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The week ahead has a clear-cut theme, and that's "heading to zero." The Administration's TARP allowance is headed that way, as the last $15 billion looks to be destined for Detroit. The President may be bartering for Congressional clearance of the last half of the bailout funds ($350 Bln.) as prerequisite for his using the only cushion he has for the unforeseen. We expect though, Congress won't give, and the President has little leverage; nor can he risk losing a major automaker in an economy that already hangs on cliff's edge.
The Fed Funds Rate also seems destined for zero, as the FOMC meets again this week to review and refresh its monetary policy. Federal Reserve Chief Bernanke has been wisely setting expectations and preparing for the inevitable question of "what next," as the Fed's rate bullet store runs low. There's been plenty of talk of "quantitative easing
" like that used by the Bank of Japan when its rate tool was rendered spent.
GDP already passed zero, and stocks are threatening to go there as well. However, over the last few weeks, equities have mustered up some courage, if not overcome by seller exhaustion. Last Friday, in the midst of one of the most frightening scenarios we could imagine, the bankruptcy of the American auto industry, stocks still managed a rally. Sure, the President's commitment was made to order, but as he returns from Iraq, one must wonder if there is yet another shoe
to fall for Detroit. Word has it that Congressional negotiators were peeved by UAW tactics, and are seeking to convince Bush to stick to the same deal offered by the Senators last week. That would force the UAW to make hourly wage concessions, along with the rest they've agreed to. We've got two desperate negotiators, neither of which can afford to lose. So it seems, the one with the most constitution
will win. Therefore, I guess it's a toss up!The Week AheadMonday
The news wires will be full of speculation and anticipation on Monday. The world waits with bated breath for the Administration's solution to the auto industry quagmire. After yet another weekend spent at his desk, Hank Paulson should have one ready to order. Besides this, a new term, "quantitative easing," will be published and republished across every major website and typed on the pages of every major newspaper this week. The Fed's meeting begins on Monday, and the world will speculate about Tuesday's decision and statement.
A series of economic reports greet the week. At 8:30, the New York Fed releases its Empire State Manufacturing Report. Long since turned sour, no degree of softness could impact stocks at this point, in our view. Bloomberg's consensus is looking for a reading of negative 27.5 in December, after measuring -25.4 last month.
October's Treasury International Capital Report (TIC) shows the level of net
foreign investment in long-term U.S. securities. The measure nets
foreign investment against U.S. investor actions with relation to holdings of foreign securities. September's measure showed a $66.2 billion net increase in long-term security demand. The global flight to quality
was likely behind the trend.
November Industrial Production, due at 9:15 AM, is expected to ease by 0.8% this month after increasing by 1.3% in October. Capacity utilization is expected to fall to 75.7%, from 76.4% in October. At 10:00, the National Association of Home Builders (NAHB) is due to report its Housing Market Index. November's measure was a lowly 9, and this month has little cause to improve.
Look east for Japan's Tankan Survey, the nation's business sentiment metric. We would be hard-pressed to find an economic data point expected to paint a pretty picture these days, and the Tankan Survey is not the exception. Barron's notes expectations for the survey to touch a seven-year low. The International Accounting Standards Board is expected to propose greater transparency for off-balance sheet items. Woo hoo! Let's regulate the dead!
The National Governors Association might provide a cause of concern on Monday when it releases its biannual fiscal survey. States are seeking TARP funds, and also asking to be directly included in the Obama Administration's expected fiscal stimulus package. Therefore, states have all the more reason to disclose every hint of economic weakness. The wheel that squeaks gets the grease after all.
