Week Ahead: Damage Control

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The Week Ahead

This week is all about damage control, especially related to the big bad AIG bonus blunder. Treasury Secretary Geithner will attempt to divert attention from that whole mess by releasing the details of his toxic financial asset program at the start of the week. However, on Tuesday, both Geithner and Bernanke are scheduled to testify before the bloodthirsty House Financial Services Committee. The President hopes to limit public perception damage by appearing on prime time television that same evening. We're guessing he intends to clear up the impending massacre of Geithner before the media feeding frenzy begins. Talk about pulling out all stops, President Obama will have made three unconventional television appearances within the course of a week, and that's not to mention his NCAA Tournament bracket selection show...

The President is doing all he can to keep his new Treasury Secretary propped up through a barrage of criticism that began almost from the moment of his selection for the role. For the life of me, I can't see why anyone would accept any Administration position now that deals with financial or economic matters.

Monday

Damage control begins on Monday morning, as Timothy Geithner takes a stab at resurrecting his own image with the details of his toxic asset plan. The embattled Treasury Secretary, feeling the heat most recently for his approval of AIG (NYSE: AIG) bonuses, will seek a better reception than his first nondescript disclosure on toxic assets. Recall that on that day the market tanked. What happens this week will have a lot to do with how well Obama's team administers damage control.

Geithner is expected to announce the creation of yet another new government entity, the Public-Private Investment Program. The Treasury is expected to seek to incorporate the private sector in its effort to buy up as much as $1 trillion of toxic assets from banks. As you'll recall from the old TARP false marketing, this should unclog the system and free banks up to lend, assuming demand exists or resumes soon.

After last week's reported jump in February Housing Starts, we get Existing Home Sales data first thing Monday morning (10:00 AM). However, the existing segment of the housing market is like the Titanic (in more ways than one), and likewise difficult to turn. It would take significant action or important catalyst to drive change, probably the likes of which the Federal Reserve and Treasury Department have just undertaken. Existing Home Sales are expected to have run at an annual pace of 4.5 million in February, which would place the rate of sales just off January's pace of 4.49 million.

The Nasdaq OMX Internet Index will effect changes on Monday, replacing 1-800-Flowers.com (Nasdaq: FLWS), Orbitz (NYSE: OWW) and RealNetworks (Nasdaq: RNWK) with names like Rackspace Hosting (NYSE: RAX). Meanwhile, Tata Motors (NYSE: TTM) will introduce its Nano model, the world's cheapest car. The Barron's 400 Index undergoes semi-annual rebalancing with 182 new companies in place starting Monday.

Monday's earnings schedule includes reports from Finish Line (Nasdaq: FINL), Lennar (NYSE: LEN), Tiffany (NYSE: TIF), Walgreen (NYSE: WAG), Air Transport Services Group (Nasdaq: ATSG), Focus Media (Nasdaq: FMCN), Hastings Entertainment (Nasdaq: HAST), Irwin Financial (NYSE: IFC), Novacea (Nasdaq: TSPT), On Track Innovations (Nasdaq: OTIV), Origin Agritech (Nasdaq: SEED), Perdigao S.A. (NYSE: PDA), Phillips Van-Heusen (NYSE: PVH), Rubios Restaurants (Nasdaq: RUBO) and Sonic (Nasdaq: SONC).

Tuesday

The House Financial Services Committee will have its claws sharpened for the testimony of Treasury Secretary Geithner and Federal Reserve Chairman Bernanke on Tuesday. The two will face questioning about their AIG bonus bumble. This is "must see TV" if ever there was... The drama that is especially present when House members get a chance to script their future campaign commercials is embarrassing for me to watch. It would be embarrassing enough just listening to the asinine questions posed by the too many know-nothings in this group, but the grandstanding that occurs for media attention tops off the distasteful experience. HOWEVER, we love Dennis Kucinich these days, because the regular crusader finally has undeniably just causes to fight for. In that regard, I will always savor his labeling of the rating agency activity "criminal," but the slap on the wrist the group got is equally criminal...

The President will take to the airwaves AGAIN on Tuesday night at 8:00 PM EDT. Talk about damage control overkill... Leno, 60 Minutes and now this??? Come on man, this is the presidency, not Hollywood! However, not too long ago, we authored an article entitled, "We Need a Hero," and without a doubt, the President is doing his best now to uplift the nation. Still, he has to repair the "Bad News Obama" image he created by constantly reminding Americans of his inheritance of this horrible mess. It took the stock market dropping 20+% under his short tenure to alert his advisors to this need, unfortunately.

This new Obama, the good cop version, filling in basketball brackets and doing late night comedy, seems like an overreaction no? Who the heck is running this PR show? Oh yeah, it's that over-caffinated dude... We need balanced, positive leadership, not poll-tethered viewpoints and media strategy!!! Even so, I like this version of the president better than the apocalyptic one, and his 60 Minutes appearance on Sunday night was simply fantastic in my humble opinion. Finally, despite my criticism, I hope to see the President throw out the first ball on April 5th when the World Champion Philadelphia Phillies take the field!

