Wall Street Greek: This Week: Fed Soap Opera

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This Week

This week is all about the Fed soap opera, with the FOMC Policy Statement due to reach an ultra-sensitive marketplace that will be hanging on every word Wednesday afternoon. Also on Wednesday, a House committee will debate whether the Fed should remain an independent entity or not. Then on Thursday, Ben Bernanke faces the heat as he testifies to Congressional panel about his alleged bullying of one Bank of America CEO, Ken Lewis.

Monday

While the economic schedule was as light as most Mondays, SEC Chairperson Mary Schapiro testified before the Senate Banking Committee on OTC derivatives. Monday's EPS schedule includes news from Ennis Inc. (NYSE: EBF), Finish Line (Nasdaq: FINL), Highway Holdings (Nasdaq: HIHO), Smith & Wesson (Nasdaq: SWHC) and Walgreen (NYSE: WAG).

Tuesday

The highly anticipated two-day meeting of the Federal Open Market Committee commences on Tuesday. Speculation surrounding its result will be in no short supply up to the moment of the FOMC Policy Statement publishing on Wednesday.

The International Council of Shopping Centers reports on weekly same-store sales trends. Tuesday morning brings the latest news, and follows an extremely poor reading from the week ended June 13. Sales fell 1.5% year-to-year through that period. However, in the weeks preceding the latest report, we had noted solid year-over-year growth on an increasingly consistent basis. However, the month of June has been impacted by poor weather, rising energy prices and increasing unemployment.

Look for the Existing Home Sales Report for May at 10:00 a.m. May's report looks to build an improving trend, after April posted a 2.9% gain. Pending Home Sales, which precedes trend in the Existing Sales data, has offered insight into an improving marketplace here (+6.7% in April). We wrote a few months ago that government efforts toward housing revival should generate results by June, and it seems the first-time home buyer tax incentive is helping to provide some of that lift. However, sales levels remain relatively weak, mortgage rates have added a full percentage point in short time, and the inventory of unsold homes remains hefty. Bloomberg's consensus of economists forecasts home sales will run at a 4.85 million annual pace in May, up from 4.68 million.

State Street's (NYSE: STT) Investor Confidence Index will be reported at 10:00 as well. The measure of investors' collective risk appetite should show some gain from May, given the herd mentality that defines market momentum. However, in June we've seen investors reconsider valuation, and so it is unclear how far the June reading will vary from May's 106.3 (up from April's 79.6).

The FDA's pediatric advisory committee will consider data on Schering Plough's (NYSE: SGP) Asmanex and Abbott Labs' (NYSE: ABT) Depakote. Tuesday's EPS schedule includes news from AeroVironment (Nasdaq: AVAV), America's Car-Mart (Nasdaq: CRMT), Apogee (Nasdaq: APOG), Cascal NV (NYSE: HOO), Commercial Metals (NYSE: CMC), Culp (NYSE: CFI), H.B. Fuller (NYSE: FUL), Jabil Circuit (NYSE: JBL), Oracle (Nasdaq: ORCL), Sonic (Nasdaq: SONC), Steelcase (NYSE: SCS) and The Kroger Co. (NYSE: KR).

Wednesday

The last shall be first on Wednesday, as the final news driver of the day will command news flow throughout it. The FOMC will issue its Policy Decision and Statement at 2:15 EDT. Based on the upward and unfavorable (for housing) movement in long-rates, we expect the Fed will refrain from any disruptive commentary. We expect the Fed may discuss its preparedness to counter any inflationary fire in an effort to talk down rates. At the same time, we see ongoing support of asset purchases. In other words, we anticipate a meticulously authored policy statement that might work in favor of the Fed's goals.

Regulation anyone? The House Financial Services Committee will hear testimony and weigh whether to allow the Federal Reserve to remain independent. That runs counter to the expanded powers recommended to it by the Obama Administration. Senate Democrat Chris Dodd is sternly opposed to the President's view here, stating last week that giving the Fed more powers was akin to buying your son a brand new car after he wrecked the family station wagon. Keeping with Washington, the SEC will meet to discuss options to allow money-market funds to float. In New York, the United Nations will take up discussion on the global crisis and its impact on economic development.

The Mortgage Bankers Association publishes its regular Mortgage Activity data in the pre-market Wednesday. We have tracked a trend of lower refinancing activity matching with higher contracted 30-year fixed rate mortgages, but have noted a favorable resistance from Purchase Applications.

At 8:30, Durable Goods Orders will be reported for the month of May. Bloomberg's consensus of economists forecasts a modest decline of 0.5%, after a rebound of 1.7% in April (-2.2% in March). The Philly Fed posted an improved result last week, but economic contraction still rules the data. The "not as bad" figures that have lifted the market the past few months are no longer good enough to lift stocks further, so we expect little reaction to a so so data point.

Like the Existing Home Sales data from the day before, economists foresee an improvement in New Home Sales for the month of May. The consensus forecasts the annual pace of sales will increase to 365K, from 352K the month before. As we alluded to earlier in this article, the housing market seems to have its anchor caught finally, given the stubborn mortgage application activity in the face of rate increase of late. With builders barely active, supply has seen improvement (it's getting smaller) in recent months as well. New home supply stood at 10.1 months at last check.

