The Greek's Week Ahead - Speed Bump Ahead for Nascent Rally
The Greek's Week Ahead has been engineered to prepare you for the events that could impact your portfolio this week.
After a horrid start to 2008, not to mention the past week, a combination of Federal Reserve action and federal government progress toward a fiscal stimulus package rejuvenated stocks. The Federal Reserve gave the market its first dose of medicine with its emergency action on Tuesday, as it cut the Fed Funds rate by 75 basis points (0.75%). However, by Friday, the market was already concerned about the risks that lie in the week ahead.
Last week, Treasury Secretary, Hank Paulson, and the Speaker of the House of Representatives, Nancy Pelosi, worked together to forge a fiscal stimulus package. In an election year, this should not be a surprise, since neither the Democrats nor the Republicans want to be viewed as indifferent to American economic weakness. The package, which still has to gain Senate approval, will basically provide Americans with $300 to $600, depending on income level, and $300 for each dependent child. Also, the first $6,000 of taxable income would be tax-free. Businesses will be allowed to deduct 50% of the cost of purchases of new equipment this year, encouraging business investment.
While the Senate is rumored to want to add an extension to unemployment benefits and to increase food stamp distribution, the aid package is expected to pass quickly. While the market is still concerned that checks may not reach Americans until after the IRS finishes with its regular tax responsibilities, Hank Paulson seems to have a head of steam and we wouldn't be surprised if he did not find a way to get this done sooner.
These two major events offered the stock market confidence that the government would support the economy as needed. The Federal Reserve continues to live in its illusory expectation that economic growth will only moderate, but many economists have increasingly pointed toward recession. Your author here has been forecasting recession for this period since early last year.
On Friday, market enthusiasm reverted to concern, and for good reason. The week ahead offers very important economic data and event risk. Perhaps the most important risk is tied to the result of the Fed’s two-day Federal Open Market Committee meeting (Jan. 29 – 30). Treasury yields are forecasting a further rate cut next week, but anecdotal evidence points to the possibility of Fed inaction on the 30th. William Poole, President of the Federal Reserve Bank of St. Louis, reportedly voted against the emergency cut and indicated that the action could wait until the Fed’s regular meeting. This seems to imply the possibility of Fed inaction on Wednesday, but market pundits on financial news networks have mostly been forecasting further action.
Fed inaction would clearly disappoint the market. It’s hoped that the Fed understands the impact it could have, and might offer another 50-point rate reduction. Wall Street Greek believes even a 25 point move would be viewed as inadequate by the market, and lead stocks lower. The Fed is governed by two mandates, maintaining employment health and containing inflation, so there is no direct requirement for it to appease stock market concern, and thus the risk is born.
The president’s last State of the Union Address on Monday January 28th was expected to carry with it the introduction of his fiscal stimulus plan, but with the bipartisan plan released this week, we see less likelihood of a positive catalyst from the president’s speech. We wonder if part of the speed of the package’s progress had anything to do with Democratic Party strategy, as preempting the president’s address minimized Republican benefit. There still remains risk of the president bringing geopolitical issues back into the spotlight again with discussion of Iran. Increased rhetoric could foretell the administration’s plans regarding the near nuclear nation.
The very important advanced reporting of fourth quarter GDP is scheduled for 8:30 EST on Wednesday morning, and Reuters survey of economists’ consensus offers expectation for a very moderate 1.2% growth rate. This definer of recession carries with it the potential to raise hope, with a high reading, or heighten concern, with a lower than forecast measure.
The week is full of important data, from December New Home Sales on Monday, to Durable Goods Orders (Dec.) on Tuesday, to Personal Income & Consumption (Dec.) on Thursday. The week also holds two separate reports on consumer confidence and six reports on employment. Of these reports, arguably the most important is Friday’s Employment Situation Report for January. In December, unemployment rose three-tenths of a point to 5.0%, waking many up to the rising probability of recession.
