The Greek's Week Ahead - ECB on the Radar
The Greek's Week Ahead has been engineered to prepare you for the events that could impact your portfolio this week.
After a tiring week on Wall Street that included an exhaustive supply of information to keep traders on their toes, the week ahead is focused on earnings news and a duo of important central bank decisions overseas.
The market had a full plate to digest last week, including: a fourth quarter GDP report showing economic growth of just 0.6%; the first decrease in monthly employment in four years; a Federal Reserve action to cut interest rates another half of a percentage point; and Microsoft’s acquisition bid for Yahoo! (Nasdaq: YHOO). Major indices moved higher on the week, benefiting more from the medicine administered by the Federal Reserve than suffering from the symptoms of illness evident in economic data.
The Dow Industrials climbed 4.4% on the week, while the S&P 500 rose 4.9% and Nasdaq increased 3.8%. Small cap stocks led the way as the sector recovered some from a horrible start to the year. The S&P Small Cap 600 Index soared 6.8%, while the Russell 2000 index moved 6.1% higher. Overseas, European markets mostly moved higher, while Asia defied the trend, with most major markets in the red. The Shanghai B Shares fell 7.9% on the week and were down 19% on the year. We've warned in the past of the risk in the mainland Chinese market tied to the pervasive participation of unsophisticated investors and bulging bubble like profits that could be taken in a hurry. Hong Kong's Hang Seng was down a much more contained 4.0% on the week.
Capital continued to flow out of equity funds as panicked American 401K holders raced like lemmings for the cliff even as the market rose. Some would argue these investors are wisely selling a bear market rally. While we expect this rally to eventually run dry, we think it still has some legs to it.
The Play By Play
The Federal Reserve followed up its three-quarter point emergency action of a week before, with another cut of a half of a percentage point at its regular meeting on the 28-29th. This action illustrated the seriousness of the economic situation, but was also reassuring to the financial markets. The often-criticized Federal Reserve proved that it would be supportive to economic well being going forward. This, and the support of the federal government, is the underlying driver of stock market rally now.
More distressing news came from the Bureau of Labor Statistics Employment Situation Report for the month of January. It showed a decrease in nonfarm payrolls of 17,000, the first such decline in four years. WallStreetGreek.com believes this week’s economic news strengthens the argument that the U.S. economy is already in recession in the first quarter of 2008. It’s important to realize that the stock market is a leading economic indicator, and rose this week in anticipation of the mitigating impact of Federal Reserve and government action. At the same time, economic data should continue to weaken, leading to volatility in equities.
In corporate news this past week, Google (Nasdaq: GOOG) and Yahoo! (Nasdaq: YHOO) reported disappointing results and a concerning outlook, respectively, and their respective shares declined. However, on Friday, Microsoft (Nasdaq: MSFT) solicited a bid for Yahoo! at a 62% premium to its closing price on Thursday. Yahoo! shares rocketed on the news, and see our research on the subject at the site WallStreetGreek.com.
This Week
The week ahead includes further important economic reports, two critical foreign central bank meetings and plenty of corporate earnings reports. After last week’s disappointing employment report, Monday’s Challenger Job-Cut Report portends to show an increase in planned layoffs. Last week’s employment data showed most of the job losses came from manufacturing and construction. Yet, January’s ISM Manufacturing Survey offered a positive surprise with an expansionary reading of 50.7. This week’s ISM Nonmanufacturing Survey, which is scheduled for Tuesday release, will offer some further insight into how the services sector is holding up. Remember, the services sector dominates American productivity and drives our economy.
On Thursday, most retailers will report same-store sales for the month of January. We’re not expecting strong performance as anecdotal evidence has offered signs of weakness. Target (NYSE: TGT) reported earlier this month that its sales had been trending at the low end of its forecast range. Not long ago, Macy’s (NYSE: M) and Talbot’s (NYSE: TLB) announced store closings. Weekly same-store sales data from the International Council of Shopping Centers has shown sales growth at a much lower rate then during anytime in ’07. The reason behind this deterioration is undeniably the result of rising stresses upon American consumers. Consumer spending has come under intense pressure, due to rising gasoline and food costs, and government relief still looks months way at this point. However, we expect the federal government to move swiftly in getting relief to the populace.
On Thursday, the Bank of England and European Central Bank are both scheduled to make announcements on regional interest rates. In America, it’s hoped that the ECB would follow suit with the U.S. in lowering rates. However, economic decline is not as evident yet in the euro zone. Since the U.S. represents Europe’s second biggest export market, economists are paying close attention. If the ECB keeps rates steady, the dollar could weaken further, and eventually U.S. treasury securities could lose foreign interest. There’s concern that this could later drive inflation in America.
Last week, European inflation was reported increased to 3.2%, the highest in 14 years, and ECB bankers are on record expressing concern. Thus, if the ECB keeps rates steady next week, it would not be a great surprise, but still hurt U.S. securities.