On the corporate front, Honeywell (NYSE: HON) is scheduled to offer its 2009 outlook. Earnings reports include news from ABM Industries (NYSE: ABM), Alico (Nasdaq: ALCO), Arrowhead Research (Nasdaq: ARWR), Avanir Pharmaceuticals (Nasdaq: AVNR), Clearfield Inc. (Nasdaq: CLFD), CPI Int'l (Nasdaq: CPII), En Pointe Technologies (Nasdaq: ENPT), eOn Communications (Nasdaq: EONC), Fortune Industries (AMEX: FFI), Forward Industries (Nasdaq: FORD), Imperial Sugar (Nasdaq: IPSU), Innsuites Hospitality (AMEX: IHT), Integrated Electrical (Nasdaq: IESC), International Absorbents (AMEX: IAX), National Technical Systems (Nasdaq: NTSC), Particle Drilling (Nasdaq: PDRT), Smith and Wesson (Nasdaq: SWHC), Spartech (NYSE: SEH), Streamline Health (Nasdaq: STRM), Titan Machinery (Nasdaq: TITN), Value Line (Nasdaq: VALU) and WPCS Int'l (Nasdaq: WPCS).Tuesday
The Fed is seen cutting the fed funds rate by a half point, to 0.5%, according to Bloomberg's consensus. The Greek
agrees that a half point move will likely result from this meeting, but I would focus more on the Fed Policy Statement, as it will offer insight into the group's future strategy. The Fed will want to be seen as still capable of nourishing economic expansion, because the image of an impotent Fed is not good for market sentiment. However, the market seems to have determined the federal government impotent long ago. We point to Barron's work this week, where it studies recent market action on days when Hank Paulson discussed the economy. Needless to say, he's proven a clear-cut negative factor. The only occasions where the market rose while Henry spoke were when he was overseas and discussing trade rather than the economy.
Look for the Consumer Price Index, Housing Starts and weekly retail sales in the pre-market on Tuesday. Ah, remember the days when we were so concerned about inflation. Well, enjoy the current change of pace, because the dollar could be worthless soon enough. The dollar touched a 2-month low (to the euro) on Monday morning, so those days may not be so
November's CPI is seen dropping 1.3% from October, but the Core figure, excluding food and energy prices (emphasis on energy) is expected to edge 0.1% higher. Housing Starts are expected to ease further in November, to an annual pace of 740,000. Starts ran at a pace of 791,000 in October. Starts should benefit from easing mortgage rates, but rising unemployment is likely to offset that adequately enough for now.
ICSC Weekly Same-Store Sales could dip back into negative territory, after a few weeks of gains on a year-to-year basis. Last week's year-over-year rise measured 0.4%. However, sales were 0.8% off the week before, portending more pain ahead.
The FDA is reporting on ImClone's Erbitux and Amgen's (Nasdaq: AMGN) Vectibix cancer offerings on Tuesday. A few companies are offering insight into their respective outlooks, including the very notable General Electric (NYSE: GE), and also ITT Corp. (NYSE: ITT) and Herbalife (NYSE: HLF).
The day's earnings schedule highlights news from Goldman Sachs (NYSE: GS), Air Corp. (NYSE: AIR), Adobe Systems (Nasdaq: ADBE), Angeion (Nasdaq: ANGN), Applied Signal (Nasdaq: APSG), Asure Software (Nasdaq: ASUR), Best Buy (NYSE: BBY), Factset (NYSE: FDS), Hovnanian (NYSE: HOV), Photronics (Nasdaq: PLAB), Rentech Inc. (AMEX: RTK), Schiff Nutrition (NYSE: WNI) and VeriFone Holdings (NYSE: PAY).Wednesday
News from overseas should steal the show on Wednesday. OPEC will key the wire, as it is expected to cut output again. Otherwise, Norway's central bank is widely expected to cut rates, possibly in eye-opening fashion.
Economic data is scheduled for the day, but it's of the Off-Wall Street
caliber. Even so, ex-Wall Street club member, Merrill Lynch (NYSE: MER, NYSE: BAC) publishes its fund manager survey. That report in particular will probably get more attention than usual, post all the Madoff madness and relative questions raised among investors.
According to Barron's, the Q3 Current Account Deficit is seen narrowing to $179 billion. The Mortgage Bankers Association Purchase Applications Report should increasingly garner attention as the Fed strives to bring down mortgage rates. It will be a key barometer for the tracking of progress made by the government's housing revival efforts. The EIA provides its weekly Petroleum Status Report at 10:35.