As earnings season kicks into high gear, related risk intensifies there as well. The reason for this is because, as analysts have lowered fourth quarter of ’07 estimates, they maintained ’08 expectations for mid-double-digit earnings per share growth. These expectations are probably ambitious, and corporate guidance is likely to be very conservative considering the economic situation. Thus, shareholder hopes are vulnerable for letdown.
Market-Moving Event Planner:
Monday
The data heavy week kicks off on Monday gradually, with only the 10:00 a.m. New Home Sales Report due. Bloomberg’s consensus of economists expects December sales ran at an annual pace of 645K, which would only be 2K down from November. Remember, Ara Hovnanian is on record saying December was relatively strong for his company’s business (Hovnanian Enterprises (NYSE: HOV). You’ll have to forego your regular television addictions Monday and survey President Bush’s last State of the Union Address. We’re big fans of the speech here at The Greek, and this Bush finale is a can’t miss.
Of the scores of companies reporting this week, a few that should be in focus on Monday include American Express (NYSE: AXP), Calamos Asset Management (Nasdaq: CLMS), Halliburton (NYSE: HAL), McDonald’s (NYSE: MCD), Tyson Foods (NYSE: TSN), Verizon (NYSE: VZ), Alberto-Culver (NYSE: ACV), Black & Decker (NYSE: BDK), Cemex (NYSE: CX), Corning (NYSE: GLW), East West Bancorp (Nasdaq: EWBC), KKR Financial (NYSE: KFN), Rohm & Haas (NYSE: ROH), SanDisk (Nasdaq: SNDK), Smurfit-Stone Container (Nasdaq: SSCC), Sysco Corp. (NYSE: SYY), Stanley Works (NYSE: SWK), VMware (NYSE: VMW) and Zoran (Nasdaq: ZRAN).
Tuesday
The Federal Open Market Committee commences its regularly scheduled programming Tuesday with it’s two-day meeting. The market should be tense heading into the powwow, and it should stay that way through its closure. At 7:45 a.m., the ICSC-UBS makes its regular reporting of weekly same-store sales. Last week’s poor growth rate of 1.6% still marked an up-tick from the very soft rate of 1.1% in the week before. As the weekly data continues to arrive, we should get an idea if the consumer is looking ahead to his late spring gift check and if he is enjoying the savings from the refinancing of his home (for those who could secure a new loan).
At 8:30, Durable Goods Orders for the month of December are expected to show a 1.6% increase from a revised and weak previous month’s decline of 0.1%. The Conference Board’s latest reading of consumer confidence at 10:00 a.m. is seen deteriorating to a measure of 87.5 for January, versus 88.6 in December. The S&P Case-Shiller Index should not surprise anyone when it shows further decline in home prices in November.
Earnings season gets real busy starting Tuesday, with news from Centex (NYSE: CTX), Eli Lilly (NYSE: LLY), Occidental Petroleum (NYSE: OXY), Robert Half Int’l (NYSE: RHI), Dow Chemical (NYSE: DOW), Traveler’s (NYSE: TLV) and Yahoo! (Nasdaq: YHOO) on the marquee. The rest of the list includes 3M (NYSE: MMM), AirTran Holdings (NYSE: AAI), Alliance Financial (Nasdaq: ALNC), American Electric Power (NYSE: AEP), ArvinMeritor (NYSE: ARM), Avery Dennison (NYSE: AVY), Burlington Northern Santa Fe (NYSE: BNI), Cardinal Health (NYSE: CAH), Countrywide Financial (NYSE: CFC), EMC Corp. (NYSE: EMC), Flextronics (Nasdaq: FLEX), Headwaters (NYSE: HW), Imperial Sugar (Nasdaq: IPSU), JetBlue Airways (Nasdaq: JBLU), Kemet (NYSE: KEM), Lexmark Int’l (NYSE: LXK), Pilgrim’s Pride (NYSE: PPC), Quixote (Nasdaq: QUIX), Smith Int’l (NYSE: SII), T. Rowe Price (Nasdaq: TROW), Techne (Nasdaq: TECH), Allstate (NYSE: ALL), Tupperware (NYSE: TUP), US Steel (NYSE: X), USG (NYSE: USG), Valero Energy (NYSE: VLO), Websense (Nasdaq: WBSN) and quite a few more.