Look for the regular Petroleum Status Report from the EIA at 10:30. Last week's data showed crude oil stocks were drawn down by 3.9 million barrels. That news helped oil above $70, but recent reconciliation regarding economic recovery has brought oil lower along with equities. Wednesday's earnings schedule includes American Greetings (NYSE: AM), Bed Bath & Beyond (Nasdaq: BBBY), CKE Restaurants (NYSE: CKR), Darden Restaurants (NYSE: DRI), Herman Miller (Nasdaq: MLHR), Mad Catz Interactive (AMEX: MCZ), Monsanto (NYSE: MON), Nike (NYSE: NKE), OMNOVA Solutions (NYSE: OMN), Paychex (Nasdaq: PAYX), Red Hat (NYSE: RHT), Rite Aid (NYSE: RAD) and Xyratex (Nasdaq: XRTX).

Thursday

Thursday has "hot soap opera episode" written all over it! Okay, "The Greek" admits to a General Hospital addiction during my teen years... Add that to the meaningless Greek trivia list... Still, you do not want to miss Ben Bernanke's testimony regarding his alleged bullying of Bank of America (NYSE: BAC) CEO Ken Lewis. This has the makings of Luke and Laura versus Stavros Cassadine and the weather machine. If C-SPAN does not cover this, be sure to catch it on Bloomberg Radio or the usual suspects of major media. This hot one is going to be covered across the spectrum.

Weekly Initial Jobless Claims are seen sticking stubbornly above 600K in this latest reporting of the death march. However, the market was enthused last week when continuing claims decreased significantly. Your favorite Greek analyst first reported to you that this was just as likely due to unemployment benefits running out for poor souls who could not find work as it was due to folks finding work. Barron's quoted another forecaster this week who seemed to pick up on that, though two days later. This kind of insight is why you read The Greek. Economists forecast weekly claims will tally 613K, versus the 608K reported last week.

General Motors (NYSE: GM) will be waiting on the final approval of the U.S. Bankruptcy Court in New York to grant permission for it to borrow $33 billion from us and the US territory of Canada (this is how I test my Canadian readership), while it works its way out of bankruptcy. Also, Toyota Motors (NYSE: TM) gives a timely update on its new management.

The final reporting of first quarter GDP is due, with no change seen from the last count of -5.7% economic contraction. The Price Index is seen holding at +2.8% annualized, quarter-to-quarter. Q1 Corporate Profits will also see last revision at 8:30, with a 22% year-to-year decline soothed by a 62.8% increase over Q4 2008. The Fed reports on its balance sheet and money supply at 4:30, though its policy statement will have already softened any blow this data could make.

German Chancellor Angela Merkel, perhaps the only EU national leader who might retain her position at next election, visits President Obama in DC. Thursday's EPS report list includes Accenture (NYSE: ACN), American Software (Nasdaq: AMSWA), Arcadia Resources (AMEX: KAD), Christopher & Banks (NYSE: CBK), ConAgra Foods (NYSE: CAG), Finish Line (Nasdaq: FINL), Image Entertainment (Nasdaq: DISK), Jackson Hewitt Tax Service (NYSE: JTX), Lennar (NYSE: LEN), McCormick & Co. (NYSE: MKC), Micron Technology (NYSE: MU), Palm Inc. (Nasdaq: PALM), Rand Logistics (Nasdaq: RLOG), Robbins & Myers (NYSE: RBN), Smart Modular Technologies (Nasdaq: SMOD), Standard Microsystems (Nasdaq: SMSC), Spectrum Control (Nasdaq: SPEC) and TIBCO Software (Nasdaq: TIBX).

Friday

A duo of economic reports will keep us busy on Friday, should Iranian and North Korean chaos get old on you. Look for Personal Income and Outlays at 8:30, and the all important PCE Price Index. The Fed's favored inflation gauge is anticipated to have calmed in May, to show only a 0.1% rise. Such a soft increase would compare rather favorably to April's 0.3% increase. Economists are basing their forecast on the soft CPI rise just reported. Spending is seen holding firm, after retail sales posted a 0.5% jolt in the month. Economists forecast Consumer Outlays rose 0.3%, compared against a 0.1% decline in April. Personal Income is forecast to move 0.4% higher in May, versus a 0.5% rise in April. The Core PCE Price Index will play a pivotal role Friday, especially if it contradicts Fed sentiment from a few days earlier.

Recent euphoria has run dry, and Reuters/Michigan Consumer Sentiment is seen sitting at 69.0, the level it was adjusted to in mid-June. Dallas Fed President Richard Fisher kicks off the post-FOMC Fed parade with his speech on the economy Friday. Much insight can be gained from these Fed appearances that just follow their group get-together, so pay attention.

Friday's EPS schedule includes news from AZZ Inc. (NYSE: AZZ), Gerber Scientific (NYSE: GRB), KB Home (NYSE: KBH), Logility (Nasdaq: LGTY) and Shaw Communications (NYSE: SJR).