This Week: Another Bank Bites the Dust

The Greek's Week Ahead offers investors a schedule of market moving events from economic reports, to earnings news and more.

And another one down, and another one down, another one bites the dust... Wow, Hank really meant it this time! We were about to nickname him, "The Treasury Secretary Who Cried Wolf" after he warned he wouldn't bail out Bear Stearns (NYSE: JPM), then Fannie (NYSE: FNM) and Freddie (NYSE: FRE), and finally Lehman (NYSE: LEH). I guess poor Lehman just failed too late in the cycle. Merrill Lynch (NYSE: MER) got the hint within hours, so it seems Paulson has already had an impact on future failure. And when it looked like he might have to step in for AIG (NYSE: AIG), he got the Governor of New York to play good cop so that he could maintain his new found tough on banks credibility.

This Week

Monday

Monday's reports, already posted at the hour of our publishing this week, both came in negative. Like we needed more bricks on this sinking ship...

Industrial Production declined 1.1% in August, and Capacity Utilization declined a full percentage point to 78.7%. Both figures sharply missed consensus expectations, which included a 0.3% production fall off and utilization of 79.5%. This, along with last week's retail data, portends serious trouble for employment and GDP in the quarters ahead.

The New York Federal Reserve posted its Empire State Manufacturing Survey's General Business Conditions Index, which measured at negative 7.4, versus consensus views for +0.5. In case you had not noticed, business conditions are deteriorating!

Excluding the fact that markets were closed in China, Hong Kong, Japan and South Korea for holiday, we had a busy geopolitical day. The IAEA offered information on Iran indicating that modern day Persia had blocked some of its nuclear inspections. That's going to play right into the hands of U.S. and Israeli plans, and help in the attainment of support from Europe.

Meanwhile, Russia is scheduled to end its illegal occupation of Georgia's port of Poti, where the majority of the tiny nation's shipping activity occurs. Russia destroyed Georgia's infrastructure so much that the United States is gearing up aid summing in the billions. Unlike the United States' such actions in Japan and Iraq, Russia will not be rebuilding its former Soviet brother. This type of illegal activity cannot be allowed to pass without penalty.

In our "weekly videos," we offered the recent interview of Sarah Palin, within which we noted a tone by Charlie Gibson that sought to demean Palin. I believe he successfully did so, but Palin's answers were right in line with how both John McCain and Barack Obama would have responded. This effort to dismantle her based on a presumption of her inability to lead our nation was employed unfairly in the interview. Charlie owes her an apology; he couldn't even look Mrs. Palin in the eye as he asked the questions, he was so sure of how unfit she is. "The Greek" happens to share concern about her experience, but her answers were spot on, and the tone of the interviewer should not override that. Reiterating, I've yet to make my decision...

As Venezuela and Bolivia expel U.S. Ambassadors, invite Russian tactical bombers and curse the United States in public forum, Colombia's President arrives for a well-timed meeting with the Senate Finance Committee; he's seeking aid for Colombia and the passing of a free-trade pact.

Monday's earnings schedule includes CREDO Petroleum (Nasdaq: CRED), Epoch Holding (Nasdaq: EPHC), Frequency Electronics (Nasdaq: FEIM), Impac Mortgage (NYSE: IMH), National Technical Systems (Nasdaq: NTSC), Pall Corp. (NYSE: PLL), Rural/Metro (Nasdaq: RURL), SteelCloud (Nasdaq: SCLD), Synthesis Energy (Nasdaq: SYMX), The Kroger Co. (NYSE: KR), Titan Machinery (Nasdaq: TTTN), Tongxin Int'l (Nasdaq: TXIC), Vermont Pure Holdings (AMEX: VPS) and WPCS Int'l (Nasdaq: WPCS).

Tuesday

We'll pick ourselves up and start all over again on Tuesday. The Treasury Secretary will appear before the Senate Banking Committee, facing questions about his engineering of government takeover of Fannie and Freddie just weeks after plainly stating the government would not do so.