Wednesday
The advanced GDP Report for the fourth quarter will be released at 8:30 with consensus expectation for a 1.2% increase for Real GDP. Clearly, nobody will get any sleep on Tuesday evening. Fed funds futures are still pricing the likelihood of a 50 basis point cut on Wednesday, but the bet is losing favor. We continue to expect a 25 point cut or no action at all. Our view is based on William Poole’s descending vote last week. Apparently Bill noted that the cut could wait a week, and this seems to imply the full move was planned or expected.
Considering the degree of speculation regarding the Fed possibly having engaged in shadow boxing last week, due to the unwinding of SocGen trades established by its notorious rogue trader, a 25 point move looks most likely in our view. Assuming the SocGen activity was at least partly behind the Fed's degree of cut, we could look at this two ways: the Fed may benefit by showing it intended the action, by following it with another; or the Fed may care less about saving face than minimizing its impact this month. Also, we should not forget that a fiscal stimulus package was introduced last week, so there is some sense that the Fed could take a break here. A lot depends on the GDP report the same morning.
The first of six employment reports hits the wire on Wednesday, that being ADP’s monthly data. Finally, the Mortgage Banker’s Association will report its weekly mortgage application activity. Over the past few weeks lower rates have inspired refinancing activity. At 10:30, the EIA will announce Petroleum Status, but the economy will be in focus in the energy pits as well as on the NYSE floor. The economic driver is so prevalent now that weekly draws and builds are almost completed muted.
Reporting earnings on Wednesday, expect news from Amazon.com (Nasdaq: AMZN), Boeing (NYSE: BA), Evergreen Solar (Nasdaq: ESLR), Kellogg (NYSE: K), Kraft (NYSE: KFT), Merck (NYSE: MRK), Pulte Homes (NYSE: PHM), Starbucks (Nasdaq: SBUX), Allergan (NYSE: AGN), Altria Group (NYSE: MO), Baker Hughes (NYSE: BHI), Business Objects (Nasdaq: BOBJ), Blade Logic (Nasdaq: BLOG), Cirrus Logic (Nasdaq: CRUS), Constellation Energy (NYSE: CEG), Covance (NYSE: CVD), Dominion Resources (NYSE: D), Everest Re (NYSE: RE), FTD Group (NYSE: FTD), Honda Motor (NYSE: HMC), Legg Mason (NYSE: LM), Overstock (Nasdaq: OSTK), SAP AG (NYSE: SAP), Silicon Labs (Nasdaq: SLAB), Tetra Tech (Nasdaq: TTEK), Tractor Supply (Nasdaq: TSCO), W.R. Grace (NYSE: GRA), Xcel Energy (NYSE: XEL) and more.
Thursday
After the week’s busy hump day, Thursday will not offer a cool breeze either. Bang! Bang! Bang! Just like that we’ll receive the Monster Employment Index, the Help Wanted Index, Weekly Initial Jobless Claims and the Employment Cost Index. Jobless claims have moderated in recent reports, easing concerns about unemployment. However, the consensus sees this week’s figure at 318K, up a bit from last week’s 301K.
The fourth quarter Employment Cost Index is expected to show an increase of 0.8%. We do not expect wages to add to inflation concerns in a recessing environment. Take what is happening at Ford (NYSE: F) as an example. The company is buying out the contracts of senior employees in order to replace them with less costly ones. This is indicative of an environment where other costs of production tied to commodity price rise and a competitive environment dictate wages.
Before the market open, the Commerce Department will report the critical Personal Income and Consumption Data for the month of December. Income is seen increasing by 0.4%, while consumption is expected to rise just 0.1% in the face of consumer pressures. Consumption is the market’s focus at the moment, and with those stimulant providing checks still bogged down by the Senate and IRS, there’s no real catalyst to inspire spending. We know already that the holiday shopping season was a letdown.