The week’s earnings reports will be headlined by news from:
Monday - Archer Daniels Midland (NYSE: ADM), Clorox (NYSE: CLX), Humana (NYSE: HUM), SOHU.com (Nasdaq: SOHU), YUM! Brands (NYSE: YUM) and more.
Tuesday – Chicago Mercantile Exchange (NYSE: CME), Duke Energy (NYSE: DUK), Nabors Industries (NYSE: NBR), NYSE Euronext (NYSE: NYX), Quality Systems (Nasdaq: QSII), Renaissance Re (NYSE: RNR), The Cheesecake Factory (Nasdaq: CAKE), THQ, Inc. (Nasdaq: THQI), Toyota Motor (NYSE: TM), Travelzoo, Inc. (Nasdaq: TZOO), Walt Disney (NYSE: DIS), Whirlpool (NYSE: WHR).
Wednesday – Akamai Technologies (Nasdaq: AKAM), Atmel (Nasdaq: ATML), Biogen Idec (Nasdaq: BIIB), Cameco (NYSE: CCJ), Cisco Systems (Nasdaq: CSCO), Devon Energy (NYSE: DVN), Hillenbrand Industries (NYSE: HB), Metlife (NYSE: MET), Nautilus (NYSE: NLS), National Oilwell Varco (NYSE: NOV), Pioneer Natural Resources (NYSE: PXD), Prudential (NYSE: PRU), Sara Lee (NYSE: SLE), Sunoco (NYSE: SUN), Time Warner (NYSE: TWX).
Thursday – Activision (Nasdaq: ATVI), Aetna (NYSE: AET), AGCO (NYSE: AG), Apache Corp. (NYSE: APA), AutoNation (NYSE: AN), Cincinnati Bell (NYSE: CBB), Corrections Corp. (NYSE: CXW), D.R. Horton (NYSE: DHI), Deutsche Bank (NYSE: DB), EOG Resources (NYSE: EOG), International Paper (NYSE: IP), Lab Corp. (NYSE: LH), McAfee Inc. (NYSE: MFE), Moody’s (NYSE: MCO), Penn National Gaming (Nasdaq: PENN), PepsiCo (NYSE: PEP), Telefonos De Mexico (NYSE: TMX), Timberland (NYSE: TBL), Unilever N.V. (NYSE: UN), Watson Wyatt (NYSE: WW).
Friday – Alcatel-Lucent (NYSE: ALU), Coventry Health (NYSE: CVH), Weyerhaeuser (NYSE: WY).
This list represents only a small portion of the companies reporting earnings this week.
After a tiring week on Wall Street that included an exhaustive supply of information to keep traders on their toes, the week ahead is focused on earnings news and a duo of important central bank decisions overseas.
The market had a full plate to digest last week, including: a fourth quarter GDP report showing economic growth of just 0.6%; the first decrease in monthly employment in four years; a Federal Reserve action to cut interest rates another half of a percentage point; and Microsoft’s acquisition bid for Yahoo! (Nasdaq: YHOO). Major indices moved higher on the week, benefiting more from the medicine administered by the Federal Reserve than suffering from the symptoms of illness evident in economic data.
The Dow Industrials climbed 4.4% on the week, while the S&P 500 rose 4.9% and Nasdaq increased 3.8%. Small cap stocks led the way as the sector recovered some from a horrible start to the year. The S&P Small Cap 600 Index soared 6.8%, while the Russell 2000 index moved 6.1% higher. Overseas, European markets mostly moved higher, while Asia defied the trend, with most major markets in the red. The Shanghai B Shares fell 7.9% on the week and were down 19% on the year. We've warned in the past of the risk in the mainland Chinese market tied to the pervasive participation of unsophisticated investors and bulging bubble like profits that could be taken in a hurry. Hong Kong's Hang Seng was down a much more contained 4.0% on the week.
Capital continued to flow out of equity funds as panicked American 401K holders raced like lemmings for the cliff even as the market rose. Some would argue these investors are wisely selling a bear market rally. While we expect this rally to eventually run dry, we think it still has some legs to it.
The Play By Play
The Federal Reserve followed up its three-quarter point emergency action of a week before, with another cut of a half of a percentage point at its regular meeting on the 28-29th. This action illustrated the seriousness of the economic situation, but was also reassuring to the financial markets. The often-criticized Federal Reserve proved that it would be supportive to economic well being going forward. This, and the support of the federal government, is the underlying driver of stock market rally now.
More distressing news came from the Bureau of Labor Statistics Employment Situation Report for the month of January. It showed a decrease in nonfarm payrolls of 17,000, the first such decline in four years. WallStreetGreek.com believes this week’s economic news strengthens the argument that the U.S. economy is already in recession in the first quarter of 2008. It’s important to realize that the stock market is a leading economic indicator, and rose this week in anticipation of the mitigating impact of Federal Reserve and government action. At the same time, economic data should continue to weaken, leading to volatility in equities.
