Week Ahead: Stimulating Confidence

By Markos N. Kaminis - Economy & Markets:

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The Administration's focus this week seems clear, stimulating consumer and investor confidence. The week highlights a hard effort to pass a fiscal stimulus bill and a return to honest banking rescue work with the introduction of a revamped TARP plan. The President will even go prime time on Monday evening in an outreach attempt to revive American confidence.

We've reached a critical point indeed in our economic development, one defined by the President as the precipice of catastrophe. We face a downward spiral if we cannot spur spending, stabilize employment and rescue confidence. This week offers a couple readings of consumer confidence, but these latest looks will most likely approach recent record lows.

While spring-like weather warms the great Northeast corridor, President Obama and his administration hope to rekindle American hope. God bless him in this important effort!

The Week Ahead

Monday

Timothy Geithner should have easily headlined Monday's news flow, though his TARP announcement was delayed while Congress works aggressively on fine tuning, and hopefully passing, fiscal stimulus into law. The president will address the nation this evening in his first prime time address as the nation's executive and chief.

Treasury Secretary Geithner will soon introduce a revamped TARP program, or the second half of it anyway. The new Treasury Chief has an opportunity to offer the market something it may remember, confidence. If Mr. G produces a brilliant renovation, the market has an opportunity to regain lift.

It seems the President is smartly working on consumer and investor confidence. I like this Administration's PR strategy, and I hope the actual substance of the fiscal stimulus and TARP changes are worthy of follow-through after the TV lights turn dim.

Overseas on Monday, China is set to publish its January trade data, while Japan produces its machine orders report. On the corporate front, Morgan Stanley (NYSE: MS) will hold its annual meeting. Pharmaceuticals will also be front and center, as Bristol-Myers Squibb (NYSE: BMY) spins off its Mead Johnson Nutrition unit, and Roche likely files its tender offer for Genentech (NYSE: DNA).

Monday's earnings schedule includes news from AGCO (NYSE: AG), American Science & Engineering (Nasdaq: ASEI), Amtech Systems (Nasdaq: ASYS), Anglogold Ashanti (NYSE: AU), Axis Capital (NYSE: AXS), Banco Santander (NYSE: SAN), Barclays (NYSE: BCS), Beazer Homes (NYSE: BZH), Beckman Coulter (NYSE: BEC), Brightpoint (Nasdaq: CELL), Brooks Automation (Nasdaq: BRKS), Capstone Turbine (Nasdaq: CPST), Charles River Laboratories (NYSE: CRL), CNA Fin'l (NYSE: CNA), Comstock Resources (NYSE: CRK), Cutera (Nasdaq: CUTR), Emcore (Nasdaq: EMKR), Energy Conversion Devices (Nasdaq: ENER), Hasbro (NYSE: HAS), Haynes Int'l (Nasdaq: HAYN), Hewitt Associates (NYSE: HEW), Lincare Holdings (Nasdaq: LNCR), Lion's Gate Entertainment (NYSE: LGF), Loews (NYSE: L), Nam Tai Electronics (NYSE: NTE), Nissan (Nasdaq: NSANY), RandGold Resources (Nasdaq: GOLD), Rohm and Haas (NYSE: ROH), SOHU.com (Nasdaq: SOHU), TDK (NYSE: TDK), Telefonos De Mexico (NYSE: TMX), The Principal Financial Group (NYSE: PFG), Veeco Instruments (Nasdaq: VECO), Vulcan Materials (NYSE: VMC), Whirlpool (NYSE: WHR) and more.

Tuesday

Another week... another interesting testimony to watch on Capitol Hill. Harry Markopolos and the SEC will be hard to follow, but Tuesday offers the House Financial Services Committee hearing of Federal Reserve Chief Ben Bernanke, as he discusses how the Fed might provide liquidity despite being out of its regular rate bullets. Tim Geithner will address the Senate Banking Committee on his just announced TARP revamping. We're taking bets on how long it takes Congressmen to turn hostile on Geithner. The over/under is two testimonies. Keeping with theme, the fresh New York Fed Head, Bill Dudley, will declare his view at a NY Fed confab on inflation-indexed securities.

The economic report schedule is light on Tuesday. Retail sales softness is now building on fear and headlines, and so we expect especially soft chain store sales to have continued last week. ICSC noted that year-to-year sales fell 2.5% at last check, and we see more of the same this time around. At 10:00 a.m., look for the Wholesale Trade data to reach the wire. Consensus expectations forecast an inventory decrease of 0.7% in December, versus a 0.6% drop in November.

Some of the best C-SPAN programming covers British Parliamentary debates, as the Brits have a very unique way of regularly politicizing everything. Well, it seems there's a new show airing on Tuesday, as the British lawmakers copy U.S. programming, bringing in the Royal Bank of Scotland's (NYSE: RBS) old boss and several other bankers for questioning.

It'll be a busy day overseas generally. Israel holds elections, and will choose a new top man (or woman!), as Tzipi Livni takes on Bibi Netanyahu and Ehud Barak. Needless to say, the world will have great interest in this one, and one might expect Livni to benefit from the fresh breeze begun in the U.S. Both Barak and Netanyahu have held the Prime Minister position before, and so Livni would represent "change." But look closely Iran, because we don't see much difference between candidates as far as policy towards Iran is concerned.