The National Association of Purchasing Managers - Chicago Report for January threatens to show the Midwest, excluding the already slumping Detroit metro area, is finally succumbing to the same pressures seen throughout the rest of the country. Economists are looking for a still expansionary reading of 52.0, versus the robust measure of 56.4 seen in December.
The EIA’s regular Natural Gas Report at 10:30 and the Farm Prices Report at 3:00 round out the day’s economic news. In light of recent budgetary questions related to how we are going to finance fiscal stimulus, the words of the Director of the Congressional Budget Office, who is scheduled to speak in Washington, could ring some bells of alarm Thursday.
Just a small portion of the day's earnings reports include Anheuser-Busch (NYSE: BUD), Bristol-Myers Squibb (NYSE: BMY), Celgene (Nasdaq: CELG), Digital River (Nasdaq: DRIV), Electronic Arts (Nasdaq: ERTS), Google (Nasdaq: GOOG), Intuitive Surgical (Nasdaq: ISRG), Mattel (NYSE: MAT), Micros Systems (Nasdaq: MCRS), Monster Worldwide (Nasdaq: MNST), Proctor & Gamble (NYSE: PG), SEI Investments (Nasdaq: SEIC).
Friday
Friday brings yet another busy day to conclude the exhaustive week. First and foremost, the market will be highly attuned to the Employment Situation Report for the month of January. December’s report really compounded concerns when the unemployment rate jumped three-tenths of a point to 5.0%. It was the kind of rise historians pointed to as a sure sign of recession ahead. After weeks of not so bad unemployment claims data, most see the rate backing up a tenth of a point this time around to 4.9%. However expected this may be, the market should still take a small sum of relief from the news.
Based on Bloomberg’s survey of economists, NonFarm Payrolls are seen rising 58,000. Here’s where we are not so sure; reason being, before you fire, you stop hiring. Small businesses and retail will probably be the next segments to consolidate (and go under in the case of many small businesses). When retailers begin reporting weak holiday quarter results and reflecting concerning forecasts for ’08, many are also likely to follow the actions of first-movers Macy’s (NYSE: M) and Talbots (NYSE: TLB), which have already closed some stores.
Those job additions that have been born by bar and restaurant employment should also start to tail off into nothingness. People may continue to drink when they get poor, but they do it at home instead of in the pub. This of course assumes they still have a home. Average hourly wages are expected to have increased by 0.3%.
The remainder of the heavy hitting economic data gets piled on at 10:00 a.m. All three of the reports should be depressing. The ISM Manufacturing Report for January will likely show a further contraction of the manufacturing sector. The metric is widely expected to measure 47.0 this time around, versus 47.7 last month. Construction Spending for the month of December should show no better, indicating a decrease of 0.5% according to economists.
The final reading of Consumer Sentiment for January, as surveyed by the University of Michigan, is seen having eased to 79.0 from 80.5 last time out, when the survey apparently concentrated on college bar exit polls. Finally, January’s domestic motor vehicle sales are seen falling by 200K, according to Barron’s. General Motors (NYSE: GM) recently broke the bad news that it will share the title of most important seller of automobiles with Toyota (NYSE: TM), based on 2007 data. That’s sort of a triumph since many auto experts were pointing to ’07 as the year the mighty would fall.
Friday’s earnings news includes the likes of Arch Coal (NYSE: ACI), British Airways (London: Bay.L), Automatic Data Processing (NYSE: ADP), Chevron (NYSE: CVX), Exxon Mobil (NYSE: XOM), Cummins (NYSE: CMI), Gannett (NYSE: GCI), Manpower (NYSE: MAN), MeadWestvaco (NYSE: MWV), MF Global (NYSE: MF), Nissan Motor (Nasdaq: NSANY), NYMEX Holdings (NYSE: NMX), Orleans Homebuilders (NYSE: OHB), Oshkosh Truck (NYSE: OSK), Public Service Enterprise Group (NYSE: PEG), Ryder System (NYSE: R), Simon Property (NYSE: SPG), Estee’ Lauder (NYSE: EL), Tidewater (NYSE: TDW) and a few more.