Overseas news looks to play an important role on Tuesday. Banking executives from the U.S., Europe and Japan are set to convene to discuss the future of banking, bonuses and other important regulatory concerns (mainly bonuses and where they can still get them cheap). The Bank of Japan will also release its February meeting minutes. Finally, speaking from Prague, Chicago Fed President Evans will participate in a panel discussion on the topic of "Central Banking in Times of Crisis - Active Player or Passive Observer."

The ICSC-Goldman Sachs Weekly Same-Store Sales Report produced a 1.4% year-over-year sales decline last week (NYSE: GS). The sales decline was attributed to cold and wet weather, and compared against the prior week's 0.9% drop. We expect that stock market rise and the onset of spring might induce a sort of near-term euphoria for consumers, leading both recently unemployed and the majority of you still employed (but scared to death) to do some shopping in the weeks ahead. The State Street (NYSE: STT) Investor Confidence Index might also improve from February's 72.9 mark, given recent stock market rise. The index measures investor risk taking, and attributes it to their confidence.

The day's EPS schedule highlights news from Macy's (NYSE: M), Target (NYSE: TGT), Deutsche Bank (NYSE: DB), Ares Maritime Transport (Nasdaq: RAMS), American Medical Alert (Nasdaq: AMAC), Carnival Corp. (NYSE: CCL), ChipMOS Technologies (Nasdaq: IMOS), Comforce (AMEX: CFS), Commercial Metals (NYSE: CMC), Companhia de Saneamento Basico (NYSE: SBS), Compton Petroleum (NYSE: CMZ), Great Basin Gold (AMEX: GBG), Jabil Circuit (NYSE: JBL), McCormick & Co. (NYSE: MKC), MDRNA, Inc. (Nasdaq: MRNA), Proliance (AMEX: PLI), Proxim Wireless (Nasdaq: PRXM), Robbins & Myers (NYSE: RBN), Taseko Mines (AMEX: TGB) and Williams-Sonoma (NYSE: WSM).

Wednesday

The weekly Mortgage Bankers Association Purchase Applications Report looks to get a little more interesting in the months ahead, what with the Fed buying up treasury and mortgage-backed securities. Activity has been sensitive to even the slightest change in long-rates, and those rates got a favorable change last week thanks to Bernanke's bold move. If I have not made it clear yet, I admire Mr. Bernanke and his actions. He is like a lone fireman, left in an inferno while he seeks to save its inhabitants; he is unwilling to waver... Heroic.

The Fed's Pianalto and Yellen are both set to take part in luncheon meetings, but recent action that has focused attention on Bernanke and Geithner should render these discussions mute.

Durable Goods Orders will be reported at 8:30 AM. After poor reports from both the Philly and Empire State Manufacturing Surveys, the consensus for February Durable Goods Orders is set for a decrease of 2.0%. Before you accept that as not so bad, realize that this latest decline follows mid-single-digit declines in both previous months, and that this is a month-to-month measure. It's simply difficult to keep piling on cumulative declines in an economy like ours, though not impossible.

At 10:00 AM, look for the New Home Sales Report for February. The sentiment among homebuilders probably could not be much worse than it was last month (Housing Market Index stood at 9 in March and February). For this reason, there should be little rejoicing if the annual rate of sales improves as economists foresee. Bloomberg's consensus of economists forecasts the February sales pace improved to 315K, from 309K in January. While we may not have reached bottom yet, the light seems visible ahead thanks to several recent government efforts.

The EIA Petroleum Status Report is due at 10:30 as usual. In the week ended March 13, oil inventory grew by 2.0 million barrels. Still, oil prices rose last week on the belief that the Federal Reserve's quantitative easing would either spur the economy as intended or set inflation in motion as unintended. We suspect some buyers' remorse might drive a pullback in oil this week.

Automatic Data Processing (Nasdaq: ADP) meets with analysts on Wednesday. Several Chinese firms report results, including PetroChina (NYSE: PTR), China Life (NYSE: LFC), and Industrial and Commercial Bank of China. Also look for news from CKE Restaurants (NYSE: CKR), DSW, Inc. (NYSE: DSW), Fortress Int'l Group (Nasdaq: FIGI), Paychex (Nasdaq: PAYX), Red Hat (NYSE: RHT), ADA-ES (Nasdaq: ADES), American Bio Medica (Nasdaq: ABMC), Antares Pharma (AMEX: AIS), Bioject Medical (Nasdaq: BJCT), Citi Trends (Nasdaq: CTRN), CPI Aerostructures (AMEX: CVU), dELiA*s (Nasdaq: DLIA), Gammon Gold (NYSE: GRS), Green Plains Renewable Energy (Nasdaq: GPRE), Hydrogenics (Nasdaq: HYGS), inTEST (Nasdaq: INTT), SAIC, Inc. (NYSE: SAI), Signet Jewelers (NYSE: SIG), SolarFun Power Holdings (Nasdaq: SOLF), The Orchid Enterprises (Nasdaq: ORCD) and WuXi PharmaTech (NYSE: WX).

