The Greek's Week Ahead - Maestro Bernanke

Our "week ahead" report has been engineered to provide readers with a market-moving event planner that can be referenced all week long.

You have to wonder if Ben Bernanke's Federal Reserve has orchestrated a masterpiece or if the band is breaking up. At the same time that positive GDP data arrived, offering hope for economic survival, Bernanke's trusty sidekick, Fred Mishkin, tendered his resignation. We must admit that Fred's announcement, along with rekindled inflation concern, lent to our own mixed emotions last week. We found great hope in the seemingly perfectly timed economic stimulus package, while at the same time we felt trepidation, since it seems Freddy might see an inflation nightmare on Wall Street approaching.

Despite the fright, the S&P 500 was courageous (+1.8%) thanks to deflating oil prices and decent economic data. The economy seemed to rise from the dead, as first quarter GDP growth was revised higher to 0.9%, from a previously reported 0.6%. That's not a recessionary figure, and the direction of change is also favorable. So what gives? What happened to that well-publicized recession everyone has been squirreling away dollars for? Guess what… we might not see it, at least not soon. Economists are currently projecting fractional growth for Q2.

Time to Fear Inflation

Friday's Personal Income and Consumption Report for April showed growth that only just kept pace with inflation. What was most interesting to us, as we perused through the hypnotizing text, was that income growth benefited from mostly synthetic and nonrecurring drivers. For instance, payrolls decreased in both goods producing and services industries, but growth in government payrolls offset the core economic decline. Also, apartment income helped drive growth, but most readers here pay rent, or God forbid, a mortgage, so who benefits then… Rental rates are likely gaining from new pressures limiting home ownership, like responsible borrower qualification for instance.

One factor we found interesting within the report, and view a great driver of hope for Q2, is the impact of economic stimulus, which added some $7.8 billion to income. Clearly this is not going to be an ongoing factor behind growth, but we only saw a small portion of the rebates received in April, with the majority coming in May and June. Thus, it looks like the government might have injected the fuel at just the right moment to stave off economic contraction. Bravo Bernanke! Bravo! Though we’ll check back in for Act 2 of this tragic composition, entitled "inflation," after intermission.

The Week Ahead

This week's data offers great insight into the state of the second quarter, since the employment reports are on the way!

Monday

On Monday, the Construction Spending and ISM Manufacturing reports seem certain to offer more of the same depressing news about two of the toughest businesses to be involved in this year, with financial services clearly completing the troubled triangle.

At 10:00 a.m., Construction Spending for the month of April is seen decreasing 0.6% by Bloomberg's consensus. Note also that two of the nation's most important builders will report earnings this week, Toll Brothers (NYSE: TOL) and Hovnanian (NYSE: HOV).

Also at 10:00, the Institute for Supply Management will report its Manufacturing Index for May, with economists' expectations set at 48.5. A reading below 50.0 marks business contraction.

Just as hurricane season gets underway and the first named storm dies out over the Yucatan Peninsula, the Senate begins debate on a bill to cap greenhouse-gas emissions. The storm season is expected to contain eleven named cyclones, including one by the marvelous moniker of Marco.

While Medtronic (NYSE: MDT) holds its analysts' day, Monday's light earnings schedule includes once "Greek" followed firm ABM Industries (NYSE: ABM), and Agilysys (Nasdaq: AGYS), Credence Systems (Nasdaq: CMOS), Lululemon (Nasdaq: LULU), Mitcham Industries (Nasdaq: MIND), Origin Agritech (Nasdaq: SEED), Terremark Worldwide (Nasdaq: TMRK) and once significant but now penny stock Thornburg Mortgage (NYSE: TMA).

Tuesday

Tuesday is not likely to offer a break from bad news, as Motor Vehicle Sales data reaches the wire. We've heard nothing but warnings about the second quarter from Ford (NYSE: F) and GM (NYSE: GM). Both companies are reducing workforce, as GM replaces about one-quarter of its hourly wage compensated employees with new ones at half the cost. Ford plans to let go of about 2,000 white collar workers. Barron's recommended buying GM in its most recent issue, but "The Greek" suggests avoiding vehicle sales report-risk with this one. GM will hold its shareholders meeting on Tuesday.

It appears as if retailers are seeing benefit from the economic stimulus check distribution. The ICSC-UBS Weekly Same-Store Sales Report noted 1.5% year-over-year growth last week. While this is not a stellar growth rate, it's better than trends seen earlier this year. Still, it looks like most of the success in retail is being hogged by discount and high-end, leaving department stores and mall-based retailers short on traffic.

April's Factory Orders are due at 10:00 on Tuesday, with Bloomberg's consensus of economists looking for a 0.1% decrease, versus a 1.4% rise in March. In case you were wondering, January and February posted declines.

The final Democratic Party primaries wrap up on Tuesday with the elections held in Montana, New Mexico and South Dakota. We expect many of the superdelegates to announce their decisions once the last votes are counted Tuesday, and it seems safe to say that Obama looks like your man (speaking to the Dems!).

The International Monetary Conference will feature an address by the U.S. Federal Reserve Chairman. Also in attendence, the ECB and Bank of Japan chiefs, so media outlets the world over will be attuned.

Ambac (NYSE: ABK) holds its annual shareholder's meeting, while earnings are noted by Bob Evans Farms (Nasdaq: BOBE), CPI Corp. (NYSE: CPY), Diamond Foods (Nasdaq: DMND), Gander Mountain (Nasdaq: GMTN), Guess (NYSE: GES), HHGregg (NYSE: HGG), Layne Christensen (Nasdaq: LAYN), Navisite (Nasdaq: NAVI), NCI Building Systems (NYSE: NCS), New Frontier Media (Nasdaq: NOOF), PLATO Learning (Nasdaq: TUTR), SAIC, Inc. (NYSE: SAI), Toll Brothers (NYSE: TOL) and Uroplasty (AMEX: UPI).