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After a horrid start to 2008, not to mention the past week, a combination of Federal Reserve action and federal government progress toward a fiscal stimulus package rejuvenated stocks. The Federal Reserve gave the market its first dose of medicine with its emergency action on Tuesday, as it cut the Fed Funds rate by 75 basis points (0.75%). However, by Friday, the market was already concerned about the risks that lie in the week ahead.
Last week, Treasury Secretary, Hank Paulson, and the Speaker of the House of Representatives, Nancy Pelosi, worked together to forge a fiscal stimulus package. In an election year, this should not be a surprise, since neither the Democrats nor the Republicans want to be viewed as indifferent to American economic weakness. The package, which still has to gain Senate approval, will basically provide Americans with $300 to $600, depending on income level, and $300 for each dependent child. Also, the first $6,000 of taxable income would be tax-free. Businesses will be allowed to deduct 50% of the cost of purchases of new equipment this year, encouraging business investment.
While the Senate is rumored to want to add an extension to unemployment benefits and to increase food stamp distribution, the aid package is expected to pass quickly. While the market is still concerned that checks may not reach Americans until after the IRS finishes with its regular tax responsibilities, Hank Paulson seems to have a head of steam and we wouldn't be surprised if he did not find a way to get this done sooner.
These two major events offered the stock market confidence that the government would support the economy as needed. The Federal Reserve continues to live in its illusory expectation that economic growth will only moderate, but many economists have increasingly pointed toward recession. Your author here has been forecasting recession for this period since early last year.
On Friday, market enthusiasm reverted to concern, and for good reason. The week ahead offers very important economic data and event risk. Perhaps the most important risk is tied to the result of the Fed’s two-day Federal Open Market Committee meeting (Jan. 29 – 30). Treasury yields are forecasting a further rate cut next week, but anecdotal evidence points to the possibility of Fed inaction on the 30th. William Poole, President of the Federal Reserve Bank of St. Louis, reportedly voted against the emergency cut and indicated that the action could wait until the Fed’s regular meeting. This seems to imply the possibility of Fed inaction on Wednesday, but market pundits on financial news networks have mostly been forecasting further action.
Fed inaction would clearly disappoint the market. It’s hoped that the Fed understands the impact it could have, and might offer another 50-point rate reduction. Wall Street Greek believes even a 25 point move would be viewed as inadequate by the market, and lead stocks lower. The Fed is governed by two mandates, maintaining employment health and containing inflation, so there is no direct requirement for it to appease stock market concern, and thus the risk is born.
The president’s last State of the Union Address on Monday January 28th was expected to carry with it the introduction of his fiscal stimulus plan, but with the bipartisan plan released this week, we see less likelihood of a positive catalyst from the president’s speech. We wonder if part of the speed of the package’s progress had anything to do with Democratic Party strategy, as preempting the president’s address minimized Republican benefit. There still remains risk of the president bringing geopolitical issues back into the spotlight again with discussion of Iran. Increased rhetoric could foretell the administration’s plans regarding the near nuclear nation.
The very important advanced reporting of fourth quarter GDP is scheduled for 8:30 EST on Wednesday morning, and Reuters survey of economists’ consensus offers expectation for a very moderate 1.2% growth rate. This definer of recession carries with it the potential to raise hope, with a high reading, or heighten concern, with a lower than forecast measure.
The week is full of important data, from December New Home Sales on Monday, to Durable Goods Orders (Dec.) on Tuesday, to Personal Income & Consumption (Dec.) on Thursday. The week also holds two separate reports on consumer confidence and six reports on employment. Of these reports, arguably the most important is Friday’s Employment Situation Report for January. In December, unemployment rose three-tenths of a point to 5.0%, waking many up to the rising probability of recession.
As earnings season kicks into high gear, related risk intensifies there as well. The reason for this is because, as analysts have lowered fourth quarter of ’07 estimates, they maintained ’08 expectations for mid-double-digit earnings per share growth. These expectations are probably ambitious, and corporate guidance is likely to be very conservative considering the economic situation. Thus, shareholder hopes are vulnerable for letdown.