Have you noticed that nobody looked toward the Fed during the most recent financial sector debacles, whereas in the past the Fed was on the hook to cut rates or be cut itself. Despite crashing commodity prices, the market has now accepted inflation risk and a 2% Fed Funds rate. Also, with the government take-over of Fannie and Freddie, mortgage rates have backed up, so why would the central bank risk fueling inflation concerns now. Therefore, there is good reason for the Fed to resist a rate cut on Tuesday at its scheduled FOMC meeting. Rates are accommodating already, and the dollar is strengthening. Despite some frantic and naive voices finding microphones on Monday morning, we expect the Fed to hold rates steady on Tuesday.

Speaking of inflation and deflation, the Consumer Price Index is also due for Tuesday morning report. After last week's soft data on energy price retreat, and a Core PPI that came in in-line, expectations have turned toward deflation. Energy prices in nose-dive have taken on the role of poster child for deflation, but we still need more consumer level data verification.

This report for August is still backward looking, however recent it may be. Bloomberg's consensus expects Headline CPI to decline 0.1%, and Core Prices are seen increasing 0.2%. Don't be surprised if the figure is hotter; these are the prices consumers pay, and commodity price decline should not work through the system quickly. While collusion is impacted by competition in an open market, it still pays to wait to cut prices at least until your serious foes do. This is where your MBA is about as useful as your grandfather's advice.

As we become further separated from "back to school" season, the ICSC Weekly Same-Store Sales Report experiences erosion of support. We've noted a steady decline in sales rates over the last few weeks, and we're looking for that to continue through the "dead zone" until Thanksgiving. Last week's report showed sales growth of 1.9%, year-to-year, and decline of 0.1% from the prior week. We find the Redbook Survey less useful a metric, but growth trends have coincided nonetheless.

The Treasury International Capital Report is due in the morning, and we expect that with dollar firming and European, Asian and general global market decline, American assets are gaining global capital interest. In the early afternoon, the National Association of Home Builders will publish its Housing Market Index. Housing stocks like Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), Lennar (NYSE: LEN) and others have benefited recently as capital flows have found beaten down cyclical names, or those outside of the financial sector for obvious reasons. However, this report could give investors some reason to cash in. At the same time, value seekers may find opportunity to take early long-term stakes as a result. Our favorite has always been TOL, and we're pleased with the league leading stock chart as a result.

Our greedy friends at OPEC, a week removed from announcing they would cut rates, are set to release their monthly oil market report in Vienna. Also in Europe, French oil giant Total (NYSE: TOT) is scheduled to offer its mid-year review. Cisco Systems (Nasdaq: CSCO) has also scheduled analyst meeting for Tuesday morning. The earnings schedule includes AAR Corp. (NYSE: AIR), Adobe (Nasdaq: ADBE), Best Buy (NYSE: BBY), CBRL Group (Nasdaq: CBRL), China Precision Steel (Nasdaq: CPSL), Darden Restaurants (NYSE: DRI), Goldman Sachs (NYSE: GS), Neurobiological Technologies (Nasdaq: NTII) and The Parent Co. (Nasdaq: KIDS).

Wednesday

Wednesday will begin with news from abroad, as the Bank of Japan is scheduled to set monetary policy. According to Barron's, the BOJ is seen keeping rates steady, but we're coming off Q2 GDP contraction and the resignation of the Japanese Prime Minister. A cut is possible, but the BOJ Chief is on record saying that the Q2 contraction might simply be the result of excessive first quarter growth. The Bank of England is also scheduled to publish its minutes from its September meeting.

Here at home, the headline report of the day will be the Housing Starts news at 8:30 ET. Starts are seen running at an annual pace of 950,000 in August, comparing against 965K in July. Permits were reported soft in July, and so there's reason for confidence in the forecast. This data could support the case against home builders, built from the previous day's measure of builder sentiment. Even so, we do not view short interest as the best long-term choice for industry investment, especially for the well-capitalized and leading builders, i.e. Toll Brothers (NYSE: TOL). Many builders are still at risk though, and this is a stockpicker's market if ever there was one.