Wednesday

Wednesday begins the parade of labor market news, as the Challenger Job-Cut Report hits the wires bright and early. Last month Challenger noted a huge layoff number of 90K. Things do not look to improve significantly for May, judging by ongoing consolidation news from significant American corporations this past month. Before the market opens, the ADP Employment Report will also note private market job additions/losses for May.

It's revision time for the first quarter Productivity and Costs measures. Both were initially reported increased by 2.2%. Productivity is now seen 2.5% higher, while costs are seen rising 1.9%. If it plays out that way, the adjustment clearly helps quell some inflation concern for the time being. Note also that this result is harmonious with Maestro Bernanke's masterpiece. After all, he's been telling us all along that inflation would ease with economic growth moderation. Just ask GM, which has managed to exploit these bad times, making major strides in improving its cost structure.

The ISM Nonmanufacturing Report is due Wednesday, but we're sorry to say that we're missing an accurate forecast at the hour of publishing. The EIA Petroleum Status Report follows up two weeks of sharp inventory draws, so it would be nice to see some counterbalance at this point.

In an address, Ben Bernanke compares 1975 to the current period, and this should get interesting. The fact that he is speaking about an inflationary period is quite noteworthy in and of itself. You might also check in on the OECD, which will offer economic forecasts for the world's major economies.

Finally, while the REIT industry hold's an investor forum in New York, Wednesday's earnings reports include ADC Telecommunications (Nasdaq: ADCT), AMERCO (Nasdaq: UHAL), American Woodmark (Nasdaq: AMWD), Angeion (Nasdaq: ANGN), Collective Brands (NYSE: PSS), Comtech Telecommunications (Nasdaq: CMTL), Conn's Inc. (Nasdaq: CONN), Dynamex (Nasdaq: DDMX), Financial Federal (NYSE: FIF), FuelCell Energy (Nasdaq: FCEL), Greif Brothers (NYSE: GEF), Hovnanian Enterprises (NYSE: HOV), IDT Corp. (NYSE: IDT), Martek Biosciences (Nasdaq: MATK), Star Bulk Carriers (Nasdaq: SBLK), Ulta Salon (Nasdaq: ULTA), Vimpel Communications (NYSE: VIP), Volt Info Sciences (NYSE: VOL) and Williams-Sonoma (NYSE: WSM).

Thursday

The big news on Thursday will most likely emanate from individual retailers' chain store sales releases. As the rebate checks started to arrive, we noticed an immediate improvement in weekly same-store sales, so this May data could offer decent news.

European bankers might completely steal the show Thursday though, if they raise interest rates to stave off serious recession risk in Europa. The U.S. Federal Reserve will not play spectator on Thursday, as it issues its quarterly flow of funds report. Also, Philly Fed President Charles Plosser is set to speak about "financial stability." That's a nice idea...

The Monster Employment Index for May is due early on Thursday, and the online measure of job availability reached 174 in April, up from 167 in March. Weekly Initial Jobless Claims are expected to measure 374K, right around recent levels. At 10:30, the EIA will issue its regular Natural Gas Report.

Home Depot (NYSE: HD) speaks to investors, while Thursday's earnings include Alloy (Nasdaq: ALOY), Analogic (Nasdaq: ALOG), Bio-Reference Laboratories (Nasdaq: BRLI), Blyth (NYSE: BTH), Cascade (NYSE: CAE), Ciena (Nasdaq: CIEN), Comarco (Nasdaq: CMRO), CRA International (Nasdaq: CRAI), Del Monte Foods (NYSE: DLM), Focus Media Holding (Nasdaq: FMCN), G-III Apparel Group (Nasdaq: GIII), Hayes Lemmerz (Nasdaq: HAYZ), Jackson Hewitt Tax Service (NYSE: JTX), MDS Inc. (NYSE: MDZ), Midas (NYSE: MDS), National Semiconductor (NYSE: NSM), Nobility Homes (Nasdaq: NOBH), Oil-Dri Corp. (NYSE: ODC), Optium (Nasdaq: OPTM), Quiksilver (NYSE: ZQK), Rex Stores (NYSE: RSC), Smithfield Foods (NYSE: SFD), Take-Two Interactive (Nasdaq: TTWO), The Cooper Cos. (NYSE: COO), UTI Worldwide (Nasdaq: UTIW), Vail Resorts (NYSE: MTN), Valence Technology (Nasdaq: VLNC) and a few more.

Friday

The Employment Situation Report headlines on Friday of course. Unemployment ran at a 5.0% rate in April, better than was expected, but the jobless rate should have inched higher in May. Bloomberg's survey shows expectations at 5.1% anyway. Nonfarm payrolls decreased 20K last month, and we see no reason to expect better this time around. Bloomberg's group sees job attrition of 60K in May. Average hourly earnings are seen increasing 0.2%. Keep an eye on the now infamous birth/death rate phantom adjustment, and how it compares to general trend.

Federal Reserve Governor Kroszner addresses financial market developments and credit conditions. This after last week's FDIC report showed banks pretty well-stressed in their ability to lend, as default rates rise faster than reserves. Higher long-term interest rates aren't helping things either.

Also on Friday, look for the RBC Cash Index at 9:00 a.m. (39.0 in May), Wholesale Trade at 10:00 a.m. (Inventories fell 0.1% in March) and Consumer Credit at 3:00 p.m. (increased $15.3 billion in March). Bloomberg's consensus of economists sees consumer credit increasing $7.4 billion in April.

Wal-Mart (NYSE: WMT) holds its annual meeting, while Friday's earnings include A-Power Generation (Nasdaq: APWR) and Signet Group (NYSE: SIG).

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