Market-Moving Event Planner:
Monday
The data heavy week kicks off on Monday gradually, with only the 10:00 a.m. New Home Sales Report due. Bloomberg’s consensus of economists expects December sales ran at an annual pace of 645K, which would only be 2K down from November. Remember, Ara Hovnanian is on record saying December was relatively strong for his company’s business (Hovnanian Enterprises (NYSE: HOV). You’ll have to forego your regular television addictions Monday and survey President Bush’s last State of the Union Address. We’re big fans of the speech here at The Greek, and this Bush finale is a can’t miss.
Of the scores of companies reporting this week, a few that should be in focus on Monday include American Express (NYSE: AXP), Calamos Asset Management (Nasdaq: CLMS), Halliburton (NYSE: HAL), McDonald’s (NYSE: MCD), Tyson Foods (NYSE: TSN), Verizon (NYSE: VZ), Alberto-Culver (NYSE: ACV), Black & Decker (NYSE: BDK), Cemex (NYSE: CX), Corning (NYSE: GLW), East West Bancorp (Nasdaq: EWBC), KKR Financial (NYSE: KFN), Rohm & Haas (NYSE: ROH), SanDisk (Nasdaq: SNDK), Smurfit-Stone Container (Nasdaq: SSCC), Sysco Corp. (NYSE: SYY), Stanley Works (NYSE: SWK), VMware (NYSE: VMW) and Zoran (Nasdaq: ZRAN).
Tuesday
The Federal Open Market Committee commences its regularly scheduled programming Tuesday with it’s two-day meeting. The market should be tense heading into the powwow, and it should stay that way through its closure. At 7:45 a.m., the ICSC-UBS makes its regular reporting of weekly same-store sales. Last week’s poor growth rate of 1.6% still marked an up-tick from the very soft rate of 1.1% in the week before. As the weekly data continues to arrive, we should get an idea if the consumer is looking ahead to his late spring gift check and if he is enjoying the savings from the refinancing of his home (for those who could secure a new loan).
At 8:30, Durable Goods Orders for the month of December are expected to show a 1.6% increase from a revised and weak previous month’s decline of 0.1%. The Conference Board’s latest reading of consumer confidence at 10:00 a.m. is seen deteriorating to a measure of 87.5 for January, versus 88.6 in December. The S&P Case-Shiller Index should not surprise anyone when it shows further decline in home prices in November.
Earnings season gets real busy starting Tuesday, with news from Centex (NYSE: CTX), Eli Lilly (NYSE: LLY), Occidental Petroleum (NYSE: OXY), Robert Half Int’l (NYSE: RHI), Dow Chemical (NYSE: DOW), Traveler’s (NYSE: TLV) and Yahoo! (Nasdaq: YHOO) on the marquee. The rest of the list includes 3M (NYSE: MMM), AirTran Holdings (NYSE: AAI), Alliance Financial (Nasdaq: ALNC), American Electric Power (NYSE: AEP), ArvinMeritor (NYSE: ARM), Avery Dennison (NYSE: AVY), Burlington Northern Santa Fe (NYSE: BNI), Cardinal Health (NYSE: CAH), Countrywide Financial (NYSE: CFC), EMC Corp. (NYSE: EMC), Flextronics (Nasdaq: FLEX), Headwaters (NYSE: HW), Imperial Sugar (Nasdaq: IPSU), JetBlue Airways (Nasdaq: JBLU), Kemet (NYSE: KEM), Lexmark Int’l (NYSE: LXK), Pilgrim’s Pride (NYSE: PPC), Quixote (Nasdaq: QUIX), Smith Int’l (NYSE: SII), T. Rowe Price (Nasdaq: TROW), Techne (Nasdaq: TECH), Allstate (NYSE: ALL), Tupperware (NYSE: TUP), US Steel (NYSE: X), USG (NYSE: USG), Valero Energy (NYSE: VLO), Websense (Nasdaq: WBSN) and quite a few more.