Thursday

Atlanta Fed President Lockhart starts the news flow with a discussion from overseas that most of us will wake up to on Thursday. Then, at 8:30 AM, the final revision of fourth quarter GDP is expected to show further deterioration to -6.6%, from -6.2% at last check. The change in the related price index is expected to stick at 0.5% on a quarterly basis. Quarterly Corporate Profits are reported at the same time as GDP, so look for this data at 8:30 as well.

Weekly Jobless Claims stuck high last week, measuring 646K, and the forecast never wavers far from the prior week's data. In fact, Bloomberg's survey of economists forecasts new claims of 650K this week.

Treasury Secretary Geithner testifies again on Thursday before the House Financial Services Committee, this time on financial regulation reform. Geithner is under intense pressure that would wear on anyone. The scrutiny began as soon as he was chosen by Obama to head the Treasury, and there's been no let up, despite the favored change from Hank Paulson's leadership. The Greek is glad to see Obama sticking behind Geithner, who has been prematurely judged.

Federal Reserve Presidents Fisher, Lacker and Stern are all also scheduled to speak on Thursday afternoon as well. The Natural Gas Report is scheduled for its regular time of 10:30. Last week's draw from inventory was lighter than the week just prior.

Johnson & Johnson's (NYSE: JNJ) patent for the drug Topamax, which is used to treat migraines and epilepsy, expires Thursday. Mylan Laboratories (NYSE: MYL) is expected to launch a generic version of the medicine to compete for market share. Also, Lexmark (NYSE: LXK) is scheduled to meet with analysts.

Thursday's earnings schedule includes Best Buy (NYSE: BBY), ConAgra Foods (NYSE: CAG), Dr. Pepper Snapple Group (NYSE: DPS), Gamestop (NYSE: GME), Lululemon (Nasdaq: LULU), Scholastic (Nasdaq: SCHL), Texas Industries (NYSE: TXI), The Wet Seal (Nasdaq: WTSLA), Accenture (NYSE: ACN), ARYxTherapeutics (Nasdaq: ARYX), Birner Dental (Nasdaq: BDMS), China TransInfo Tech (Nasdaq: CTFO), Conn's Inc. (Nasdaq: CONN), Cornerstone Therapeutics (Nasdaq: CRTX), Embraer-Empresa Brasileira de A (NYSE: ERJ), Fred's (Nasdaq: FRED), Intelli-Check (AMEX: IDN), Nanophase Technology (Nasdaq: NANX), New York Mortgage Trust (Nasdaq: NYMT), P&F Industries (Nasdaq: PFIN), Response Genetics (Nasdaq: RGDX), Rosetta Genomics (Nasdaq: ROSG), Smart Modular Technologies (Nasdaq: SMOD), Spectrum Control (Nasdaq: SPEC), Synnex (NYSE: SNX), Synta Pharmaceuticals (Nasdaq: SNTA), TIBCO Software (Nasdaq: TIBX), TRI-S Security (Nasdaq: TRIS), UTI Worldwide (Nasdaq: UTIW) and Xyratex (Nasdaq: XRTX).

Friday

Before the market opens, Personal Income and Outlays will be reported for the month of February. Bloomberg's consensus sees Income decreasing 0.2% month-to-month, after posting a rise of 0.4% in January. Spending is forecast to have risen by 0.3%, versus a 0.6% increase in January. Core PCE Price Inflation is expected to increase 0.2%, versus a 0.1% rise in January. The Core PCE Index is the Fed's most favored inflation gauge. It is expected to produce a change this time around that the market would seem likely to dislike due to recently revived inflation concern. In case you can't read between the lines, this may prove a catalyst for Friday decline in the broader marketplace.

Reuters/University of Michigan Consumer Sentiment is expected to improve in the last reading for March, to 56.7, from 56.6 last time out. Finally, the Inter-American Development Bank will convene its annual meeting on Friday.

Reporting EPS, look for news from Sinopec (NYSE: SHI), Aracruz Celulose (NYSE: ARA), Biofuel Energy (Nasdaq: BIOF), Hellenic Telecommunications (NYSE: OTE), K.B. Home (NYSE: KBH), KHD Humboldt Wedag International (NYSE: KHD), MI Developments (NYSE: MIM), Netlist (Nasdaq: NLST), Sadia (NYSE: SDA), VCG Holding (Nasdaq: VCGH) and Xinyuan Real Estate (NYSE: XIN).


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).