China will publish its consumer and wholesale data for January. In the States, Tuesday's earnings slate includes Applied Materials (Nasdaq: AMAT), Arrow Electronics (NYSE: ARW), Bob Evans Farms (Nasdaq: BOBE), Cerner Corp. (Nasdaq: CERN), China Precision Steel (Nasdaq: CPSL), Choice Hotels (NYSE: CHH), Computer Sciences (NYSE: CSC), Corrections Corp. of America (NYSE: CXW), Coventry Health (NYSE: CVH), Cray (Nasdaq: CRAY), Cynosure (Nasdaq: CYNO), Expeditors Int'l (Nasdaq: EXPD), Gaylord Entertainment (NYSE: GET), General Cable (NYSE: BGC), Genworth Fin'l (NYSE: GNW), Given Imaging (Nasdaq: GIVN), Hanger Orthopedic (NYSE: HGR), Hercules Offshore (Nasdaq: HERO), Intercontinental Exchange (NYSE: ICE), Kforce (Nasdaq: KFRC), LCA-Vision (Nasdaq: LCAV), Learning Tree Int'l (Nasdaq: LTRE), Manhattan Associates (Nasdaq: MANH), MDC Holdings (NYSE: MDC), Molson Coors (NYSE: TAP), NetSuite (NYSE: N), NVIDIA (Nasdaq: NVDA), Pepsi Bottling Group (NYSE: PBG), Perot Systems (NYSE: PER), ProLogis (NYSE: PLD), Protective Life (NYSE: PL), Qwest Communications (NYSE: Q), Radware (Nasdaq: RDWR), TETRA Tech (NYSE: TTI), The DirectTV Group (NYSE: DTV), UBS (NYSE: UBS), Unisys (NYSE: UIS), VF Corp. (NYSE: VFC), Vishay Intertechnology (NYSE: VSH), Website Pros (Nasdaq: WWWW), Williams Controls (Nasdaq: WMCO), XL Capital (NYSE: XL), Yingli Green Energy (NYSE: YGE) and more.

Wednesday

Be sure not to miss the House Financial Services Committee hearing on TARP Wednesday. Talk about must see TV! The Congressmen have called in the CEOs of the eight major banks that participated in the first round of TARP help. We expect the word of the day will be "transparency." Congress wants to know where the money went, where the rest of it is going, and why many of these banks are still paying dividends and dishing out big bonuses.

Fed Governor Duke is scheduled to give a speech on housing market stabilization. It's timely, as the regular Mortgage Bankers Association Purchase Applications report is also due. Chicago Fed President Evans is set to address a group in Iowa on the economy generally.

Overseas, Japan's markets will not open on Wednesday due to holiday, while in Sweden, the Riksbank is expected to cut rates by 50 basis points, to 1.5%. After China's trade data release earlier in the week, the U.S. posts its International Trade Report for December on Wednesday. The trade deficit is expected to have narrowed to $36.0 billion in December, compared against a deficit of $40.4 billion in November. There are offsetting factors at play here. Lower oil and commodity prices have decreased the cost of imports, but at the same time, export demand has fallen off as global economic contraction has taken hold. Future months will lose the beneficial oil price factor, but retain that of global economic recession. At the same time, America represents the largest consumption market in the world, so domestic weakness will also impact import demand.

Besides the regular oil inventory data release from the EIA, the IEA, or International Energy Agency, is scheduled to publish its monthly oil market report. Meanwhile, a rumor made its way out of Iraq on Monday that more OPEC production cuts are on the way. Oil prices started the week higher as a result.

At 2:00 p.m., the U.S. Treasury Budget release should show a $79.5 billion deficit for January, after posting an $83.6 billion deficit in December. As the second half of the TARP program is released, and with fiscal stimulus at hand, deficits will only increase in the months ahead.

The earnings schedule includes reports from Acadia Realty (NYSE: AKR), Activision Blizzard (Nasdaq: ATVI), Alcon (NYSE: ACL), Allegheny Energy (NYSE: AYE), ArcelorMittal (NYSE: MT), ARRIS Group (Nasdaq: ARRS), Audiocodes (Nasdaq: AUDC), Buffalo Wild Wings (Nasdaq: BWLD), CAE (NYSE: CGT), Chipotle Mexican Grill (NYSE: CMG), Coca-Cola Enterprises (NYSE: CCE), Compugen (Nasdaq: CGEN), Credit Suisse (NYSE: CS), Cymer (Nasdaq: CYMI), Dean Foods (NYSE: DF), Delphi Fin'l (NYSE: DFG), Everest Re (NYSE: RE), Forrester Research (Nasdaq: FORR), Genesee & Wyoming (NYSE: GWR), Genzyme (Nasdaq: GENZ), Great Plains Energy (NYSE: GXP), GSI Commerce (Nasdaq: GSIC), Ingersoll-Rand (NYSE: IR), iRobot (Nasdaq: IRBT), Jones Apparel (NYSE: JNY), Level 3 Communications (Nasdaq: LVLT), Marsh & McLennan (NYSE: MMC), Masco (NYSE: MAS), NICE Systems (Nasdaq: NICE), Orasure Technologies (Nasdaq: OSUR), P.F. Chang's China Bistro (Nasdaq: PFCB), Petrobras (NYSE: PZE), Renaissance Re (NYSE: RNR), Reynolds American (NYSE: RAI), Sanofi-Aventis (NYSE: SNY), Taubman Centers (NYSE: TCO), Terex (NYSE: TEX), Toll Brothers (NYSE: TOL), Vestas Wind Systems (CPH: VWS.CO), Willis Group (NYSE: WSH) and more.