Wednesday
The advanced GDP Report for the fourth quarter will be released at 8:30 with consensus expectation for a 1.2% increase for Real GDP. Clearly, nobody will get any sleep on Tuesday evening. Fed funds futures are still pricing the likelihood of a 50 basis point cut on Wednesday, but the bet is losing favor. We continue to expect a 25 point cut or no action at all. Our view is based on William Poole’s descending vote last week. Apparently Bill noted that the cut could wait a week, and this seems to imply the full move was planned or expected.
Considering the degree of speculation regarding the Fed possibly having engaged in shadow boxing last week, due to the unwinding of SocGen trades established by its notorious rogue trader, a 25 point move looks most likely in our view. Assuming the SocGen activity was at least partly behind the Fed's degree of cut, we could look at this two ways: the Fed may benefit by showing it intended the action, by following it with another; or the Fed may care less about saving face than minimizing its impact this month. Also, we should not forget that a fiscal stimulus package was introduced last week, so there is some sense that the Fed could take a break here. A lot depends on the GDP report the same morning.
The first of six employment reports hits the wire on Wednesday, that being ADP’s monthly data. Finally, the Mortgage Banker’s Association will report its weekly mortgage application activity. Over the past few weeks lower rates have inspired refinancing activity. At 10:30, the EIA will announce Petroleum Status, but the economy will be in focus in the energy pits as well as on the NYSE floor. The economic driver is so prevalent now that weekly draws and builds are almost completed muted.
Reporting earnings on Wednesday, expect news from Amazon.com (Nasdaq: AMZN), Boeing (NYSE: BA), Evergreen Solar (Nasdaq: ESLR), Kellogg (NYSE: K), Kraft (NYSE: KFT), Merck (NYSE: MRK), Pulte Homes (NYSE: PHM), Starbucks (Nasdaq: SBUX), Allergan (NYSE: AGN), Altria Group (NYSE: MO), Baker Hughes (NYSE: BHI), Business Objects (Nasdaq: BOBJ), Blade Logic (Nasdaq: BLOG), Cirrus Logic (Nasdaq: CRUS), Constellation Energy (NYSE: CEG), Covance (NYSE: CVD), Dominion Resources (NYSE: D), Everest Re (NYSE: RE), FTD Group (NYSE: FTD), Honda Motor (NYSE: HMC), Legg Mason (NYSE: LM), Overstock (Nasdaq: OSTK), SAP AG (NYSE: SAP), Silicon Labs (Nasdaq: SLAB), Tetra Tech (Nasdaq: TTEK), Tractor Supply (Nasdaq: TSCO), W.R. Grace (NYSE: GRA), Xcel Energy (NYSE: XEL) and more.
Thursday
After the week’s busy hump day, Thursday will not offer a cool breeze either. Bang! Bang! Bang! Just like that we’ll receive the Monster Employment Index, the Help Wanted Index, Weekly Initial Jobless Claims and the Employment Cost Index. Jobless claims have moderated in recent reports, easing concerns about unemployment. However, the consensus sees this week’s figure at 318K, up a bit from last week’s 301K.
The fourth quarter Employment Cost Index is expected to show an increase of 0.8%. We do not expect wages to add to inflation concerns in a recessing environment. Take what is happening at Ford (NYSE: F) as an example. The company is buying out the contracts of senior employees in order to replace them with less costly ones. This is indicative of an environment where other costs of production tied to commodity price rise and a competitive environment dictate wages.
Before the market open, the Commerce Department will report the critical Personal Income and Consumption Data for the month of December. Income is seen increasing by 0.4%, while consumption is expected to rise just 0.1% in the face of consumer pressures. Consumption is the market’s focus at the moment, and with those stimulant providing checks still bogged down by the Senate and IRS, there’s no real catalyst to inspire spending. We know already that the holiday shopping season was a letdown.
The National Association of Purchasing Managers - Chicago Report for January threatens to show the Midwest, excluding the already slumping Detroit metro area, is finally succumbing to the same pressures seen throughout the rest of the country. Economists are looking for a still expansionary reading of 52.0, versus the robust measure of 56.4 seen in December.