In corporate news this past week, Google (Nasdaq: GOOG) and Yahoo! (Nasdaq: YHOO) reported disappointing results and a concerning outlook, respectively, and their respective shares declined. However, on Friday, Microsoft (Nasdaq: MSFT) solicited a bid for Yahoo! at a 62% premium to its closing price on Thursday. Yahoo! shares rocketed on the news, and see our research on the subject at the site WallStreetGreek.com.
This Week
The week ahead includes further important economic reports, two critical foreign central bank meetings and plenty of corporate earnings reports. After last week’s disappointing employment report, Monday’s Challenger Job-Cut Report portends to show an increase in planned layoffs. Last week’s employment data showed most of the job losses came from manufacturing and construction. Yet, January’s ISM Manufacturing Survey offered a positive surprise with an expansionary reading of 50.7. This week’s ISM Nonmanufacturing Survey, which is scheduled for Tuesday release, will offer some further insight into how the services sector is holding up. Remember, the services sector dominates American productivity and drives our economy.
On Thursday, most retailers will report same-store sales for the month of January. We’re not expecting strong performance as anecdotal evidence has offered signs of weakness. Target (NYSE: TGT) reported earlier this month that its sales had been trending at the low end of its forecast range. Not long ago, Macy’s (NYSE: M) and Talbot’s (NYSE: TLB) announced store closings. Weekly same-store sales data from the International Council of Shopping Centers has shown sales growth at a much lower rate then during anytime in ’07. The reason behind this deterioration is undeniably the result of rising stresses upon American consumers. Consumer spending has come under intense pressure, due to rising gasoline and food costs, and government relief still looks months way at this point. However, we expect the federal government to move swiftly in getting relief to the populace.
On Thursday, the Bank of England and European Central Bank are both scheduled to make announcements on regional interest rates. In America, it’s hoped that the ECB would follow suit with the U.S. in lowering rates. However, economic decline is not as evident yet in the euro zone. Since the U.S. represents Europe’s second biggest export market, economists are paying close attention. If the ECB keeps rates steady, the dollar could weaken further, and eventually U.S. treasury securities could lose foreign interest. There’s concern that this could later drive inflation in America.
Last week, European inflation was reported increased to 3.2%, the highest in 14 years, and ECB bankers are on record expressing concern. Thus, if the ECB keeps rates steady next week, it would not be a great surprise, but still hurt U.S. securities.
The week’s earnings reports will be headlined by news from:
Monday - Archer Daniels Midland (NYSE: ADM), Clorox (NYSE: CLX), Humana (NYSE: HUM), SOHU.com (Nasdaq: SOHU), YUM! Brands (NYSE: YUM) and more.
Tuesday – Chicago Mercantile Exchange (NYSE: CME), Duke Energy (NYSE: DUK), Nabors Industries (NYSE: NBR), NYSE Euronext (NYSE: NYX), Quality Systems (Nasdaq: QSII), Renaissance Re (NYSE: RNR), The Cheesecake Factory (Nasdaq: CAKE), THQ, Inc. (Nasdaq: THQI), Toyota Motor (NYSE: TM), Travelzoo, Inc. (Nasdaq: TZOO), Walt Disney (NYSE: DIS), Whirlpool (NYSE: WHR).
Wednesday – Akamai Technologies (Nasdaq: AKAM), Atmel (Nasdaq: ATML), Biogen Idec (Nasdaq: BIIB), Cameco (NYSE: CCJ), Cisco Systems (Nasdaq: CSCO), Devon Energy (NYSE: DVN), Hillenbrand Industries (NYSE: HB), Metlife (NYSE: MET), Nautilus (NYSE: NLS), National Oilwell Varco (NYSE: NOV), Pioneer Natural Resources (NYSE: PXD), Prudential (NYSE: PRU), Sara Lee (NYSE: SLE), Sunoco (NYSE: SUN), Time Warner (NYSE: TWX).
Thursday – Activision (Nasdaq: ATVI), Aetna (NYSE: AET), AGCO (NYSE: AG), Apache Corp. (NYSE: APA), AutoNation (NYSE: AN), Cincinnati Bell (NYSE: CBB), Corrections Corp. (NYSE: CXW), D.R. Horton (NYSE: DHI), Deutsche Bank (NYSE: DB), EOG Resources (NYSE: EOG), International Paper (NYSE: IP), Lab Corp. (NYSE: LH), McAfee Inc. (NYSE: MFE), Moody’s (NYSE: MCO), Penn National Gaming (Nasdaq: PENN), PepsiCo (NYSE: PEP), Telefonos De Mexico (NYSE: TMX), Timberland (NYSE: TBL), Unilever N.V. (NYSE: UN), Watson Wyatt (NYSE: WW).
Friday – Alcatel-Lucent (NYSE: ALU), Coventry Health (NYSE: CVH), Weyerhaeuser (NYSE: WY).
This list represents only a small portion of the companies reporting earnings this week.
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Labels: Week Ahead
posted by The Greek | 11:32 PM
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