The earnings schedule includes a few heavy hitters Wednesday. Look for news from Nike (NYSE: NKE), Morgan Stanley (NYSE: MS), General Mills (NYSE: GIS) and ConAgra (NYSE: CAG). Also reporting, see Apogee (Nasdaq: APOG), Commercial Metals (NYSE: CMC), CPI Corp. (NYSE: CPY), Heico (NYSE: HEI), Joy Global (Nasdaq: JOYG), Lindsay Corp. (NYSE: LNN), Luby's (NYSE: LUB), MDS Inc. (NYSE: MDZ), Nordson (Nasdaq: NDSN), Paychex (Nasdaq: PAYX), Take-Two Entertainment (Nasdaq: TTWO) and Xenonics (AMEX: XNN).Thursday
After hitting a 26-year high last week, jobless claims will key the radar screens of all investors and economists on Thursday. Jobless Claims hit 573K last week, and Bloomberg's consensus of economists is looking for 560K this time around.
Nearly as frightening as the employment report, November's Leading Indicators data poses great risk to investors. Economists are not shy about forecasting Q4 GDP contraction as high 4%, so Leading Indicators estimated at -0.5% might prove too modest. October's Leading Indicators eased by 0.8% from the month before.
If neither of those two data points does us in, Treasury Secretary Paulson might. He's speaking at a Y in New York City on Thursday, and we all know the market record of late when Paulson speaks. Dallas Fed President Fisher will also have a microphone, as he discusses the financial crisis from a historical perspective. Somebody should tell Richard it ain't
over yet, and we need him thinking ahead not back.
The all-popular FCC will vote on plans to encourage national wireless Internet. While that might not raise ire, their plans to strengthen television networks in talks with cable providers might bring tomatoes. The FCC has come under intense pressure regarding the consolidation of media. Don't worry folks, your favorite Greek is still independent! (donations welcome)
The Philadelphia Fed Survey is expected to go to hell this month, as Bloomberg economists forecast a reading of -40.2. That will compare against the much better
reading from last month, -39.3. The EIA offers its weekly Natural Gas Report at 10:35.
Keying the earnings schedule, look for reports from FedEx (NYSE: FDX), Darden Restaurants (NYSE: DRI), Discover Financial (NYSE: DFS), Research in Motion (Nasdaq: RIMM) and Oracle (Nasdaq: ORCL). Also look for news from 3Com (Nasdaq: COMS), Accenture (NYSE: ACN), Actuant (NYSE: ATU), Bio-Reference Laboratories (Nasdaq: BRLI), Carnival Corp. (NYSE: CCL), China Medical (Nasdaq: CMED), Electroglas (Nasdaq: EGLS), Lennar (NYSE: LEN), Palm (Nasdaq: PALM), Pier 1 Imports (NYSE: PIR), Progress Software (Nasdaq: PRGS), Quiksilver (NYSE: ZQK), Rite Aid (NYSE: RAD), Scholastic (Nasdaq: SCHL), Shiloh (Nasdaq: SHLO), Smart Modular (Nasdaq: SMOD), The Marcus Corp. (NYSE: MCS), Wimm-Bill-Dann Foods (NYSE: WBD), Winnebago (NYSE: WGO) and Worthington Industries (NYSE: WOR).Friday
Friday is economic report light, but news should arrive from overseas. The Bank of Japan is expected to cut rates, however tiny a move, from 0.3% now. Iceland, which embraces its uniqueness and is just plain weird sometimes, might do the same, but on Saturday when everyone is sleeping.
Honda Motors (NYSE: HMC) holds its annual news conference. The light EPS schedule highlights news from Cintas (Nasdaq: CTAS), Jabil Circuit (NYSE: JBL), CarMax (NYSE: KMX) and Stewart Enterprises (Nasdaq: STEI).(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). Please see our disclosures at the Wall Street Greek website and author bio pages found there.
Labels: Week Ahead