.2%, as compared to a 0.5% decline in October, which was greatly impacted by a decrease in energy prices. Anything above 0.2% would once again raise inflationary concerns. November industrial production is scheduled as well, and the consensus sees a 0.1% increase versus a 0.2% rise in October. November capacity utilization is seen at 82.1%, compared to 82.2% in October. The Empire State Manufacturing Index is expected to decline to about 18.0 in December from a 26.66 level in November. Clearly, all of this data individually poses threat to the market, should results reflect a weakening economic outlook or an inflationary environment.

Ben Bernanke is scheduled to speak in China, while the Bank of Japan will issue its tankan survey of manufacturers for the fourth quarter. Some analysts believe the report could help the market to judge whether the BOJ will raise rates this month. J2 Global Communications is the only firm scheduled to report earnings on Friday. We hope you find value in "The Greek's Week Ahead" and we wish you a good week trading. (disclosure)