Week Ahead - Trepidation

"The Greek's Week Ahead" has been engineered to provide a reference for the week's market-moving events.

We enter this week after last week's shedding of 7.3% on the Dow Jones Industrials Index, 9.4% on the S&P 500 and 10.8% on the Nasdaq Composite. The decline continued on Friday, despite the "better late than never" passage of the Emergency Economic Stabilization Act of 2008. Markets also saw no significant benefit from the announcement that mark-to-market rules could be eased. We enter this week in trepidation, as despite new reason for hope, California declared it may need $7 billion to make its payroll, the European financial system seems on the brink, and Senator Reid declared a major insurance giant was close to collapse. This mighty trio of trouble was quite enough to raise the wall of worry even higher, and we didn't even mention the labor market's count of 159K less jobs in September.

(Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK)

Fed Cut Necessary Now

What seemed a bad idea just a few weeks ago, now appears a necessity; and that's yet another Federal Reserve rate cut. I think we need a 50 basis point cut here to further encourage business activity and help drive a favorable yield curve for banks. The difference between now and a few weeks ago is that there seems little reason for near-term inflation concern. Asset prices are collapsing, from crude oil to, well, just about everything. Inflation is the least thing from the market's mind at the moment. Also, Bernanke reassures that the bailout action is not inflationary either, since valuable assets are being acquired. The dollar looks to have a cushion as well, since Europe is falling down the tubes. The ECB at least considered a cut last week, and I expect they will also issue an emergency cut soon enough. The Banks of Japan and England both issue rate decisions this week, and I would not be surprised to see cuts from both. Heck, Toyota (NYSE: TM) is already pushing 0% financing, and doesn't TM run Japan anyway?

The Week Ahead

Monday

If we don't get a surprise action from the Federal Reserve on Monday morning, and I'm looking for a 50-point action, then the day's big news could come from one of two other possibles. First, we could discover exactly which large insurance company Senator Reid was speaking about when he said one was on the brink. In that regard, it would be quite interesting to see yet another government intervention so soon after the last. Market sentiment would simply fall off a cliff.

If neither of these surprise news stories breaks on Monday, all eyes will be on the Congressional testimony of former Lehman Brothers CEO Richard Fuld. Poor Richard might prove the sacrificial Wall Street lamb, and he'll definitely take some serious heat. Congress wants to shift attention from itself now, to Mr. Fuld and basically Wall Street, so that it might restore reelection possibility. Fuld should have put off this testimony long enough for another Street representative to schedule one. I would not want to be anywhere near Fuld on Monday, as there could be collateral damage to bear as Congressional bullets stray wildly.

Two regional central bank presidents, Dallas' Richard Fisher and Chicago's Charles Evans, are scheduled to address the economy on Monday. If no surprise cut greets us, you'll want to pay close attention to the discussion of these representatives. Bloomberg Radio often interviews regional presidents (we'll be listening), and so, we will update our readers if we hear anything interesting.

Overseas, the Australian market will be closed on Monday, and in recent times it's a crap shoot whether the Russian market will be open or not, as volatility and government panic have shut the doors often. In the States, Auerbach Grayson hosts a conference in New York on investing in Turkey. Mars' acquisition of Wrigley (NYSE: WWY) closes just in time for Halloween, the busiest season for candy confectioners. Monday's earnings schedule includes IDT Corp. (NYSE: IDT), Leading Brands (Nasdaq: LBIX) and Zila (Nasdaq: ZILAD).

Tuesday

The Federal Reserve will issue the minutes of its September meeting at 2:00 PM, but I suspect it will have news to report ahead of this release. Ben Bernanke is also scheduled to address the National Association for Business Economics on Tuesday. Before any of these things occur, the Bank of Japan is expected to hold rates steady in its regular monetary policy meeting. I see the clear possibility of a slew of central bank actions from the Sea of Japan to the Potomac this week.

In the pre-market, the International Council of Shopping Centers Weekly Same-Store Sales Report, now co-sponsored by Goldman Sachs (NYSE: GS), should continue to show a decelerating rate of year-to-year growth. There's significant likelihood this metric will turn negative before Christmas, despite population growth.

Believe it or not, Consumer Credit, due at 3:00 PM, is expected to have increased by $5.5 billion in August. We have to wonder how long that can that last, as unemployment spreads to epidemic levels and individual consumer credit availability is exhausted to pay other bills. After all, it's no secret; credit is dry.

Markets in Hong Kong are closed, but corporate earnings season officially begins in the U.S. Tuesday with the report of Alcoa (NYSE: AA). Red Hat (NYSE: RHT) has its analyst day scheduled, and the short list of earnings reports includes Acuity Brands (NYSE: AYI), Aracruz Celulose (NYSE: ARA), Yum! Brands (NYSE: YUM), CalAmp (Nasdaq: CAMP), Cantel Medical (NYSE: CMN), Centennial Communications (Nasdaq: CYCL), Navisite (Nasdaq: NAVI), Premier Exhibitions (Nasdaq: PRXI), Safeway (NYSE: SWY), Sealy (NYSE: ZZ), Team Inc. (Nasdaq: TISI) and Wal-Mart De Mexico (Nasdaq: WMMVF.PK).