Thursday

As always, Thursday produces heavy economic news flow. Topping the wire, look for January's Retail Sales release to garner headlines across popular media. The release in the premarket, is forecast to show a retail sales decline of 0.8% in January (vs. December). That will compare against a 2.7% drop reported for December. Excluding autos, which is a good idea these days, sales are seen falling 0.5% in January.

Last week's Initial Weekly Jobless Claims Report produced a 626K job loss. Then last Friday, the Employment Situation Report showed a net nonfarm payroll loss of 598K in January, the fourth highest ever recorded. This is what is driving the government's impetus for stimulus and confidence preservation. We face a downward spiral of job loss, spending decline and confidence depression if the Administration cannot draw a line in the sand now. Obama's wording, "catastrophic" was unfortunately apropos. Economists forecast the weekly job loss total will reach 610K in the latest reading.

A few timely confidence measures will get special attention this week, since this is the focus of the Administration's effort now. The RBC Cash Index, a survey of consumer attitudes and spending by households, is due for release at 9:00 on Thursday. While we have no consensus measure to compare against, January's reading of 13.3 marked a six-year low. There seems little reason to expect much better for February's look-see.

December's Business Inventories are set for release at 10:00 a.m. Inventories decreased by 0.7% in November, and Bloomberg's survey shows economist expectations for another drop of 0.8% in December. The problem is that sales are falling at a sharper pace, and so the revealing inventory-to-sales ratio has deteriorated of late (October and November).

Overseas, the Banks of Korea and Chile are expected to cut rates on Thursday, as the world adjusts to global decline. The EIA releases its regular Natural Gas Report at 10:30.

Thursday's EPS report schedule includes news from Aetna (NYSE: AET), Amkor (Nasdaq: AMKR), BorgWarner (NYSE: BWA), Cabot Oil & Gas (NYSE: COG), California Pizza Kitchen (Nasdaq: CPKI), Cavalier Homes (NYSE: CAV), Cedar Fair LP (NYSE: FUN), Cephalon (Nasdaq: CEPH), Coinstar (Nasdaq: CSTR), Ecolab (NYSE: ECL), Encana (NYSE: ECA), Glatfelter (NYSE: GLT), Hansen Medical (Nasdaq: HNSN), Lab Corp. (NYSE: LH), Martin Marietta Minerals (NYSE: MLM), Marriot Int'l (NYSE: MAR), McAfee (NYSE: MFE), Netgear (Nasdaq: NTGR), Novamed (Nasdaq: NOVA), Orthofix (Nasdaq: OFIX), Panera Bread (Nasdaq: PNRA), Patterson-UTI (Nasdaq: PTEN), Peet's Coffee & Tea (Nasdaq: PEET), Potlatch (NYSE: PCH), Precision Drilling (NYSE: PDS), RealNetworks (Nasdaq: RNWK), Revlon (NYSE: REV), Rio Tinto (NYSE: RTP), Stamps.com (Nasdaq: STMP), The Cheesecake Factory (Nasdaq: CAKE), The Coca-Cola Co. (NYSE: KO), The Knot (Nasdaq: KNOT), Total (NYSE: TOT), ValueClick (Nasdaq: VCLK), Viacom (NYSE: VIA), Waste Management (NYSE: WMI), XenoPort (Nasdaq: XNPT) and more.

Friday

Things cool down on Friday, but another important confidence metric is due. The Reuters/University of Michigan Consumer Sentiment Index is widely expected to stay stuck at sad levels. The February reading is seen standing at 61.0, compared to January's 61.2.

Overseas, finance ministers of major industrialized nations are set to meet in Rome, as they try to devise cooperative means to put out the global fire. In the States, fixed-income markets will close at 2:00 p.m. ahead of Monday's Presidents Day holiday.

The final trading day of the week closes with earnings news from Abercrombie & Fitch (NYSE: ANF), Brookfield Asset Management (NYSE: BAM), Cameco (NYSE: CCJ), Cognizant Technology (Nasdaq: CTSH), Enbridge (NYSE: ENB), Iam Gold (NYSE: IAG), Michelin (PAR: ML.PA), Nordic American Tanker (NYSE: NAT), OGE Energy (NYSE: OGE), Pepsi (NYSE: PEP), Pioneer Behavioral Health (NYSE: PHC), Standard Pacific (NYSE: SPF), TELUS (NYSE: TU) and Wyndham Worldwide (NYSE: WYN.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. (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)