The second quarter Current Account is due for release on Wednesday. This data measures the international trade balance and import and export activity. In this day and age, every investor should be aware of capital flow activity across borders, whether it involves goods and services like this report, or investments.

Look for the regular Mortgage Bankers Association take of mortgage activity to show a pickup on recently lower mortgage rates. The EIA Petroleum Status Report is due at its regular time, and stands to see impact from storm related closures. Closures, however, do not drive price trend (short-term prices yes); storm damage that causes extended closure for repair purposes drives trend here.

Wednesday's EPS schedule includes Apogee (Nasdaq: APOG), Brady Corp. (NYSE: BRC), CKE Restaurants (NYSE: CKR), Clarcor (NYSE: CLC), Comtech (Nasdaq: CMTL), Dress Barn (Nasdaq: DBRN), Dynamex (Nasdaq: DDMX), General Mills (NYSE: GIS), Herman Miller (Nasdaq: MLHR), Morgan Stanley (NYSE: MS) OMNOVA (NYSE: OMN) and Somanetics (Nasdaq: SMTS).

Thursday

Watch out, one of few Wall Street survivors, Morgan Stanley (NYSE: MS) is due to report earnings on Thursday. We expect the shares will back up into the report, so if the news is not so bad, you might even get a pop here. We're not intimately in tune with MS these days, so check out Cramer tonight. I expect he'll be discussing JP Morgan (NYSE: JPM), Goldman Sachs (NYSE: GS) and Morgan Stanley, among the living.

While the Weekly Initial Jobless Claims forecasts offer no insight into what will likely eventually shock stocks, we think you have to start worrying about this report on Thursday mornings. Macro players might want to use it for shorting purposes. The meaningless consensus view anticipates 440K new claims were filed this past week. Remember, consensus sticks close to prior week result, simply due to the time factor. Clearly, there should not be major change from week to week, but economists seem to miss large floods of jobless to the labor market as they take their eye off the ball and rely on the recent result. Think about those Lehman folks who'll be filing soon.

August Leading Indicators are due at 10:00 AM Thursday. Bloomberg's consensus of economists anticipates a 0.2% deterioration, month-to-month, which is better than the 0.7% fall-off seen in July. The Philadelphia Fed will release its monthly business conditions data around the same time, and the consensus sees that index measuring -10.3. July found the measure at -12.7 though. Still, Thursday clearly looks to offer more reason for economic concern, and the week overall will serve as a true market test. We've seen the lows now three times this year, and each time so far, we stood our ground around current prices on the indexes. This is a big test, and while there are factors setting up that I believe will favor stocks through early next year, investor sentiment looks to face stiff challenges with these very public events dominating the news. Regular investment position reports are undoubtedly still worrying pension fund investors, and perhaps more so than usual.

Look for the EIA Natural Gas Report at the regular 10:30 release time on Thursday. The earnings schedule includes Carnival Corp. (NYSE: CCL), Cintas (Nasdaq: CTAS), ConAgra (NYSE: CAG), Cuisine Solutions (AMEX: FZN), Electroglas (Nasdaq: EGLS), FedEx (NYSE: FDX), IHS, Inc. (NYSE: IHS), Netsol (Nasdaq: NTWK), Nova Biosource Fuels (AMEX: NBF), Oracle (Nasdaq: ORCL), Palm, Inc. (Nasdaq: PALM), Pier 1 Imports (NYSE: PIR), Pro-Dex Inc. (Nasdaq: PDEX), Progress Software (Nasdaq: PRGS), Schiff Nutrition (NYSE: WNI) and The Marcus Corp. (NYSE: MCS).

Friday

Friday brings quadruple witching, and nice timing at that. Otherwise, there's not much to look forward to (on the schedule at least). Chicago Fed President Charles Evans will address a group on the economic outlook.

Please see our disclosure at the Wall Street Greek website. Article interests AMEX: DIA, AMEX: SPY, AMEX: SDS, AMEX: DOG, AMEX: QLD, Nasdaq: QQQQ, NYSE: NYX.