HUD will host a housing summit, and the second presidential debate is scheduled for 9:00 PM. We will attempt to place video of the entire debate here on the site for your viewing on Wednesday.

Wednesday

Philadelphia Fed President Plosser is scheduled to discuss the modern difficulties of central banking at the Council on Foreign Relations. In the sunset of his reign at the helm of the SEC, Christopher Cox's highly scrutinized agency is holding a round table on the modernization of its disclosure system.

"Modernization must be the new English for regulation."

Modernization must be the new English for "regulation." I know it's new to our vocabulary, but get ready for a crash course. That said, the SEC's short-selling ban is suppose to expire at 11:59 PM. I expect that last week's decision to ease the pressure from mark-to-market accounting is viewed as an offset. Keep up here, because there are a lot of moving parts.

August's Pending Home Sales Index is set for 10:00 AM release. While the August figure, which is due on Wednesday, may not reflect recent financial market losses and renewed credit crunch, what seemed like might be a housing bottom now looks like just a short stopover to somewhere further south. July's Index was down 3.2% from June, and measured 86.5. The regular Mortgage Activity Report is due as usual. Long rates are down on economic fears, but any pick up in mortgage activity that results is unlikely to inspire any sort of confidence, to say the least.

Several retailers will report September sales on Wednesday, but the majority of the industry reports on Thursday morning. This can't be good! On Wednesday, look for news from Wal-Mart (NYSE: WMT), Target (NYSE: TGT), Limited Brands (NYSE: LTD), BJ's Wholesale Club (NYSE: BJ) and Nordstrom (NYSE: JWN). The EIA Petroleum Status Report is due as usual. Last week's report offered an unexpected build in inventory and sent oil sharply lower.

The day's earnings schedule includes Costco (Nasdaq: COST), Monsanto (NYSE: MON), Acergy (Nasdaq: ACGY), Helen of Troy (Nasdaq: HELE), Kayne Anderson Energy Development (NYSE: KED), Lindsay (NYSE: LNN), Merix (Nasdaq: MERX), Nu Horizons Electronic (Nasdaq: NUHC), Richardson Electronics (Nasdaq: RELL) and Ruby Tuesday (NYSE: RT).

Thursday

Look for the majority of retailers to report Chain Store Sales for September. But, before that, the Bank of England will decide on what to do with its interest rates. Here at home, Minneapolis Fed Chief Gary Stern is scheduled to discuss "Repercussions of the Financial Shock."

After two weeks of near 500K initial jobless claims, economists forecast 480K this week. So, why bother with sentiment indexes now? I say just closet them for a few months. But, the RBC Cash Index is due Thursday nonetheless. The September measure was 69.2.

August Wholesale Inventories are due at 10:00 AM. After rising 1.4% in July, Barron's reports economists' consensus expectation for an increase of 0.4% in August. Personal Outlays, reported last week, showed no change in August. Spending has and is tightening, and so companies are expected to cut back further on investment activities. However, due to just-in-time inventory efficiencies resulting from technological and other advances, inventories do not swing as wildly as they had through past cycles.

The regular EIA Natural Gas Report is due at 10:30. Indian markets are closed on Thursday, but the US earnings schedule includes Chevron (NYSE: CVX), Bassett Furniture (Nasdaq: BSET), CardioDynamics (Nasdaq: CDIC), International Speedway (Nasdaq: ISCA), Robbins & Myers (NYSE: RBN), RPM International (NYSE: RPM), Saba Software (Nasdaq: SABA) and Tortoise Capital Resources (NYSE: TTO).

Friday

The August International Trade Report is expected to show the trade deficit narrowed in August to $59.0 billion, from $62.2 billion in July. Notoriously, fluctuations in crude prices have played a big role in short-term swings in the trade report. September Import Prices likely fell 2.5%, say economists, again due to the sharp drop in crude oil prices. In the afternoon, the Treasury Budget (laugh out loud here) is expected to have turned positive, to a surplus of $68.5 billion in September, from a deficit of $111.9 billion in August.

Overseas, the Bank of Japan will publish the minutes of its September meeting. Finance Ministers of the G8 economies are scheduled to meet in Washington. Not so coincidentally, Friday also marks the same day Russia is suppose to have the totality of its troops withdrawn from Georgia. Nice incentive creation there by Mr. Sarkozy and Ms. Rice.

Financial futures and options markets close at 1:00 PM ahead of the Columbus Day holiday. Reporting earnings, look for news from General Electric (NYSE: GE), Audiovoxx (Nasdaq: VOXX), Emmis Communications (Nasdaq: EMMS), Host Hotels & Resorts (NYSE: HST), Infosys Technologies (Nasdaq: INFY), Northfield Labs (Nasdaq: NFLD) and Oil-Dri Corp (NYSE: ODC).

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