The EIA’s regular Natural Gas Report at 10:30 and the Farm Prices Report at 3:00 round out the day’s economic news. In light of recent budgetary questions related to how we are going to finance fiscal stimulus, the words of the Director of the Congressional Budget Office, who is scheduled to speak in Washington, could ring some bells of alarm Thursday.
Just a small portion of the day's earnings reports include Anheuser-Busch (NYSE: BUD), Bristol-Myers Squibb (NYSE: BMY), Celgene (Nasdaq: CELG), Digital River (Nasdaq: DRIV), Electronic Arts (Nasdaq: ERTS), Google (Nasdaq: GOOG), Intuitive Surgical (Nasdaq: ISRG), Mattel (NYSE: MAT), Micros Systems (Nasdaq: MCRS), Monster Worldwide (Nasdaq: MNST), Proctor & Gamble (NYSE: PG), SEI Investments (Nasdaq: SEIC).
Friday
Friday brings yet another busy day to conclude the exhaustive week. First and foremost, the market will be highly attuned to the Employment Situation Report for the month of January. December’s report really compounded concerns when the unemployment rate jumped three-tenths of a point to 5.0%. It was the kind of rise historians pointed to as a sure sign of recession ahead. After weeks of not so bad unemployment claims data, most see the rate backing up a tenth of a point this time around to 4.9%. However expected this may be, the market should still take a small sum of relief from the news.
Based on Bloomberg’s survey of economists, NonFarm Payrolls are seen rising 58,000. Here’s where we are not so sure; reason being, before you fire, you stop hiring. Small businesses and retail will probably be the next segments to consolidate (and go under in the case of many small businesses). When retailers begin reporting weak holiday quarter results and reflecting concerning forecasts for ’08, many are also likely to follow the actions of first-movers Macy’s (NYSE: M) and Talbots (NYSE: TLB), which have already closed some stores.
Those job additions that have been born by bar and restaurant employment should also start to tail off into nothingness. People may continue to drink when they get poor, but they do it at home instead of in the pub. This of course assumes they still have a home. Average hourly wages are expected to have increased by 0.3%.
The remainder of the heavy hitting economic data gets piled on at 10:00 a.m. All three of the reports should be depressing. The ISM Manufacturing Report for January will likely show a further contraction of the manufacturing sector. The metric is widely expected to measure 47.0 this time around, versus 47.7 last month. Construction Spending for the month of December should show no better, indicating a decrease of 0.5% according to economists.
The final reading of Consumer Sentiment for January, as surveyed by the University of Michigan, is seen having eased to 79.0 from 80.5 last time out, when the survey apparently concentrated on college bar exit polls. Finally, January’s domestic motor vehicle sales are seen falling by 200K, according to Barron’s. General Motors (NYSE: GM) recently broke the bad news that it will share the title of most important seller of automobiles with Toyota (NYSE: TM), based on 2007 data. That’s sort of a triumph since many auto experts were pointing to ’07 as the year the mighty would fall.
Friday’s earnings news includes the likes of Arch Coal (NYSE: ACI), British Airways (London: Bay.L), Automatic Data Processing (NYSE: ADP), Chevron (NYSE: CVX), Exxon Mobil (NYSE: XOM), Cummins (NYSE: CMI), Gannett (NYSE: GCI), Manpower (NYSE: MAN), MeadWestvaco (NYSE: MWV), MF Global (NYSE: MF), Nissan Motor (Nasdaq: NSANY), NYMEX Holdings (NYSE: NMX), Orleans Homebuilders (NYSE: OHB), Oshkosh Truck (NYSE: OSK), Public Service Enterprise Group (NYSE: PEG), Ryder System (NYSE: R), Simon Property (NYSE: SPG), Estee’ Lauder (NYSE: EL), Tidewater (NYSE: TDW) and a few more.
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Labels: Week Ahead
posted by The Greek | 8:22 AM
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